While the cost of implementing an ERP can intimidate organizations to take the step forward, the cost of NOT implementing an ERP is what they really should worry about.
Enterprise resource planning (ERP) software has been around for a long time. The term was coined in the 90s but used even around the 70s in mainframe-driven accounting systems. Today, it’s a part of a company’s digital transformation to make processes more efficient. Organizations depend on ERP systems to connect supply chain management processes with financial and accounting workflows, CRM systems, human resources and more.
The costs of maintaining legacy systems or using outdated business processes is often much higher than an ERP implementation. In this article, we’re going to present the possible ways you could waste money when you’re waiting too long to implement ERP.
Consider how much time you could save by keeping everything in one place. A system that could record, track, analyze and report. Instead of dealing with errors and workarounds from outdated processes, which could be time assuming, you could instead be working on projects that generate revenue.
Forrester’s Total Economic Impact study for Microsoft Dynamics 365 found that companies who implemented D365 improved operations efficiency by $39 million and avoided $10.6 million in legacy costs. Organizations avoided legacy license, maintenance, hardware, and systems administration costs by adopting Microsoft Dynamics 365 for Finance and Operations.
Cost of applications and extensions
Organizations most often need several apps and extensions to fulfill the functionality they need in a software. These individual components could add up the cost real fast and might end up costing more than having an all-in-one solution like an ERP. It can also be overwhelming and require more resources to maintain and manage several different software.
Any business can all victim to a cyberattack, but some setups are more vulnerable than others. How much time, effort and money does it take to maintain your current infrastructure, custom code and integrations?
Data entry errors
Not only can the data be entered wrong and cause losses, but it can also be costly and time assuming to manually correct all the mistakes.
The need of additional employees and employee hours increases as the tasks become more tedious and time assuming.
ROI calculation for ERP
The actual cost of not implementing ERP can be calculated by understanding the potential benefits offered by a modern ERP system versus the cost of maintaining a legacy system.
Cost of NOT implementing ERP = ROI – TCO
Return on Investment (ROI)
ROI is a standard measure to evaluate the efficiency of an investment.
ROI = (Value of current ERP – cost of investment) / New ERP cost
Total Cost of Ownership (TCO)
TCO is used to calculate informed financial decisions. Instead of just looking at the purchase price, TCO looks at the complete cost from purchase to implementation, including expected costs during the lifetime of the product, such as service, maintenance, and more.
Possible extra costs to take into account when calculating costs:
- Cost of software
- Cost of infrastructure
- Opportunity costs
- Cost of compliance
- Cost of labor
Why choose Microsoft Dynamics 365 over other modern ERP systems?
Other than its competitive price, ease of operations and higher ROI, Microsoft Dynamics 365 offers scalability. As your business grows and as your daily operations demand additional applications, your business can opt for additional features in the future.
Dynamics 365 is always changing and improving. With its cloud based software it no longer requires you to wait for new versions or features.
Before any company decides that an ERP is too expensive or too complex for their needs, they should consider how not having an ERP will impact their growth potential. The bottom line is that mistakes cost money so it’s crucial to avoid errors by implanting ERP.
Without an ERP, organizations miss out on many opportunities to remove inefficiencies, accelerate processes, increase productivity and do more with less.
Want to learn more about Microsoft Dynamics 365? Contact one of our ERP consultants to get a better understanding how an ERP can help your company with a digital transformation.
More to read about ERP:
- How to Select an ERP Vendor?
- 3 Factors That Will Impact Your ERP Selection
- ERP Security Framework – Protect Your Sensitive Data
- How Much Does an ERP System Cost?
- Industries That Benefit Most from ERP
- Dynamics 365 Benefits – Advantages of Having ERP from Microsoft
- This is Why Your Company Need an ERP Solution Today