Overhauling Your ERP Could Be Overkill. Consider These Costs First.

What in the world do cars have to do with ERP systems? Nothing, except the possibility of spending way too much on them. If your truck is sliding in the snow, you wouldn’t buy a brand new truck when new tires would do the trick. This would be like replacing an ERP system when it could have simply been updated. While you might have plans to replace or update your ERP system, you should carefully examine your business needs and what options will satisfy those needs without a large scale software and hardware overhaul.

Often, business process owners look to software packages to solve their problems, and they are right to do so. However, you can sometimes overspend if you begin to search for issues to fit the software features instead of finding software solutions that solve your specific problems. That behavior will ultimately increase costs and set you up with a system that is significantly more robust than you need. Instead, think creatively about your problems and examine adjustments that you can make to solve them.

Here are some of the significant costs to a full ERP implementation to consider.

Software Licensing

This is a considerable direct cost of implementing a new system. ERP systems can run into the hundreds of thousands (or even millions) to license depending on the size of your organization and the breadth of the software solution. If you are using an older ERP system, a middleware solution that gives you the ability to capture signatures electronically is a significantly smaller investment that still solves your business need.

Labor Costs to Switching

You will have to pay people to implement, train, and eventually adjust the software to fit your needs. Your current system is like your favorite pair of old shoes. It is set up just the way you are used to and expect. Keep in mind that there is a real labor cost to implementing a new ERP system over a middle ware solution that allows you to capture signatures electronically.

Impact on Productivity

A new ERP system may enhance productivity in the long run, depending on your organization, but there will still be a period of learning and growing pains that create an indirect cost for your business. You will likely see productivity declines for the first six months to a year as your staff gets to know the new system and you begin to use its functions. This indirect cost is often overlooked and ignored but can impact your bottom line.

Bottom Line

A new ERP system may seem to be right for your business, but keep in mind that it is a very costly process and one you shouldn’t enter into without careful consideration. Examine the current third party software packages available to you now, and you will find a creative solution that will save you those costs.

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