Understanding TCO - The ERP Affordability Concept For SMEs
Searching for the ERP prices online is particularly tiresome. Most top vendors want to speak to their prospects first and give them a custom solution and price - which make sense at a point. On the other hand, makes it difficult for SMEs to get an idea of affordability. When searching and the rates raised up are in the millions range, it feels like ERP is inaccessible for these SMEs.
Fortunately, there are possibilities. Here are some of the ways to look for the affordability of your ERP Investment - Singo Africa Limited can help you on this as your consultant
Calculating the total cost of ERP ownership
Before go into some pricing modes, it is best to take a look at the bigger picture. You know that, implementing any new Software like ERP takes time and money. That’s not enough to price up the software itself and think that is the end of your expenditure. To get a true number, you need to evaluate the total cost of ownership (TCO) for your chosen software. This figure is what you will need to budget for and to measure your Returns (ROI) against.
Here are the main factors influencing ERP costs to Small Medium and Enterprises business
Deployment/hosting type (on-premise vs SaaS)
End User subscribers (User Subscription)
Features and modules needed
Here are some description of these variables.
ERP costs by deployment type and number of users
On-premise solutions don’t make a lot of sense for SMEs business. The cost of buying the infrastructure you’d need to host your ERP would be unjustifiable. Smaller businesses usually go for a SaaS deployment. Less initial outlay means you’ll see a faster return. SaaS ERP options are usually based on a per-user basis. For example, Many other ERP’s has plans from $22 per user per month while Odoo costs $8 per user, per module.
ERP costs by features and modules
Small businesses get a heap of benefits from less complex ERP systems. You probably don’t need all the functionality of a $70k system, so why pay for it? Some of the most common features included are:
Customer relationship management (CRM)
Human resources (HR)
Supply chain management
Before you buy a system with unnecessary bells and whistles - or get put-off by frightening prices - take these features into account. Which do you really need? Shortlist the systems offering modular pick-and-mix packages or that have the basics that match your needs.
ERP customization costs
It’s unlikely that you’ll need to spend the extra it takes, for customization. As a small business, you won’t have the complex integration with other enterprise apps and proprietary systems that large organizations have to bear. Look for systems that is seamlessly integrated as you don’t want to part with or that easily replace and improve on existing systems. You’re smaller and more nimble, make the most of this as it gives you a cost saving where the giant organizations get hit hard.
This is a tricky area for small businesses. ERP training can poke holes in your productivity if it’s not done right. While big companies can afford to train user groups and keep a skeleton staff turning the wheels, a small business might have all employees tied up in training sessions. It could be that your vendor offers training or you might want to hire an experienced consultant to get you off the ERP blocks.
To conclude this, It is our humbly advice to all business owners to understand the overall concept of Total Cost of Ownership [TCO] before inventing on technology as a matter of fact, there are costs that happen only once and there are other hidden costs that may happen during the lifetime of your investments.
So, it’s very crucial to sport out all the costs (both one time and hidden costs/recurring costs) at the beginning of your negotiations and/or selections of your ERP solution for your business.