Whether you’re moving on from accounting software or addressing the challenges presented by legacy ERP products, the move to a new software often represents a significant investment. But like any investment, the decision is one that is meant to create value—no different than moving to a new facility, buying a fleet of vehicles that deliver better fuel economy, or introducing a new product line.
It Pays to Analyze the Big Picture of Your Investment
Understandably, an investment needs to be justified. A new facility in a higher-taxed jurisdiction could expose you to unnecessary damage to your margins. Higher insurance or maintenance costs could override any fuel savings. Your new product might not work for your customers, and your ERP implementation project could fail to deliver the benefits you need.
Balancing risks, costs, and potential benefits is a major part of any business decision, and to help companies in need of advice, leading analyst firm Forrester Research recently took a different look at measuring the value of ERP. From the report,
“To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed four Acumatica customers with various before states. Some interviewed customers had legacy on-premises ERP solutions that had outlived their usefulness. Some organizations often ran numerous (or dozens in one case) of instances of various ERP solutions. Integration, management, and upgrades were labor-intensive and time-consuming. Other organizations had no ERP solution at all, relying on a mishmash of disparate solutions to run their businesses. Each of the interviewed customers recognized that they needed to overhaul their environment to drive growth and reduce costs.”
In turn, the firm used the interviews to look at the potential financial impact of Acumatica on their organizations
Total Economic Impact: A Broader Look at Return on Investment
While the concept of Return on Investment has long been part of an ERP analysis, and still delivers a direct understanding of the potential value of a project, better metrics and a broader understanding of ERP has led to a broader understanding of ROI.
What is the Total Economic Impact Framework?
This framework, called Total Economic Impact, seeks to identify the cost, benefit, flexibility, and risk factors that affect the investment decision, noting,
“The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders.”
Four Pillars of TEI
This approach accounts for the following:
- Benefits represent the value delivered to the business by the product. The TEI methodology places equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization.
- Costs consider all expenses necessary to deliver the proposed value, or benefits, of the product. The cost category within TEI captures incremental costs over the existing environment for ongoing costs associated with the solution.
- Flexibility represents the strategic value that can be obtained for some future additional investment building on top of the initial investment already made. Having the ability to capture that benefit has a PV that can be estimated.
- Risks measure the uncertainty of benefit and cost estimates given: 1) the likelihood that estimates will meet original projections and 2) the likelihood that estimates will be tracked over time. TEI risk factors are based on “triangular distribution.”
Combining customer interviews, analysis, and interviews with Acumatica stakeholders, Forrester was able to create a composite organization based on characteristics of the interviewed organizations.
The Results: The Combined Experiences of Four Real-Life Customers
The composite organization is representative of the four organizations that Forrester interviewed, and it’s used to present the aggregate financial analysis used in the study.
So how did this composite organization fare? Though the report goes into much greater detail on the path to purchase, the outcomes, and the benefits, Forrester found the composite organization was able to:
- Increase their gross margins for gains of $1.3 million.
- Reallocate 50% of IT time, saving $614,300.
- Increase sales volume by 15%, boosting revenue by $471,700.
- Eliminate legacy licensing costs for savings of $464,300.
- Enhance operational efficiency by 45% for a $309,600 savings in labor costs.
Get the Entire Report and Get to Know TEI
If you’re looking to understand just how much of an impact Acumatica can have on your business, the entire report offers much more detail, exploring every single moving part that goes into the numbers. The Total Economic Impact™ Of Acumatica: Cost Savings And Business Benefits Enabled By Acumatica provides nearly 30 pages of insights and analysis, discussing how Acumatica Cloud ERP equips organizations with the tools they need to succeed in today’s rapidly changing atmosphere.
The Right Solution Starts with the Right Partner: CCS Technology
One of the hardest parts of an ERP decision is not just the solution, but the partner who gets you there. The wrong ERP partner can derail even the best ERP for you, so it pays to work with someone who has been there, done that, and can get you where you need to be.
With centuries of combined experience, the CCS team has led software projects of all sizes and has the skills to deliver for you. Get to know more about our process, our skills, and our team, and when you’re ready to get started, reach out.