"Return of Invest" - What is an ERP system worth?
28 June

“Return of Invest” – What is an ERP system worth?

What should an ERP system like SAP Business One cost?? ? This is a question that we hear time and again. The answer is often expected to be a fixed amount or a calculation based on turnover. But no company should be satisfied with this. The value of an ERP system should rather be measured by how the company uses it. While there are companies that use their ERP software as a data repository, others define their entire ERP system in terms of its value. processes about this system. This turns the question "What should an ERP system cost?" into "What do we want to achieve with an ERP system?" and thus "What is it worth to us?

Measured in terms of one or two software licences, the sums that a company invests in a software system seem horrendous. ERP system must invest. Therefore, it is much more important for the decision-makers to answer the question: "What is the benefit? If the desired effect is not achieved, the company has to cope with a noticeable deficit. In order to make the investment calculable, a Return on investment ? ROI for short ? is used.

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ERP systems and external costs

In a return on investment, the expected added value is put in relation to the investment to be made. In the case of a pending Investment in an ERP system The assessment of the service life is particularly important here. This is because the costs, e.g. for licences, are incurred in the short term with ERP software, but the benefits are more noticeable in the long term. It is most difficult to make realistic estimates for the future. That is why ROI is part of the ERP evaluationwhich in turn should be an integral part of or precede every ERP implementation. By precisely defining the initial situation, requirements, demands and goals, unpleasant surprises can be avoided and investment can be calculated in a more targeted manner. To do this, the company has to define itself and its but know the processes accordingly wellto make corresponding statements. However, the right project team in combination with the right provider can work with foresight here and precisely the external costs can be determined quite closely by means of the ROI method.

ERP systems and internal costs

A greater challenge is the determination of the internal costs of an ERP implementation is a challenge. This is because during the project there will be internal work in the company for which employees must be held responsible. It is difficult to determine where and when this work will take place. The subsequent costs will depend on the capacities of the company. The planning of the ERP implementation also plays an important role here. If the relevant employees are included at the same time, the costs can be calculated more easily.

In addition, a return on investment should also take into account the costs that arise after the system has been put into operation and that have to be invested in further development, for example. It is often difficult to divide up these costs and those incurred for apps or interfaces to other programmes.

The measurable benefits of ERP systems

However, the biggest challenge of the return on investment is still the definition of the ultimate measurable benefit or added value. Because this is always made up of two components: On the one hand, the benefit that comes directly after the Introduction of the ERP system by automating tasks, for example. On the other hand, there are also improvements that are far more complicated to capture. These include, for example, the transparency that ERP software creates or reduces sources of error. It is therefore very difficult to establish a concrete measurable value here.

One option is to choose between a ?guaranteed? and a ?possible? value. While the ?guaranteed? value is achieved immediately with the use of the new ERP system, the 'possible' value must often first be realised with additional measures (e.g. through appropriate technical know-how). value must often first be realised with additional measures (e.g. through corresponding technical know-how). Thus, the respective value that flows into the ROI calculation always depends to a certain extent on the internal circumstances in the company.

Also of interest on the topic:

State funding for your ERP projects

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