Save Thousands of Dollars with Special Depreciation Rules in 2008 Stimulus Act

By Emily Lehnen
Senior Marketing Manager

In addition to paying out to individuals, the 2008 Stimulus Act passed earlier this year provides extra incentives for businesses. Two special depreciation rules apply for assets put into service in 2008, allowing companies to garner thousands of dollars in tax savings. Following is an explanation of the rules, and an example of the potential savings.

While lots of capital assets qualify for the special depreciation, I’m going to discuss how they relate to software purchases, one of the qualifying assets.

The incentives include:

• A 50% first-year bonus depreciation
  Software normally depreciates at a rate of 33% per year. With the incentive, for the first year an asset is placed into service, companies can depreciate 50% of the cost of an asset in addition to the regular 33% depreciation and any Section 179 deduction.



• Increase in “Section 179 Expensing”
  A company can elect to treat an asset as an expense and depreciate the asset in one year instead of over several years. This practice is referred to as “Section 179 Expensing”, very cleverly named after the IRS code that explains it. If a company chooses to do this in 2008, it can expense up to $250,000 of the cost of the asset, up from the general limit of $128,000. Again, a company can take advantage of this special allowance in combination with the 50% first-year bonus depreciation./LI>

Real World Example of Savings
Before your eyes completely glaze over from looking at IRS codes, let me show an example of the potential tax savings. Let’s say you spend $300,000 on upgrading or purchasing new software, and that software is put into service in 2008. Below is a calculation of the maximum depreciation allowed in 2008.

Purchase Price: $300,000
Section 179 expensing: $250,000

Remainder to use for calculating
other depreciation: $50,000

50% Bonus depreciation: $25,000
33% Standard depreciation: $7,500

Total depreciation amount
($250,000 + 25,000 + $7,500): $283,250

Total 2008 Tax Savings
(assuming 32% tax rate): $90,6400

Without the two 2008 incentives, this same software purchase would result in a tax savings of only $58,880. These incentives are a great way to bolster your ROI justification for starting a software project.

The Discipline of Project Justification: Part 7 – Creating Story Boards

By Tom DeVroy
VP of Sales

When selling software, the most difficult kind of users to win over are end users. Senior managers tend to have some vision or preset notion of how they would like things to run in the future versus how they run today. They think in terms of efficiencies, overlapping processes and increase productivity. The Future-State model.

End users, on the other hand, don’t think in terms of change. They think about how things work today, and the steps they need to take to get their job done. The Current-State model. Therefore, the prospect of change, especially is not explained well by management, creates a lot of anxiety for end users.

To dispel this anxiety, managers need to help end users look past the Current State, and help them visualize the Future-State. To so this, it is essential that management and project leaders clearly map out the path for change and how it will affect the end user. They need to explain to the user community how their job will look in the future, and that the new system is just a tool to help them do their jobs better, faster, more easily.

At Metrix, we use the creation of story boards to help explain the path for change for new processes. This usually takes the form of a flow chart or some other diagram that explains how processes will be performed and by whom. It’s even better when the application software vendor can demonstrate these new processes so people can visualize the new model, and their job function in it.

So if a simple narrative doesn’t do it, take the time to define the future state, lay out how it affects people, and define what their new job responsibilities will look like when the new tool is selected.

3 ways to save money by reducing service inventory in the field

By Tom Bowe
VP of Engineering

Most service companies track inventory in the field to some degree and most can report cost variances and usage trends each month. Occasionally I run across service business that expense all of their field inventory, but most track at least their highest cost items with some care. Few have real-time visibility and closed-loop logistics, which is essential to eliminating surplus stock, recouping warranty reimbursements, reducing shrinkage and uncovering hidden costs.

Service parts management is complex and difficult to understand, let alone fix, with a lot of people involved across multiple departments. However, its impact on cash-flow and profitability causes service executives to spend a significant amount of time white-boarding, analyzing and brainstorming ways to optimize field inventory. When the normal process fails (i.e. stock out, urgent, NFO, hard down, etc.), split-second decisions often have a negative, cascading effect on service levels, first time fill rates, customer satisfaction, and cost. Here are three suggestions that make for a better running service logistics organization:

1. Closely track the number of parts requested vs. the number of parts used to fix each customer problem. It used to be difficult to link these transactions together because they occur at different times; different places and can involve different systems. But now, Metrix (for example) can require technicians to disposition each part that was shipped, pulled, installed, repaired, tested or swapped before they can close the call.


2. Implement periodic cycle-counting in the field. This used to be tedious, but now it’s easy to automate and requires little user effort or training with intelligent barcode scanning. Service part cycle-counting has a number of advantages over traditional physical counts, especially if the field doesn’t see it as a waste of time and frequency is based on value, like ABC.


3. Enforce approved stock lists and levels. Ideally, on-hand inventory in a service van or a technician’s trunk consists of low-cost/ high-use parts and essential tools…that’s it. Everything else is delivered on-demand, purchased as needed, or consigned to customers and parts are consumed or returned immediately.

