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The first step in organising any software evaluation is not to focus on the software simply as an application. Instead, software should be seen as part of your overall process! So it’s that process you should evaluate. Then, in the final analysis, the price, the number of features, and other criteria become secondary considerations at best. The only criterion that really matters is the productivity of your process!
In the illustration above, Professor Topo shares actual performance numbers from a single mobile LiDAR system, or MLS (the data is provided by a consultancy which is a member of the TopoDOT community). The revenue generated by this single MLS increases dramatically after 2013, as the MLS market begins maturing – until in 2017, this single system produces $8,000,000! Also plotted are the annual technician costs of $1,220,000 and TopoDOT licensing costs of $52,550. So that’s a gross profit of 84%!
What does this impressive performance tell us? Well, it tells us three very important things:
1 – A productive process drives revenue
This consultancy enjoyed dramatic revenue growth because they executed a highly productive process which delivered quality products to their clients – on time and at competitive prices. This means your office processes must produce high-quality deliverables which meet or exceed your clients’ requirements and expectations.
2 – Technicians are the primary cost drivers
In Professor Topo's example, where the annual technician costs are $1,220,000, we know that this consultancy used 18-20 technicians each day to process their data. That's about 15% of MLS revenue… not insignificant! And this leads us back to the criterion of productivity.
3 – Software price doesn't matter! Software productivity does
Clearly, in this example, the TopoDOT licensing cost to support these 18-20 technicians is very low. So the real story doesn't lie in the direct software cost, but the productivity of the software process. For it is the productivity of the software process that directly drives the technician cost!
Typically, software purchase decisions which are based on outlay costs, or sticking with existing software, result in less productive processes – often by an order of magnitude. For example, a lower-priced software product (typically 4 times less productive than TopoDOT) would require 4 times the technician manpower to process. In the example above, this would raise the technician cost to 4 x $1,220,000 = $4,880,000 to support the $8,000,000 in revenue. The operational model is actually more complex: if technicians aren't added, the process won't produce the $8,000,000 revenue – thus margins are squeezed from both sides.
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The example given by Professor Topo is typical of performance within the TopoDOT community. In North America, where TopoDOT has become the standard for transportation corridor applications, these kind of calculations and results are well understood. However, as TopoDOT expands its presence into the UK and Europe, people are raising these questions and wanting to know about productivity and profitability. So when evaluating any software, keep in mind you’re purchasing a process. The productivity of that process will decide your costs – and your primary costs are all about manpower, which are driven by software process productivity and not software licensing costs.
Our suggestion is to dedicate time and resources to evaluating your process productivity. Focus on the technician manpower costs needed to meet revenue objectives! Make sure the difference is sufficiently large to support an overall profitable operation.
Article by Ted Knaak: President, TopoDOT