When it comes time to make a major purchase, I think we all are concerned about making sure that we get the best deal possible. Nobody wants to make a major purchase and find out later you could have gotten a better deal or there was a better quality brand. Whether we call it this or not, we are all looking for a certain “ROI” or Return on Investment for every major purchase that we make.
Take a house for example. You do all the market research and location research to find a home in the area that you want to live and within your price range. Once you have established these initial factors, you begin looking at homes. You find one, put it under contract and have inspections and an appraisal done. If the inspection comes back with several maintenance issues, then you may want to look at negotiating repairs or lowering the price of the home. If the appraisal comes back with a number that is less than your contract price, then you have to consider how long it will be before you can make your money back on the home.
There are many questions to answer in that kind of scenario. First, what is the current housing market like? Is it increasing, declining, or stable? Secondly, are there other home sales that support the price of the house you are trying to purchase, or is there something about this home and its location that may not be considered on the appraisal? Thirdly, how long do you plan to live in the house? Will you be there 2-3 years, is this a starter home, or is this your retirement home? All these questions determine your flexibility on the ROI of your purchase.
Many of the same questions apply when you are trying to determine whether or not to upgrade or replace your current ERP Software. A recent Nucleus Research analysis of ERP software revealed that ERP applications have an average ROI of $7.23 for every dollar spent. If you actually assign a dollar figure to that number, the argument for new or upgraded ERP software becomes even more compelling. If you were to commit to spending $120,000 on ERP software, and you apply the ROI of $7.23 per dollar spent, your ROI is approximately $868,000.
It is difficult to ignore a six digit ROI. The keys to successful ERP purchases and implementations can be found in the planning and purchase phase. These are critical times to ensure that you have the right ingredients. From recognizing quality demos, choosing the right consultant, to naming your ERP implementation project, there are steps that can be taken in order to implement ERP Software without experiencing an “epic fail”.
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