Documentation is a profit center!

by Geoff Hart

Previously published, in a different form, as: Hart, G.J. 2000. Documentation is a PROFIT center. Connections [STC, Montreal Chapter], March:5.

Everyone knows that documentation is a cost center, and that downsizing writers and moving documentation online save money. Unfortunately for “everyone”, it’s trivial to demonstrate that documentation is actually a profit center—and we don’t even have to wrassle with messy stuff like customer satisfaction to prove it.

Let’s start by pricing two versions of an “office” suite that shall remain nameless to satisfy our lawyers: the retail version, which includes a skimpy printed manual, and the “OEM” version available to computer manufacturers as a CD-ROM minus the printed documentation. I obtained costs from from several mail-order companies, then simplified the numbers so you can’t tell who I’m talking about. (Pesky lawyers!) Naturally, “your mileage may vary” as a result.

Back to our exercise: Turns out, the retail version cost as little as $400, versus $200 for the OEM version. Since selling a product for less than its real cost (“dumping”) is illegal in North America, the $200 higher retail cost is due solely to the retail documentation, which thus accounts for 50% of the sticker price. This particular software is popular to the point of ubiquity, so we can assume that more than 1 million copies are in circulation; thus, the printed documentation represents $200 million in revenues. I like to think that most of this impressive sum is spent pampering the technical writers at that company, but the skeptically inclined might instead infer an obscene amount of hidden profit.

We’ve just proven that the documentation is actually worth as much as the software, but what does this mean for the bottom line? Companies set prices to make a profit, so revenues from software sales must at least cover total operating costs; more generally, there’s a markup of (say) 10% for profits to reward hardworking employees (sometimes even writers) and loyal stockholders. To simplify the math, let’s say that total operating costs amount to $100 per unit of software sold, and the software sells for $110 (a 10% profit). Since we’ve proven that documentation accounts for 50% of revenues, documentation must generate $5 of that $10 profit. The inescapable conclusion is that the more you spend on documentation, the greater your profits!

So much for the notion that documentation is a cost center!

I don’t know about you, but next year I’ll be asking for a raise, a bigger office, a more powerful computer, and my own executive assistant. Superficially, it may seem like I’m just increasing costs, but to my newly enlightened readers, it’s obvious that I’m selflessly generating profits for my company. (Despite my irreverence, the logic is solid; a confidential survey on techwr-l revealed that documentation does indeed generate significant profits for some companies. I eagerly await the STC study that proves this.)