You’ve recently implemented a new enterprise resource planning (ERP) software and now it’s time to calculate return on investment (ROI) on the solution. So, how exactly do you measure ROI on a new ERP solution? Here are the top three metrics used to measure ROI for an ERP software system.
At The Resource Group, we work with many customers in different industries who purchase a new ERP system and have a challenge measuring ROI. Oftentimes, these organizations buy a new truck or investment in a piece of equipment for their manufacturing floor. It's fairly easy for them to calculate the ROI for those investments. Measuring a software investment is a little bit more challenging. When calculating ROI, we like to break the investment metrics into tangible versus intangible. There are several metrics out there, but I’ve narrowed it down to the top 3 that I think are the most important for ERP software.
So let's start with a tangible one, which is reducing the cost of your IT expenditure. With the shift to the cloud, we’re finding that many organizations are able to reduce internal IT costs because cloud-based ERP systems require very little, if any, IT maintenance. In addition, you have a reduction in the cost of software licensing, hardware infrastructure investment, as well as ongoing maintenance and upgrades. So the shift to cloud ERP is perhaps the most impactful on reducing IT costs.
The second tangible metric is increased productivity. I really like increased productivity because it's one of the most impactful measures that is tangible and really can be categorized on how to save your employees' time. An example of the most common increased productivity metric that we do at The Resource Group is to automate the integration of data from other systems into your ERP.
The third metric, which is classified as an intangible benefit, is improved visibility. Although it’s difficult to measure, I believe improved visibility is perhaps the most impactful metric. It's really about the value of making better business decisions quickly. When we work with clients to configure a new ERP system we do so with the end reporting in mind. For example, we’re able to get your data to reside instantaneously on a dashboard. Also, we really want to get that information in the hands of employees and key decision makers to enable them to make impactful decisions.