[LNSY]

Let's do some math.

So, say you're paying me $15 an hour. Really, if you own a business by the time you pay for taxes, infrastructure, capital outlay and insurance you are really paying about $45 an hour for me to hang out and do what you tell me to do at varying levels of competency. You need to make that much more value from my labor per-hour or you are going to go out of business.

Say I have a piece of software that, because of a miscommunication between the developers who wrote it and the people who have to use the software (ideally this is what management is for but, lolz) has added 30 seconds to a transaction I do 20 times an hour. This means that, suddenly, there are 10 minutes of labor added to this task on aggregate an hour.

If you have a piece of software that wastes 10 minutes of my time, you just wasted $7.50 worth of my labor. But, of course, I'm using this software for 8 hours a day. So that is $60 of money wasted a day.

So, really, you thought you needed to make $45 an hour from my labor, but you just added $7.50 to the total. So, $52.50, and now you have a morale problem to boot: because the folks who are using the software are now accomplishing less than they used to for the same amount of work.

[bena]

How are you not double counting your time?

Regardless of how you spend your hour, it still costs them $45/hr for you. If $7.50 of that is paying for idle time, that's still part of the $45, it doesn't get added again. If they could save those 10 minutes, that would just make you more productive and allow them to reach $45/hr easier.

[LNSY]

That is a good point. You're still cutting out 1/6th of my productivity, which has to be quantified.

How would you quantify this?

[bena]

It's essentially lost profits.

Let's say that your $45/hr number accounts for all the overhead. Just to keep the math simple here.

Let's then say that you generate $60/hr value for the company. That's $15/hr of profit for them right now.

If they could eliminate that delay, that's $10/hr of value you could be adding with that time. That's straight to their profits if they could eliminate it at zero cost.

Now, we both know that it's not zero cost. There's some cost associated with eliminating that delay. If the cost of eliminating that delay is more that $10/hr, it'll cost more to remove it than to realize it. And that'll eat into the $15/hr they're currently making.

We also know that while it'll cost now to fix the delay, at some point it will stop costing because the delay will be fixed. At that point, we get to realize the full profit.

Then it becomes a calculation of how long will it take. Because if it would take $11/hr for an entire year, then it might be worth it to suffer the loss in profits this year because the extra profits in the new year will make up for the shortfall this year.

And if you have multiple people using the app, the cost to fix it gets spread out across all the employees. With two employees, that's now $20/hr I could capture and as long as it costs less than that, we'll be good. Well, less than $30/hr because we aren't capturing that $20/hr until the work is done and we have to pay for the labor in the meantime and that means affecting current profits.

And of course, that scales. The more employees you have using the app, the more you can afford to throw at the problem and the more profitable it becomes to capture that extra. At just 100 employees, that's $1500/hr you can afford to fix this issue and you'll see returns of $1000/hr.

[LNSY]

Thanks for this!

[LNSY]

P.S. I have seen software deploys add 30 seconds to transaction before, it certainly has an effect on a companies bottom line.