As part of the enterprise resource planning (ERP) evaluation process, it is essential to understand both the return on investment (ROI) and the total cost of ownership (TCO). A Chicago IT consultant such as PositiveVision can help you assess both and provide you with a complete understanding of your investment in this critical digital transformation technology and the potential return on your investment.

Determining ERP Total Cost of Ownership

The total cost of ownership of an ERP system is more than the purchase price. To calculate the total cost of ownership, you must consider all costs relative to the system when you purchased it, as well as all costs associated with its use over time. Costs associated with its use over time may include updates and upgrades, system maintenance, licensing fees, etc. 

Other Considerations When Evaluating ERP Costs

With on-premises ERP systems, your calculations should include the cost of hardware to run the system as well as possibly salaries or IT-managed services costs to maintain it. If the personnel needed to manage and run the ERP system is shared with other projects, such as overall IT services for your company, you may need to assess and assign a percentage or portion of their time to the TCO of the ERP. 

Cloud-based systems do not require special hardware, but there are other considerations. For both on-prem and cloud systems, consider the capabilities of the ERP. Can it match and meet all of your company’s current needs? What about future planning? If you have big growth plans, ensuring you have an ERP that can scale quickly and easily accommodate more users and new functions is crucial. Consider how well the platform you’re considering integrated with other systems, such as warehouse management systems, distribution software, customer relationship management systems, human resources systems, and more. 

Calculate the ROI

To calculate the ROI of your ERP investment, you’ll need to perform the following calculations: 

1. Quantify benefits: Quantify as many benefits as you can, applying the best estimates or numbers from your current business information. Examples of quantifiable benefits include increased revenues, time saved, money saved, improved CSAT, and more.
2. Estimate costs: Include all the costs you can think of to implement the system, including licensing costs, hardware costs (if any), training time and costs, and more.
3. Subtract costs from benefits: After tallying the value of the benefits, subtract the costs from the total benefits. This figure is the overall gain (a positive number) or loss (a negative number) from the ERP investment.
4. Calculate the ROI: Now subtract the total cost of the ERP implementation from the total expected benefits, then divide that number by the total cost to get a percentage representing the return on investment. 

Need help? Chicago IT consultants PositiveVision can help you evaluate ERP solutions and calculate the ROI of each so you can compare platforms and make sound decisions based on features, advantages, and ROI. 

PositiveVision: Chicago IT Consultants

PositiveVision, a leading IT consulting firm based in Chicago, specializes in providing comprehensive business management software solutions for small to mid-sized manufacturing and distribution companies. Since 2002, we have been dedicated to helping businesses streamline processes, reduce inefficiencies, and grow revenue by leveraging advanced technologies such as SYSPRO ERP, Sage 300 ERP, and various business intelligence applications. Our team of experts offers tailored support and exceptional customer service, ensuring that clients achieve their operational goals and maintain a competitive edge in their industries. Contact us for more information.

Robert Baran

Robert Baran is the founder and President of PositiveVision. He has worked in a variety of positions including system analyst, computer consultant and programmer, project manager, and division manager.