Calculating the cost of a new ERP system
You may have an ERP system in place at your business such as MS Dynamics, Sage, Pronto, Netsuite, Accredo or one of the many other incumbent solutions. The reality is that this ERP system may not be serving your business as well as it did when it was first implemented. This poses two courses of action:
Continue to maintain your existing ERP system
Implement a modern ERP system and reap the benefits
Granted that committing to a new ERP system can be costly, but how costly exactly? There are plenty of factors involved in implementing a new ERP system from outright hardware purchases to installation of specific software modules. Most ERP pricing models only look at the initial capital outlay for hardware, software and implementation, but fail to account for the ongoing costs relating to running an ERP system.
As no two businesses are the same, the cost of an ERP system is variable dependent on factors such as the number of staff that you have, the scope of the project, whether customisations are required or even the deployment itself. Plenty of software vendors will allow you to buy specific modules on their platform allowing you to just purchase the core ERP module and saving on cost, however one important factor to note is expandability. Check in with your vendor to understand the costs involved with expanding your ERP system as your business needs change. Ideally you would implement the ERP system within the bounds of the out-of-box application, however unique business processes necessitate customisation which can very quickly drive up the cost of your implementation. Customisations need to be added to the ERP in such a way that the software can still be updated without breaking, otherwise each time the ERP software is updated additional coding must be done to ensure it is compatible.
Here is a list of costs you may face relating to the implementation of a new ERP system:
Hardware and related operating systems:
ERP system licensing (SaaS model or up-front)
Process planning, development and documentation
Staff training
Implementation consultation fees
Now that we have an idea what it would cost to implement a new ERP system, here are some direct benefits:
Leaner inventory, less capital tied up in stock
Increased productivity through workflow enhancements
Reduced wastage/spoilage
Less last minute changes causing wage overtime or air-freight
Increased revenue due to better customer service
Decreased time-to-market for new products, increased margins
There are also some indirect benefits that are a little harder to quantify, but still very relevant:
Increased employee retention and productivity through lower day-to-day frustrations
Better information leading to smarter in-market moves (pricing, specials etc.)
There are many different angles to look at when considering the cost of implementing a new ERP system and creating a ROI statement. Just be sure to go through the process, documenting everything as you go along to ensure that all stakeholders have visibility and can clearly understand what the project will achieve. In engaging with an ERP project consultant, such as Alt Shift, they will simplify this entire process for you. If you would like to understand how implementing a new ERP will benefit your business, get in touch with us.
