SMEs need to ponder some factors, cost included, before adopting ERP solutions.
What’s the solution? Best of Breed ERP. How does it compare to Traditional ERP solutions and where does it offer cost benefits? Here are ERP cost drivers:
It’s no secret that SMEs require enterprise solutions such as ERP in their race for market share. Of course, they need to carefully consider some factors in order to avoid not overstretching their resources.
For many, among the primary roadblocks is the cost of adopting traditional ERP solutions. However, some have found a smart way forward via utilizing best-of-breed (BOB) ERP solutions.
How? We’ll explain the how by exploring the role of BOB solutions across 8 cost drivers.
What Are Best Of Breed (BOB) Solutions?
While it may seem obvious to seek a single solution that incorporates all of the data your firm needs, the fact is that these one-dimensional solutions are not appropriate for every business.
After using traditional ERP solutions for a while, Many businesses discover that the ERP system cannot satisfy the needs of every department.
As a result, people devise workarounds and manual methods, creating a patchwork solution that contradicts the company’s expected cohesive approach. In addition to creating an unproductive environment, it can also have major impacts, such as breaches in data security and compliance.
To overcome these stumbling obstacles, many companies adopt a best-of-breed software solution. These solutions offer a wide range of benefits, many of which help companies avoid wasting their resources and time while scaling faster than ever.
Here, we’ve outlined the benefits of such solutions across several cost drivers.
ERP Cost Drivers
Best-of-breed solutions allow SMEs to save money across a wide range of factors. Let’s go through some of them one by one.
Perhaps the biggest factor driving ERP implementation costs higher is the hardware or the infrastructure cost. This is particularly exorbitant with on-premise ERP solutions and includes buying machinery, setting up storage spaces and servers, and getting sufficient bandwidth.
Whereas traditional ERP solutions might take months to deploy, best-of-breed solutions are often up and operating in a matter of weeks. Best-of-breed systems have fewer deployment prerequisites and are less time-consuming than ERPs since they deal with fewer players and offer more specialized solutions, making them an excellent choice for companies that need results right away.
They also help organizations more successfully manage their resources, increasing efficiency, improving utilization, and fulfilling their clients’ demands more rapidly.
On-premise ERP solutions can be expensive to purchase. Consider all of the infrastructure required to keep the system working. First and foremost, you’ll need a server to house the ERP and its data.
A single server runs between $3,000-$5,000 on average, with some more premium models costing as high as $12,000. Then there are databases and security measures to consider. Some of these costs are so subtle they may sneak up on you if you’re not careful.
After you’ve spent a fortune on initial hardware, don’t forget to plan for backup in case of failure. This means spending more cash on data storage. It’s almost as if you’re purchasing data insurance. If you want to save money on IT, this isn’t the place to do it. A backup solution is required for every on-premises system.
Meanwhile, suppose you’re running a third-party cloud ERP solution. In that event, all expenses are absorbed into the monthly fee, allowing you to control your software costs with greater flexibility without maintaining or buying servers.
3. Human Resources
In a traditional ERP system, the staff will require extra training to operate every system. This might also include managing several platforms – operating systems, servers, and databases. Obviously, people would be far more comfortable handling a single BOB solution that takes care of all tasks.
There’s less need for training when fewer solutions are used. This is true for everyone, including the staff, admins, and even end-users. Existing skills can be used in new projects if the same solution is utilized across the company. This decreases the amount of time needed to complete specific software projects.
Human resources take up a good chunk of the ERP setup budget. Therefore, they’re a vital cost driver to consider when assessing the cost of an ERP solution and how effectively a system will fit with your company’s objectives.
When selecting a traditional ERP system, you have to accept a certain level of compromise. These solutions are not comprehensive or flexible enough to meet your unique demands.
The technology market might be tricky since it’s always evolving. However, with best-of-breed solutions, companies can respond to changes in the business or environment much more swiftly.
It also implies that they may provide features and capabilities that are highly focused while still working in tailored operations. Most successful organizations have utilized technology to distinguish their operations in some manner, and Best of Breed products enable them to do so.
5. Data Integration
As stated before, there’s no single traditional ERP solution that can keep up with your changing needs and goals. That’s why businesses often opt for several ERP systems. That results in multiple separate databases, additional servers, and different operating systems, all of which hinder data integration.
A wiser solution would be to utilize a BOB system that integrates all operations into one, making data integration easier than ever before.
6. Licensing Costs
It’s a well-known fact that using ERP solutions requires companies to pay a licensing fee. Of course, it’s obvious that a single company needs several traditional ERP systems, meaning it has to cover each system’s licensing fee as well.
That’s not the case with best-of-breed ERP and the prime example is one of our own clients (requiring ERP services in 4 different areas).
Now, if the client had chosen the traditional SAP Business One solution for its 4 different sites, it would’ve required 45 different licenses to run functions such as CRM, financing, inventory, etc.
However, they made the smart decision by choosing our best-of-breed ERP package, thereby saving 40% in support & maintenance costs. They also saved 30% on ongoing costs by adopting our cloud-based solution over an on-site system.
Over the course of the software’s seven to ten-year lifespan, a business will require specialist support for multiple systems, which is typically more expensive. Additionally, the longer it takes to fix a problem, the more likely it is that the two suppliers will play a blame game!
The fact that updates can and will come from different sources makes them more problematic. That can result in customization and further integration coding each time there is a system update.
The story is a little different with best-of-breed systems because the updates come from a central source, i.e. the service provider. That way, most of the heavy lifting falls on the vendor, making maintenance easier for the client.
8. Change Management
A long-term benefit of implementing a scalable solution is you can add additional mechanisms as needed and evaluate them on a case-by-case basis. While many assume traditional ERP systems are scalable due to their extensive features, the truth is they’re very often laborious and sluggish.
A best-of-breed software meets both your current and future needs. It has been shown to handle complexity that adds significant costs and delivery issues to the ERP system.
So, there you have it. These are just some of the areas where deploying a BOB solution can make a real impact.
In many instances, a traditional ERP system may prove to be too costly and not flexible enough for a specific company.
Therefore, it’s optimal to obtain an accurate cost estimate for a BOB solution and choose one that fits your standards in line with the factors alluded to above.
Of course, you don’t need to look very far because we at IMTS can provide the best BOB system able to be tailored to your specific requirements and objectives. All you need to do is contact us and we’ll handle everything.