When you’re calculating the return on your ERP investment, it’s not just about the money
“Show me the money!” Tom Cruise shouted over and over in Jerry Maguire. And when you’re a slick sports agent securing the best deal possible for your client, it really is all about the dollar signs.
As budgets get tighter, business owners and CFOs need good reasons to approve large budget items. An ERP system is expensive, and if the implementation of one is being considered, one of the first questions any executive is going to ask is: “what’s the ROI?”However when it comes to the return on investment (ROI) for your enterprise resource planning (ERP) system, it’s important to base the calculation not just on the dollar gains, but on the intangible benefits as well.
From a purely monetary standpoint, it’s not usually too difficult to figure out. The ROI can usually be calculated simply by dividing the monetary gain minus the cost of the investment by the total cost of ownership (TCO). And there are many resources available online to guide detailed calculations. But if you really want to build a strong business case for investing in an ERP system, an ROI analysis should be coupled with another around intangible benefits and key performance indicators (KPIs).
From the outset it's important to consider the business outcomes that can be achieved on top of resolving the pain or constraint that led your business to evaluate implementing an ERP system. These intangible benefits are also important for creating an overall business case and in many instances, they'll form a base line objective for the project.
To help you with this, we’ve developed a new eBook: The ROI on your ERP: Don’t (just) show me the money. It looks at both the tangible, quantitative ROI measures, as well as those that are viewed as intangible and often overlooked when it comes to calculating ROI.
The guide looks at 3 key areas:
- What’s driving the decision – and what’s the potential?
The decision to implement an ERP system is usually driven by constraints or pain points that they're suffering, and this is understandable. However, to truly realise the ROI, the greater potential of the ERP project should be considered at the outset and made part of the overall outcomes that are to be delivered.
- The quantifiable, the tangible and the intangible
A detailed look at all the measurable benefits, as well as those that are tougher to measure such as the time factor and maximisation of profit and cash flow.
- Applying ROI calculations to the real world
With over 25 years’ deep ERP experience and hundreds of successful implementations under our belt, we’ve seen first-hand how an ERP’s ROI is not just about dollar gains. This is a look at some real-life examples.
Although common sense dictates that there must be a monetary return calculated before a project is funded, it's just as important to consider the less tangible benefits as part of the overall ROI. While the intangibles are more difficult to measure, they still need to be taken into account, because the true ROI on your ERP rests on them just as much as they do on ’showing the money’.