Still in doubt whether ERP is really needed by the company?
While the cost of implementing an ERP solution can be estimated, you should be more concerned with the expense of not doing so.
What exactly do we mean when we say that?
Using your outdated ERP software, or running your business on spreadsheets can be dangerous.
What are the hidden costs that can arise due to not implementing an ERP system? Why should ERP systems be a major concern? Find the answer in the article below!
Why should the cost of not installing an ERP solution be included in your ERP ROI calculation?
“What will my Return on Investment be when I deploy an ERP solution?” is a question that many businesses ask.
Calculating ROI can be done in a variety of ways, including:
- Cash flow has improved.
- Retention of employees
- Customer satisfaction is higher.
The problem is that companies too often focus on the costs incurred to use ERP, not the other way around.
‘what is the cost of doing nothing?’
Companies go to the market in search of and adopt a new ERP solution for a variety of reasons:
- Information islands - There are various solutions that aren't connected together. Separate data and information silos pose a risk in this situation. Getting a holistic perspective of operations becomes tough.
- Reporting - Restricted reporting choices or manual reporting The need to replace old systems is frequently cited as a rationale to seek a new ERP solution.
- Support – Businesses that use an older ERP application are concerned about business continuity and maintenance.
- Growth of the company - When high-growth businesses outgrow their current ERP systems, they go to the market for an ERP system that can support and accommodate to their rapid expansion.
- Technology advancements – Wishing to take advantage of technological advances (mobility, cloud and big data analytics are a few examples).
Other important factors to consider while adopting an ERP system include feature requirements, legacy systems, and more.
Things that companies usually do when choosing an ERP
- Companies misjudge the budget requirements and the work necessary to adopt ERP when they first join the market for an ERP solution. As a result, businesses decide to "do nothing."
- Companies who make no decision (do nothing) often regret their decision and re-enter the ERP market shortly after their first decision to do nothing.
Now the question is “How much does it cost to do nothing?”
The answer to this question will depend on your company's current system, growth pattern, geography, and plans. Consider the following scenario:
1. The company has grown at a fast pace, surpassing the current system.
Companies in this situation frequently put off adopting an ERP solution because they are too busy growing their business. This is a waste of money.
As your company grows, your demands for better reporting, faster decision-making, and a more comprehensive perspective of operations will increase.
The longer you wait, the more serious the problem will grow.
The best companies are those that implement ERP before the business reaches the point of despair and begs for a better system.
2. Wanting better support for your ERP solution
Your business will be harmed if your ERP support is poor or limited.
There are two elements to this:
- day-to-day business continuity and
- missing out on the advantages of a well-supported, modern solution.
It's like not having an insurance policy for your business if you don't have a good support procedure and structure in place.
You may not require ERP assistance for months or even years, but if something goes wrong, your entire company could be threatened.
Keep in mind that your ERP solution manages your debtors, customer connections, suppliers, employees, and more - ERP is the backbone of your company.
Even if you don't have a significant system failure that requires emergency support, consider the daily costs of not having an ERP partner you can rely on to help you streamline your operations.
A strong ERP support partner will be able to provide new technology advancements, which will streamline operations and financials while also saving time and money.
3. Moving away from information islands
As a company grows, so does the amount of internal systems it uses. Consider the main accounting system as well as many third-party CRM, manufacturing, estimating, reporting, and other applications.
As your company grows, so will your need for information to make better, faster decisions. These complications are increased by growing product lines, new geographies, and additional personnel. The more your company grows, the more you'll need a single source of truth — an ERP system that consolidates data across all business groups.
4. Better reporting is required for decision-making.
Integrated reporting platforms are available in modern ERP solutions. Integrated KPIs, dashboards, and analytics are only part of the story when it comes to analyzing big data volumes.
Modern reporting and analytics, which include in-memory technologies, provide two significant benefits:
- Sorting through massive data sets to provide real-time reporting
- Pre-written data analytics allow users to write their own reports without needing advanced technical expertise or experience.
If you wait too long to adopt a modern ERP system, you will almost likely be unable to utilize modern reporting platforms for quick decision-making.
5. Take advantage of technological advancements
Technology is progressing at a fast speed - quicker than it has ever been. These improvements are included into modern ERP applications. Consider the following recent ERP developments:
- Big data analytics
- In-memory technology
If you want to advantage from these and other technological advancements, you'll need to act quickly and deploy a modern ERP solution.
6. Missed opportunities
Modern businesses are changing their business practices at an ever-increasing rate. As technology evolves, marketing, sales, reporting, logistics, and production all change.
You risk missing out on new chances if you don't implement modern platforms for change. After all, you don't put in an ERP system solely to take advantage of new technologies.
You install new systems because of the benefits they can provide. Consider the following:
- Cash flow has improved.
- Customer service that is better
- Retention of employees
Although the cost of implementing an ERP solution is predictable, it is NOT the cost of implementing an ERP that you should worry about. The reason is simple.
For a growing business, using basic management technologies can result in performance issues with a significant impact on operations and cashflow. Additionally, poor or limited support options for your outdated technology can seriously harm your business.
A technology system focused on a single ERP platform can help your business overcome misinformation and reporting/forecasting challenges, giving you the tools you need to get a broader view of your operations.
To find out more about how we can help your company take advantage of the SAP Business One ERP, click here and you will receive a series of emails regarding the SAP B1 ERP.