Power conditioning delivers proven ROI

04 January 2013

Problems associated with power quality can take a huge toll on companies, with interruptions to the power supply such as impulses, noise, sags, surges, brownouts and outages causing sensitive electronic and computing equipment to fail. Rob Morris describes his company’s two-year study of power quality systems installation to identify their real return on investment (ROI) performance.

The benefit of installing power conditioning equipment to manage and eliminate power quality issues such as those described above has long been clear. However, it has not always been easy to quantify whether improving the power quality supply has a significant effect on the bottom line.

With the state of the economy continuing to make headline news and the future uncertain, businesses are looking to make their assets work harder for longer. They also have to justify every penny of spending.

With that in mind, my company recently undertook a two-year study, which looked to better understand how improving power quality affected the bottom line. Put simply is there a return on investment when installing power conditioning equipment?

Variable power quality
While there are only around nine hours of power outages on average each year in developed countries, the quality of the power produced by the grid does not meet desired standards for around 79 hours per year. Generally speaking, the power that comes from the grid still meets the standards that were set out in the early days of electricity. This was more or less acceptable up until a few years ago when hi-tech equipment with sensitive components was introduced. This equipment requires good quality power if it is to perform correctly.

These irregularities can cause systems to fail, crash or lock up suddenly and without warning, leading to cumulative damage to integrated circuits and electrical systems. Failures lead to down-time, lost production, lost customers - possibly even lost lives where medical devices are concerned - and it can take days for systems to recover.

In manufacturing, if computers and other sensitive electronic equipment that control processing lines are knocked out, production can be halted entirely. In retail, problems can include failure of point-of-sale systems and other back-office systems essential for successful day-to-day business.

Equipment failures such as these inevitably lead to call-outs and service visits, which can come at significant cost. We call this on-going cost the ‘service burden rate’ and it can often be very high for bespoke or critical systems.

To find out whether the financial benefits of cutting the service burden would outweigh the capital expenditure of a power management system, we set out to measure our customers’ service burden rate before and after installing our equipment and compare it with the cost of power management. This enabled us to identify the true ROI of power conditioning equipment.

Our extensive research found that the typical service burden rate for a piece of commercial electronic equipment is in the region of 4 – 8 per cent of its original price. Taking into account the high capital cost of specialist equipment, and this service burden rate becomes a significant factor.

When we compared the results gathered from more than a thousand pieces of installed power conditioning equipment, customers reported a significant fall in service costs of between 43 and 88 per cent. Taking into account the cost of buying the power protection equipment, we found the ROI in these applications varied from 154 per cent to a staggering 1,148 per cent.

For high value electronic equipment, a service burden at four per cent, the lower end of the spectrum, represents a large ongoing cost to a business, meaning that a reduction in costs of 43 to 88 per cent can represent a saving of hundreds of thousands or even millions of pounds.

The research found that the benefits were not just financial. There is a softer side to consider, such as improved customer satisfaction, greater customer loyalty, less downtime and fewer call-outs to manufacturers. For example we found that calls to help desks decreased by an average of 60 per cent, which can represent a significant saving to an OEM in client servicing.

The service burden rate also includes software training, hardware and staffing issues; so, addressing the ‘hidden’ problems caused by power fluctuations frees up time and resources to focus on the business in hand.

ROI in practice
In theory, therefore, the research showed that businesses that install power-conditioning equipment can expect a minimum ROI of around 154 per cent - but what is the reality? One example is James Hall & Co, a major Spar Group wholesaler that installed power quality equipment to protect its electronic point-of-sale equipment and back office systems in shops and petrol forecourts.

At outlets where the power conditioning equipment was tested, staff reported an 80 percent fall in hard disk failures and data corruption, a figure which prompted the company to invest in power conditioning equipment across all 500 of its retail stores.

James Hall & Co currently rents retail systems to its outlets for five years but is confident that an investment of around £130,000 in power conditioning equipment would make it possible to extend the trouble-free life of front and back office systems by 20 per cent and deliver additional rental income of more than £2m.

With pressure on budgets, the power quality market is having to evolve and demonstrate the financial benefit of installing power quality management equipment and associated UPS.

Our recent study proves that there is a strong financial case for investing in this type of equipment as it can demonstrate savings from the measurable areas of service and warranty costs with proven ROI as well as the softer benefits of improved customer satisfaction and retention.

Rob Morris manages the UK based operations of the US power conditioning specialist, Powervar