Courtesy Adobe Stock
Courtesy Adobe Stock

Technology often helps concrete producers enact small changes that make a big impact. This Tech Talk column examines real-life ROI (return on investment) for reducing the expense of IT. The data is from real producers using technology to improve performance. This article uses fictional company financials.

The cost of a ticket
WW Ready Mix was concerned about the seemingly endless costs associated with IT support for the quote-to-cash process. The CFO decided to look at all costs, well beyond dispatch software. He created a checklist of all costs directly related to the process:

Software – Systems for dispatch, Citrix server, DB (MSSQL, Oracle, etc.), security protection, mix management, quality control, sales support/customer relationship management (CRM), and others.
● Amortization, i.e., the monthly cost over 5 to 7 years to depreciate the initial purchase.
● Annual support fee averaging 22.5% of initial list price of software, per year

● Data center amortization for physical environment
● Servers, switches, routers, security fees - for installation, configuration, maintenance and annual support
● Energy (power and cooling)

● T1, trunk, etc. internet line between server locations and remote sites
● Old-school modem, router, wiring, etc. amortized purchase, installation, configuration and support fee

● Employee support, maintenance and configuration of software and hardware
● Contractors for configuration, training, support and maintenance
● Training expenses

WW’s CFO recognized that any fully-depreciated equipment or software that was 10 years or older represented a tangible risk of failure, and planned to re-purchase these items. Therefore, he calculated a reasonable, ongoing amortization amount for purchasing new equipment and software.

In 2017, the producer delivered 602,410 loads at an all-in cost of $2,620,000. Based on known expenses, the IT “tax” on operations totaled $4.35 per ticket or 0.55% of revenue.

The cost of the Cloud
The CFO created a technology focus group to scour the marketplace for SaaS (Software as a Service) offerings to improve the quote-to-cash process. Given the extreme age and technical obsolescence of the core dispatch software, it was difficult to find suitable “plug-in” alternatives for functional areas such as CRM. However, several component packages were identified as well as a promising quote-to-cash offering.

The SaaS offerings were found to have several key features, first of which was Total Cost of Ownership (TCO). The pricing model was based on usage and thus scaled with the seasonal volume. Further, there was no need for servers, data centers, support software (such as Citrix or Oracle), or the hoard of staff required for support. Finally, and somewhat unexpectedly, data exchange and security were much better since the SaaS offerings were all based on modern tools.

As a result of the focus group’s findings, WW Ready Mix began migrating away from outdated, client-server tools to modern, Cloud-based systems. The economics justified the change; but more importantly, the modern tools enabled WW to improve business processes to reduce costs for the producer and its customers. Customers loved being able to see daily activity on mobile phones, salesmen could quote on tablets, and so much more.

Economic impact
WW has started the process of switching from client-server based software to SaaS. The first target was an isolated group of five plants and included a complete transition to SaaS. The all-in costs of the SaaS, prior to staff training, amounted to $2.50 per ticket. This equated to a savings of $1.85, with the (invaluable) bonus of empowering better business processes. The CFO plans to complete the company-wide transition in 2019, anticipating a $1,115,000 savings, or 2.3% EBITDA improvement.