Sometimes it’s best to manage these critical service parts functions in your service systems. Traditional supply chain systems don’t account for the nuances of managing service parts, and are often times are too complex for the job. Good forward and reverse logistics management is a key driver of customer satisfaction, and overall service profitability. We think closed-loop service parts and logistics should be a core component of all field service automation projects.

How to integrate Mapping into a Field Service system

By Tom Bowe
VP of Engineering

I attended an Aberdeen briefing this week highlighting the benefits of location-based service. GPS-tracking and vehicle monitoring are becoming standard business practices in the U.S. field service industry.

The benefits are tangible too…some companies are seeing double-digit cost savings in gas! This is good news for us all, and very timely for Metrix. We recently added a “Show Map” feature to our schedule board so dispatchers can visualize customer locations, technician routes and unassigned jobs (like find nearest tech) using a web-based map tool (like Yahoo or Google Maps).

We evaluated the leading map software vendors and found it to be a fairly arduous task. Although, it took less than 60 minutes to integrate to M5 and verify data was passed back and forth properly, it required 3 weeks to fully assess their respective strengths and weaknesses…especially for technician routing which is non-trivial. So, if you need to incorporate maps into your service system (everyone is doing it), I can save you some time!

Google Maps
Pro - Web service is easy to deploy/integrate and has lots of features including routing
Con – Pricing based on total # of requests and page views

MapPoint
Pro - Easy to integrate into .NET and has lots of features
Con - Full client install makes it harder to deploy, especially if multiple versions are required.

Virtual Earth
Pro - Web service is easy to deploy and easy to integrate with…cool “tiles” and free of charge?
Con – Missing some routing functionality, but supposed to be in new v6 api

MapQuest
Pro - Web service is easy to deploy/integrate and has lots of features including routing
Con - Performance seems slower than the others and doesn’t support mouse wheel zooming

Yahoo Maps
Pro - Web service is easy to deploy/integrate with lots of features and can render using Flash which loads faster than AJAX
Con – Missing some routing functionality, but offers workarounds

If you want to know who we selected and why… give me a call and I’d be happy to share. For more information on market trends and business benefits, the Aberdeen report will be published October 31st.

(Case in point...GPS for NYC taxi cabs...Link)


Tom Bowe

Good Advice from Bill Carollo, an NFL Referee

By Larry Laux
President and Founder
Yesterday I heard Bill Carollo, veteran NFL referee, talk to my son’s U14 soccer team. As you would expect, a ref that’s had experience in 8 NFL conference championship games, two Super Bowls and a Rose Bowl riveted the attention of the team. His message reminded me that sports, business and life in general can be dealt with successfully. I’d like to remind you, as he did to the team, of things you already know but may be overlooking as you run around at Mach 6.

Teamwork is important. If you are reading this blog you are somehow involved in the service business. It might seem that service is often ‘one-on-one’ as an engineer resolves a problem. But you know that the network of dispatchers, logistics people, supervisors, contract administrators and even vehicle coordinators each could mess up a successful service event, if they don’t do their jobs right. Part of teamwork is doing your job right. Another part is encouraging your teammates in their tasks. Take some time today to encourage one of your teammates, either complimenting them when they do something good, or encouraging them after a mistake. Letting them know what they are doing impacts others is in itself a team positive action.

There is no substitute for hard work. I suppose if your job were pure fun, they wouldn’t have to pay you to do it. But whatever part of your job is the equivalent of ‘hitting the weight room’ should be on your action list. To switch to a rowing metaphor, if someone in the boat is loafing on their oar, we will have a difficult time keeping t he boat going straight. Don’t be that person.

Passion for your team is good. This is much more difficult that it may seem. When you’ve been doing a job for 3, 5, 10 or more years, it is very easy to slip into a comfort zone. But caring, and showing that you care for your customers, your teammates and the issues they have to deal with is a differentiator. So often people would like the magic bullet to lose weight, to get the big bonus or to grab recognition. Being enthusiastic is a pretty magical potion, and it is contagious.

Character matters. Bill defined character as doing the right thing when nobody’s looking. He also spent some time talking about Atlanta Falcon Michael Vick. All of us, all of us have many opportunities every day to choose A or B, to get something done now or leave it for later, to shrug something off as ‘not my job’. And no one makes the right choice every time. It’s human nature! But you should challenge yourself to step it up a notch, even if no one is watching right then. And as Grandma used to say, “Nothing good ever happens away from home after midnight.”

Nothing here is unfamiliar, but you know what? I need reminders every once and a while. Bill Carrolo helped me remember last night, and I hope this blog note helps you in the same way.

Larry Laux

The Discipline of Project Justification - Part 6

By Tom DeVroy
VP of Sales

Change Management is the process and communication necessary to get your organization prepared for a change and necessary activities to make it happen. Managers usually have a pretty good idea of what they want to accomplish with a new system. They either want to automate processes, become more efficient, make their people more productive, grow the business, improve customer satisfaction, or just attain some other tangible and measureable benchmark that improves business operations and performance. I’m not sure they always communicate this clearly to the troops. The end user community really is interested in one thing, and that is how it will improve their work. How is this new software going to make their life easier?

