SMBs and ROI in ERP

In the not so distant past, enterprise resource planning applications vendors were misconstrued to have ignored the small to medium business enterprises as a potential market for their ERPs. But now, these companies have known better and have starting to recognize the vast potential for sales from the SMBs.

But despite the ERP vendors development of customized ERP for SMBs as manifested by SAP's A1s, Micrsoft's multitenant CRM and Oracle's JD Edwards Enterprise One, many SMBs are still hesitant to get the last ERP wares for them due to prohibitive costs. Most of the vendors ERPs could reach to six figures in price.

Well, in businesses, the price of any investment does not really matter as long as the company can afford and the return of investment (ROI) is clear. In the case of ERP, since there plenty of vendors and the prices are sky high, the decision makers of the company should evaluate the investment potential by making a comparison of the magnitude and timing of expected gains against the investment cost.

Of course, everybody, and not just the business people, knows that technology has become an indispensable commodity in business. Investment and ROI are always tied together almost as if one cannot exists without the other (ROI could be zero). So if one know how to invest means that one has already calculated the ROI.

In considering the ERP, it is important to know the upfront cost of software as different vendors have different pricing structure. Some ERP vendors offer complete package will all modules and the pricing is based on the number of concurrent users. Some vendors would allow you to specify which modules you want to buy and how many concurrent users can use.

If you have 10 employees, you do not want to buy a prepackaged ERP for 20 concurrent users otherwise your ROI would not be good unless you are sure that your company will grow to more than 20 employers within the next few months. You will want to buy and ERP for a minimal number of concurrent users and then upgrade when need arises. But then again, your situation maybe different so it's really up to you.

The same goes for the concept of modularity. If you buy a prepackaged ERP and your company may only use 35 percent of all the functionalities, then ROI may not be optimized. You should try to scrutinize: Is buying an ERP 40 percent cheaper if I only buy 40 percent of the package's functionalities?

Implementation cost of an ERP refers to the start of implementation to the one going use of the system. A good ERP vendor does not just have smarter sales people but have good technical support as well. Remember that any given period the ERP stops functioning due to problems could mean loss on the business.

ERP is not just a one time process but a continuing one. So it is also important to consider the cost of upgrades. Knowing the goals and objectives of the company as well as proper planning of the ERP implementation will definitely mean good ROI.