As your business grows, its operational processes become more complex. Deploying a Cloud Based ERP software solution can support business growth by providing a single, centralized information platform for efficient and cost-effective business management. But what are the ERP “Investment Gotchas” and costs involved in a new ERP system? What benefits and returns on investment (ROI) does an ERP platform bring to your operation? This article provides insightful answers to these questions and what to be aware of when investing in such a system.
Understanding ERP Cost
It isn’t easy to put a standard price on a new ERP platform because businesses have unique needs and requirements. Allocating the budget for a new ERP platform requires a thorough understanding of your unique business needs.
Historically, one of the factors that determines your ERP cost is the number of users. You can expect to spend an average of $9,000 per user when deploying an ERP software suite. This figure spikes as the number of users increases.
A more cost-effective pricing model is a Cloud solution based on consumption. Consumption-based pricing is based on the computing resources you use, not on the number of users permitted into the system. In this scenario, you’re not required to pay for additional licenses, even when you add casual users, suppliers, and customers to the mix.
Per user pricing limits growth, but if you’re charged for resource usage, you can provide all employees with real-time data. Additionally, having the ability to grow-shrink resource levels and data storage when you need is a huge cost-saving benefit.
Some of the key areas you must consider when budgeting for an enterprise resource planning system include:
- ERP licensing costs plus customization options (if need be)
- Data conversion, testing and training.
- Go-Live Support and post-implementation consultancy support.
Understanding the Benefits of Implementing an ERP System
What capabilities does a Cloud based ERP solution provide that your business currently doesn’t have?
- Improved business reporting with real-time information
- Enhanced and cost-effective inventory management
- Data and cloud security
- Easy compliance with industry regulations and policies
- Improved cash flow
- Enhanced productivity
- Effective supply chain management
- Boosted visibility and scalability.
- Cost-saving opportunities
- Organized business workflows
- Accurate forecasting
- Better team collaboration
Understanding the ROI of ERP Deployment
- Tangible benefits – Also known as “hard benefits”, these quantifiable benefits include metrics, such as revenue growth, improved equipment management, decreased material cost, reduced overhead, etc.
- Intangible benefits – It’s almost impossible to quantify intangible benefits, but that doesn’t mean they are less impactful. Intangible benefits include metrics like boosted staff morale, accurate inventory reporting, centralized information, legal and regulatory compliance, enhanced customer service, etc.
Calculating ERP ROI
Typically, ERP ROI is calculated by adding the expected returns and dividing the results by the Total Cost of Ownership (TCO) of ERP implementation. The resulting amount or quotient is the ROI of your ERP system. That said, the higher the quotient, the better the ERP platform is for your company.
ERP ROI = ERP returns / ERP Cost
Organizational growth brings complexities to various business processes and workflows. Without an ERP system, crucial business information is decentralized, causing confusion, higher business management costs, poor collaboration, and a lack of proper customer service. However, implementing an ERP system means you have a centralized platform where all your business data is stored, which offers real-time business reporting, cost-effective management, and streamlined business processes.
Are you thinking of investing in or upgrading to an ERP system? Download a free IT Audit. An IT audit focuses on an organization’s information systems, operations, and practices to determine whether the IT system is meeting the organization’s goals.
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Partner with MaxQ Technologies, a reliable and knowledgeable software reseller, and independent software vendor with over three decades in providing business solutions for maximum performance. Contact us today, and we’ll leverage our industry expertise to help you implement an ERP system that will take your operation to the next level.
