It’s essential to quantify the value and expected returns from implementing a new ERP system like NetSuite. After all, any new IT system is a substantial business expense, requiring a compelling business case to gain buy-in from stakeholders.
To justify the costs and prove that the change is financially worthwhile for your company, the process involves translating the benefits of NetSuite into tangible figures so you can calculate the return on investment (ROI).
If you’re considering changing ERP system, and NetSuite is one of your options, here’s how to undertake an informed analysis that will demonstrate the savings you can make.
Understanding the Financial Benefits of NetSuite
When calculating your ROI, one side of the equation focuses on your expected benefits. While some of these are intangible, it’s possible to assign others a specific financial value.
NetSuite doesn’t require large initial investments in infrastructure since it is cloud-based and accessible from anywhere at any time with just a browser and internet access. You will make savings on hardware, server rooms, air conditioning and IT staffing, which are all associated with on-premises systems.
There are also much reduced ongoing maintenance costs since NetSuite benefits from automatic updates and patches. It is also upgraded twice a year, delivering continuous software improvements that cost your business nothing.
NetSuite is a unified business management solution with functionality for finance, accounting, CRM, sales, marketing, HR and operations. Its integrated nature means that your staff will benefit from a reduction in manual effort. NetSuite eliminates time spent on rekeying data or exporting figures from one system and importing them into another. Automation also limits errors. You can calculate the time your staff spend on these manual interventions and also estimate any financial losses you have previously suffered due to errors.
As you grow, NetSuite scales with you. Instead of investing in entirely new systems or costly upgrades to cope with that growth, you can extend the functionality of your NetSuite implementation by adding new modules or SuiteApps as required. This is more cost-effective in the long run.
With instant access to real-time insights and analytics, you can make more timely decisions. This can help you better allocate your resources and respond more quickly to market changes. As they are intangible, these savings are more complex to calculate, though.
For international operations, there is a cost benefit from only needing one system. NetSuite provides multi-language, multi-currency and local tax compliance functionalities that streamline your global operations and eliminate the need to manage and maintain several disparate systems.
Breaking Down the Costs of NetSuite
There are initial costs for implementing and customising your system. Plus, you should account for costs to train your staff and to support your system. These costs will depend on your needs and the solution provider you work with.
The ongoing NetSuite pricing is simpler and more predictable. It runs on a software-as-a-service (SaaS) model, so you pay an annual subscription to access the modules and features you want, for the number of users you have.
To make paying for your NetSuite implementation more manageable, NoBlue offers a financing option that allows companies to pay for their NetSuite implementation and user licenses monthly, rather than annually.
Calculating the ROI of NetSuite
Once you have calculated your likely software costs and estimated the savings to be made and any incremental revenue you will gain, you can calculate the ROI of moving to NetSuite.
Your ROI is the value of your investment minus the costs, expressed as a percentage of the costs:
(Value – costs) / costs x 100%
So, taking a three-year example, if your implementation and training costs are £22,000 and your annual subscriptions are £11,000, your three-year costs will be £55,000.
If you have estimated productivity gains, sales growth and cost savings of £105,000 over three years, then by applying this ROI calculation, your ROI after three years will be 90.9% (£105k value minus £55k costs equals £50k, divided by £55k costs, multiplied by 100 equals 90.9%).
It’s important to be aware that this is a simplified calculation. It doesn’t take account of economic factors that might bring changes in the cost of goods or wages, nor how you might react by amending your own pricing or business models.
You also may prefer to estimate the ROI over a longer timeframe – since you will not outgrow NetSuite and it will continue to serve you even if you grow into a multinational enterprise.
All the same, the ROI calculation is a useful measure to demonstrate the effects of the efficiencies and cost savings that NetSuite brings and how that might look for your business.
If you would like help validating the cost of NetSuite for your company, contact us today and our team of certified consultants can help audit your current system and assess the potential cost savings and revenue improvements you can make by switching to NetSuite.