I always say that to an end user the worst system in the world is the one they currently have....the best system in the world is the one they are looking at...until...it’s time to replace the old one, where it instantly becomes the best system and they usually work hard to make the new one look like the old one. This drives me crazy, but it happens all of the time. Why? Because the lack of vision, and a fear of the unknown.

The great chasm needs a bridge - a good change management plan builds the bridge. They can’t envision how they are going to get from where they are today to where they will be. Panic and fear sets in, and then the only fall back is to a comfort zone of what they are familiar with. See how that old system all of a sudden becomes too attractive. To make matters worse I’ve seen some customers engineer a new contemporary system with best practices and make it look and feel just like the old one they are replacing. What’s the point?

I worked at a consulting company by the name of Bentley Consulting which was later acquired by Technology Solutions. Bill Bentley was an acknowledged leader in Service Management operations. We used a variant of the following graphic to describe the process of change, which still applies today. It looks like this:


Senior management usually has a vision, and it drives overall business goals. This could be new operating methods, improved financials, competitive posturing or whatever, it is going to drive how the business will change to achieve these goals. So the next logical step is to look at the way things are done today and determine if the way you are structured today will facilitate the execution on the vision.

If it can’t, there is a process of re-engineering. This starts by defining the new model. This is usually when people start to inquire into vendors like Metrix. They realize that their existing system(s), for whatever reason, fits the old model, but that model won’t work going forward, so they need a new system that will accommodate the new model. This whole change needs to be communicated to the company, making sure they understand the following:

1. What are we trying to achieve and why?
2. What’s wrong with the way we do it today?
3. How are we going to change and what will it accomplish?
4. What parts of my job are going to change and how do I fit it to the new model?
5. How do I fit it to the new model?
   
6. What’s the timeframe and expectation of an outcome?
7. What role will I play in making this happen?
   
8. How do we sustain the change?
9. Can I provide feedback for future improvement?
   

This step is usually not addressed until after a system and implementation is underway, but if you have some of this information in your hip pocket when you ask for funding you will look like a very prepared project manager.

Just for grins I pinged Wikipedia for their definition of Change Management. I thought this might be useful as it has a few methodology references. I think their definition supports my arguments:

Individual Change Management
An early model of change developed by Kurt Lewin described change as a three-stage process[1]. The first stage he called "unfreezing". It involved overcoming inertia and dismantling the existing "mind set". Defense mechanisms have to be bypassed. In the second stage the change occurs. This is typically a period of confusion and transition. We are aware that the old ways are being challenged but we do not have a clear picture to replace them with yet. The third and final stage he called "refreezing". The new mindset is crystallizing and one's comfort level is returning to previous levels.

Some change theories are based on derivatives of the Kübler-Ross model from Elizabeth Kubler-Ross's book, "On Death and Dying." The stages of Kubler-Ross's model describe the personal and emotional states that a person typically encounters when dealing with loss of a loved one. Derivatives of her model applied in other settings such as the workplace show that similar emotional states are encountered as individuals are confronted with change.

A Formula for Change was developed by Richard Beckhard and David Gleicher and is sometimes referred to as Gleicher's Formula. The Formula illustrates that the combination of organisational dissatisfaction, vision for the future and the possibility of immediate, tactical action must be stronger than the resistance within the organisation in order for meaningful changes to occur.

The ADKAR model for individual change management was developed by Prosci with input from more than 1000 organizations from 59 countries. This model describes five required building blocks for change to be realized successfully on an individual level. The building blocks of the ADKAR Model include:

1. Awareness – of why the change is needed
2. Desire – to support and participate in the change
   
3. Knowledge – of how to change
4. Ability – to implement new skills and behaviors
   
5. Reinforcement – to sustain the change
   

Organizational Change Management
Organizational change management includes processes and tools for managing the people side of the change at an organizational level. These tools include a structured approach that can be used to effectively transition groups or organizations through change. When combined with an understanding of individual change management, these tools provide a framework for managing the people side of change.

Other Discipline of Project Justification Posts:

View Part 1 Here
View Part 2 Here
View Part 3 Here
View Part 4 Here
View Part 5 Here

An Eye-Opening Trip to Japan and China

By Larry Laux
President and Founder

I have just returned from a trip to Tokyo, Beijing and Shanghai. Perhaps you have been fortunate enough to have visited those cities. If not, or if it has been more than 2 years, I can tell you that they are all undergoing building booms. In the Chinese cities, it is a BOOM!

It is almost unbelievable how quickly new buildings are going up. One ‘small’ 40 story building was 1/3 done, and I was told each remaining floor would be completed in 1-2 days per floor.

I saw the ‘Bird’s Nest’ in Beijing, where the opening and closing ceremonies will be held for next summer’s Olympic Games. The Beijing subway has 3 lines now, but by next summer is expected to have six more completed or underway. They completed a 6 lane 100 km ring highway around the city in 2003, and have already completed another 4 lane one, 5-10 km further out.

And Shanghai gives credit to the world’s expo of 2010, but only a fraction of the new construction is directly related to that event.

All of this will impact your company. There is opportunity in these markets. Get there in person if you can and be amazed. Even if you can’t get there, get your products and services there, soon.