ROI calculations for ERP software tend to be black magic and seem to be used a lot as a sales tool to sell software. Sure, there are a lot of on-line tools or spreadsheets to download to give you a guesstimate of what should be your ROI. What they don’t take into consideration is that most businesses are unique in the way they are setup and function. You can’t just say by spending “X” amount of dollars you are going to save $250,000 annually. Some claim a return of 500%, which may be true under the right conditions.
Things to consider are how lean the business already is. Some have already installed ERP software and want to upgrade to something different or decrease IT spending. That’s a whole different topic. If you change your ERP vendor and find a suitable ERP solution for less should this be considered part of the ROI? Another way to approach is to say that after your software implementation your efficiencies should increase by to 3%-5%. From a sales point of view 5% just doesn’t look as sexy as 400%-500%. When purchasing ERP software everybody should expect some return on their investment keeping in mind realistic goals . A proper calculation is most likely calculated after the implementation when all the facts are in and you know exactly how long the string is.
Interesting perspective, one I certainly haven’t seen much of on other blogs. Do you have any other writings on this subject? If so, I will check back again with you. I will say one thing on the subject, calculating ERP ROI is a lot more complicated then it has been made out to be. I would like to know what some of the variables are and how I can go about choosing an ERP based on proposed ROI. I would be curious to know what the bloggers have to say on the subject.
J. Richard