Some of the most frequently asked questions are about the cost of ERP. How much will a new system cost? What will the return on investment be for updating a legacy system to a modern ERP?
Calculating the Actual Cost of ERP
In order to calculate the actual cost of an ERP upgrade, it’s important to understand the total costs of ownership. To do so, you will need to run a cost-benefit analysis.
An Aberdeen Strategy & Research study found that the total cost of ownership ranks third in top ERP selection criteria. Any significant business purchase, whether it’s software or a new warehouse, must be weighed against the expected ROI.
Another study by Forrester shows that companies that implement Acumatica have a 66% ROI with payback in just 16 months.
ERP Upgrade Costs
Obviously, your current legacy system had a cost. That cost has probably depreciated to zero by now, so any new system will be a fresh cost to your company. What are the costs to upgrade?
Cloud or Site-Based?
First, you must make some choices. Will you choose a cloud or site-based system? Each has its pros and cons. Cloud systems are secure, efficient, and generally less costly, but the data resides on external servers. Site-based systems remain under your physical control, an important consideration for some industries.
Cloud ERP systems will have a license fee. This fee may be seat or user-based or usage based. For example, the costs of Acumatica ERP are based on usage, which may be more advantageous than a user-based system. It’s important to estimate as best as you can how many users will be on the system and the potential usage per month. Your reseller can help you estimate and compare various services and licensing fees.
On-site ERP systems require hardware to run the software as well as specific hardware requirements to access the system, so you may need to upgrade everyone’s computers to fully utilize a new on-site ERP. Cloud ERP can run on any internet-connected device, so your current hardware should be sufficient.
After examining the new ERP system, you may have questions about the feasibility of integrating other third-party applications that you’re currently using with the legacy ERP into the new system. Depending on the application, there may be additional custom programming fees to ensure the new system works well with other systems.
Data Migration and Customization
Upgrading from a legacy ERP to a modern ERP requires moving the existing legacy data into the new system. You’ll need an ERP consultant or specialist on hand to help with that. Custom reporting may also need to be imported into the new system or other features programmed specially into the system.
How Much Is Your Legacy System Costing You Now?
Legacy systems are comfortable and familiar. Even their glitches and quirks are familiar. Yet they can be costing you a great deal.
- Lost productivity: how much time does your staff currently spend on workarounds to ensure the legacy system produces the reports, data, and other materials needed?
- Missed opportunities: if your legacy ERP doesn’t integrate with other systems, the data and reports generated may miss information that can lead to insights for new opportunities, competitive advantages, new product development, new marketing campaigns and so on. That translates into many missed opportunities.
- Faster response time: newer ERP systems may be faster and more responsive, yielding information to customer inquiries faster which can improve customer satisfaction.
If you feel that your company has outgrown your current ERP system, this is an excellent time to upgrade. Many manufacturers upgrade to Acumatica ERP thanks to its excellent reputation as a user-friendly, powerful, and cost-effective ERP. To estimate the total economic impact of adding Acumatica ERP to your company, visit our Acumatica page and download the study.