Meaningful Return On Investment (ROI) calculations are challenging for Engineering Simulation
Return On Investment (ROI) calculations are a method commonly used to quantify financial benefits of any planned activity. Approval to proceed usually requires achieving a calculated ROI within a specified range. This approach has both benefits and drawbacks. I am going to focus here on the specific issues related to using this approach related to Engineering Simulation.
There are 3 key challenges associated with the ROI calculations related to Engineering Simulation as follows:
- The efficiency trap: One common method of calculation of benefit is increased efficiency for engineering. This approach has two flaws: 1. the engineers by nature are actually likely to use the same amount of time and effort to get better designs, and 2. The finance guys are just going to ask “who are you letting go?”
- Disconnect from technology & business goals: Those who understand the technology required often do not also understand its relationship or are uncomfortable in its communication.
- The higher the business value, the harder it is to quantify: This is true of any business activity as it transitions from tactical to strategic importance. Quantifying the value of an expected reduction in cost or schedule can be challenging but it is much easier than quantifying value for increasing: quality, performance, or innovation.