ERP: is it possible to get high ROI with low TCO in ERP Implementations? – Are they the right values to measure?


When assessing any major investment, there are many factors to consider: –

  • Why are you looking to change?
  • Where is the business going?
  • What are your businesses aches and pains?
  • Do you have visibility across all areas of your business?
  • What is the value to the business?
  • What does value mean to you?

These questions culminate in a blend of what you currently have from a function perspective, what is essential, what is good practice along with the blue-sky list of what you would ideally want!

From all of this, you have vendors throwing all sorts of solutions in to try and meet your needs or selectively ignoring pieces to try and make the commercials look attractive without offering the best of breed solution.

From this, you are expected to understand the ‘value’ across each proposal and the relevant sections within.

How do you recognise the value?

Many ERP ROI calculators look at areas such as man-hours saved, projected increases in sales, projected reduction in stock holding, increased margins…….but it’s all theoretical and unproven, due to all businesses being different and with different reasons or drivers to make the change.

You may well save 3,000 man hours through order entry, accounts closure and system automation, but that does not mean you will want to cut your headcount, so is this real value?

The answer, of course, is yes. Due to being able to scale and grow by utilising this time in more positive areas of the business, but from a straight monetary perspective, this is not often an overhead cutting exercise.

You may well have more control over your stock turnover, but will this reduce your stock holding?

Again, this may not be the case, as you may realise that you are losing sales by not managing the key products effectively and missing sales too often. So, it may actually cause your inventory levels to need increasing to maximise sales. This will, of course, add value but would an ROI calculator truely pick this up? Plus how would you value this?

The simple truth is, aside from lean consultancy, it will always be difficult and often unrealistic to provide a sensible and tangible ROI calculation. No Vendor will ever be able to guarantee an ROI. So where is the value in trying to pin this down?

What is relevant, is looking at a cost vs benefit exercise to see which of the blue-sky elements are worth investing in and when. Adding sales channels once the initial implementation is live may then make sense, such as ecommerce, CPQ or field sales.

The decision should be driven from the benefits to allow the company to add efficiency, reach key goals and scale and compete within a changing marketplace.

real ROI are the benefits to allow the company to add efficiency, reach key goals and scale and compete within a changing marketplace.

Same happens with TCO, it is easy to search for with examples such as the up-front cost for hardware, software and implementation, one should not omit the support and maintenance costs too. Or go further and think of data breach, the costs of repair and business reputation risks but few think in other costs, such as training, process re-engineering, special personnel needs, or even simple things as future upgrade or downtime and outage costs.

Again, even if these are important points to consider, TCO should be measured by the ability of your ERP to evolve, improve and add features.

Generally speaking, a positive technology investment is not a cost-saving process, but a driver for change and improvements. From my experience, this is proven by clients continually looking to add features and take advantage of more of the solution as both their business and our solution evolves.

Need help calculating your TCO or estimating ROI? We can provide you with official figures and results from clients who have implemented NetSuite with us in a similar business, but real value and cost can only be calculated by you. We are happy to talk to you and show you our system, not only in figures, but also walk you through its functionality and possibilities, so you get not only quantitative insights, but qualitative. Get in touch, I will be happy to talk to you.

Comments (4)

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Thanks for finally talking about >ERP: is it possible to get high ROI with low TCO in ERP Implementations?
– Are they the right values to measure? – NoBlue <Loved it!

Thanks for your comment, we always try to offer good content and is good knowing it is appreciated.

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