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- IT Costs:
This is often the most measurable factor involved. Hardware costs, replacement costs, personnel costs, ongoing
- Desired Productivity Impacts:
You can – and should – estimate the impact of better system support or better integration, if there are specific areas you are looking to improve team productivity and effectiveness. The impact of data errors - and the time required to correct these in un-integrated systems is a very common ROI component to consider.
- Visibility Impacts:
Financial control is gained through better information and more reliable data. If it isn’t possible to get reliable data now, you can often expect your new ERP system to provide better data and better access to that data. This impacts financial visibility, frequently in a significant way. Additionally, having better visibility impacts how fast data moves through your organization, including how fast it gets to the right people, which is a measurable value.
- Audit and Compliance Impacts:
Better controls and repeatable processes reduce audit and oversight costs, which will increase your ROI. Whether GAAP, ISO, or whatever industry requirements you have, compliance requirements are often better served with a new system. You can save money through lower oversight and review costs, and you can also make more money by better demonstrating quality controls that make a favorable impression on your customers.
- Risk Impact:
This very real cost is often the hardest to estimate. You’ll want to carefully consider how much risk is built into your current system. There are risks to relying on people-based processes where you are highly dependent on specific people or specific skills sets for some company functions. There’s the risk of revenue leakage or unhappy customers, since poor administration execution has an impact on customer satisfaction. And, never underestimate the risk of an older system crashing, especially if you are running an unsupported version.
Your business can be impacted by an ERP system implementation quite broadly, and sometimes in unexpected ways. Not all of the impacts are easily measured, but an ROI analysis can be a helpful starting point. You will, of course, need to apply your best judgment based on your specific situation.
Bob Scarborough is the President of Tensoft, Inc. and has more than 20 years of experience in business software design, implementation and support. Before co-founding Tensoft, Bob was the Vice President for West Coast Operations of Deltek, Inc. Prior to that, Bob was the