Optimizing the Return on Your ERP Investment: Part 2

In our recent blog titled, Optimizing the Return on Your ERP Investment: Part 1, we talked about the importance of measuring return on investment (ROI) and the benefits that can be achieved when done so.

Our team revealed how businesses who chose to pivot by utilizing innovative technologies in 2020 opened the door to further opportunities. It showcased how critical decision-making must include an in-depth analysis of a current ROI and the knowledge of how it can be improved upon.

Today, we will share the key measurements our team considers when helping a business determine its potential ROI of an ERP investment, and reveal the benefits a company can experience when they take advantage of a cloud-based computing platform.

Old Versus the New

Historically, companies have typically calculated improvements in financial efficiency by monitoring receivables, measuring billable hours, and calculating utilization rates and so forth. This is generally paired with their current technology and infrastructure, leading to a total of “hard savings.”

However, businesses that measure their ROI today through emerging technologies calculate ROI through a new methodology that considers enhancements in revenues, reduced risks, and total organizational efficiency. Instead of ROI being confined to a basic cost/ implementation versus income approach, it now considers cost/ implementation versus productivity, efficiency, employee and customer satisfaction, and so on.

When considering key value drivers such as revenue, risk reduction, visibility and efficiency, you can begin to compare it with your business’s current infrastructure and position it against your goals. These goals or benchmarks can include;

  • Increase in revenue (value = 5X cost)
  • Reduction of risk (value = 10X cost)
  • Increased compliance, accuracy and quality
  • Greater focus on higher-value tasks
  • Efficiency and transparency across departments

Once you have determined what is necessary to meet your goals, you can better identify what is required to achieve them.

Benefits Lead to Returns

Implementing new technologies always comes at a cost, as you are choosing to gain access and make use of a service to help your business, no matter the industry, operate at peak efficiency. In the past, hardware and software was based on physical location, meaning that employees had to use specific servers or computers to access the available tools and resources. Cloud-based computing software has changed the way people work, as an employee can use any device from a location of their choice, and still gain access to these tools. As the cloud stores specified information and is protected by layers of security, data can be saved and accessed daily without backup drives and offsite storage.

If we consider the typical costs associated with onsite programs versus cloud-based ones, ROI can already be measured. Cloud computing reduces the need for server hardware, operating systems and software, backups, and regular maintenance. For example, if a cloud-based software is updated, users can access the changes without needing to schedule maintenance to take advantage of the benefits.

Keys to Determining ROI

Regardless of your industry or offerings, cloud-based computing systems such as enterprise resource planning (ERP) can assist in increasing overall efficiency, reducing profit leaks, and providing analytics and information that can directly influence decisions regarding strategy and growth opportunities. For example, a multi-entity company may focus on consolidation and budgeting for growth achieved through CRM Integration, dashboards and statistical accounts. In contrast, a software and SaaS provider may focus on subscription billing, compliance and development through contract and revenue management and reporting. No matter your industry, determining ROI can be boiled down to a streamlined approach.

  • Discovery – Analyze the current situation and quantify its specific impact. Then, analyze the effect that an ideal situation would have. Where do they differ?
  • Summarize the Findings – Highlight areas of improvement that can be addressed through a tool or resource. How would implementing a personalized system impact ROI?
  • View Possible Outcomes – Determine how this new tool or resource would improve day to day operations, either through trying it yourself or working with an advisor to quantify the software change.
  • Propose and Implement – Finalize the ideal solution your business requires based on the findings and benefits you have seen. Based on experience and initial reports, have you established a healthy ROI?

Calculating an accurate ROI can be challenging, especially if you don’t have access to the tools, resources and expertise required to do so successfully. Through utilizing an ERP designed to increase efficiency, measure productivity, and replace outdated processes and procedures, you can effectively measure ROI, month over month and year over year. We understand that investing in an ERP solution is only one element of many to consider in managing your business’s complex operations. Allow our team to help you navigate these complexities and provide you with the information and tools you need to succeed. We will help you find the best solution for your business and guide you in your digital transformation efforts.

Request a free consultation to explore the ROI of an ERP solution for your organization.