ERP Software Investments Achieving the Highest ROI For The SMB Market

ERP

Recent market studies conducted with small and medium sized businesses (SMB) with revenues less than $300M in revenues found that the economic environment has focused these companies on cost cutting initiatives rather than customer service and growth initiatives prevalent before the recession. Customer service initiative are still rank high on corporate initiative, but with cost reduction at the very forefront of company agendas, companies are turning to ERP software tools and new ERP implementation initiatives to help reduce operational and corporate costs.

The pressure to cut costs has also impacted the criteria required to justify ERP software investments that are being looked to cut organizational costs. The focus on ERP systems and software initiatives in general had been based on the total cost of ownership both from the ERP vendor side and their customers. Now, given the extreme pressures to minimize capital expenditures, the evaluation process and justification for ERP expenditures is also including a return on investment criteria.

Fortunately for ERP software vendors and enterprise software developers, research shows that ERP software investments do generate returns on investment that meet company financial hurdle requirements. SMBs implementing ERP software solutions can realize a 9-20 percent reduction in inventory levels and operational costs. As companies deploy their ERP systems they are able to automate may processes behind the scenes that help reduce labor and other resource costs savings.

To achieve these favorable results, however, the selection and implementation of ERP systems are critical. The average time for an ERP implementation from integration to deployment takes just under one year to complete. Any variances in this timeline, particularly any delay or unexpected hurdles could dramatically impact the ROI of the software investment. Total software and implementation costs can range from $500 thousand upwards to $1.5 million depending on the size of the company and the complexity of the software implementation. The point is to get the implementation right by making sure you have a detailed plan laid out, the right ERP software solution is selected, and the right resources both external and internal are dedicated to delivering a successful execution.

Companies that achieve the highest ROI on their ERP software investments have a solid gameplan and set their expectations high. Financial objectives and operational objectives expected from the ERP implementation are also well quantified and documented as well with a clear baseline for measuring improvements in operations and cost savings.