Things to be considered for the evaluation of ROI
IT Costs — IT costs includes cost of hardware , replacement cost , cost for training in progress , cost for workforce , cost of software and subscription .
Expected Productivity Impacts — If you are planned to improve the productivity & efficiency then you have to utilize the technical support and integration . Don’t forget to estimate the effect of data errors and time needed to correct . You have to consider all small details because each and every small things can cause the impact on ROI .
Visibility Impact — Financial activities are controlled by the management to achieve the desired Return On Investment . Financial control is achieved by better information and trustworthy data . You have to confirm that the new ERP system will definitely provide better , reliable and updated data and also better access to the data . In addition to this having better visibility helps us to control the movement of data and we can understand that how fast the data can move and how fast it reaches to the right people . Right information at right people will definitely steer our organizational growth .
Audit & Compliance impact — A new system should reduce audit compliance & oversight cost because it allows for better control and repeatable process .
Risk Impact — This cost is the hardest to estimate one . Calculating the overall risk is going to be the most difficult . Your company should consider the risk that is currently built into your system . Such as relying on people based processes leakage of revenue , or unsatisfied customers .
So how can we calculate ROI ???
We will go for a simple way . I hope that is more effective rather than we go for complicated and unfamiliar way.
ERP–ROI can be calculated as follows ;
ERP-ROI = ( monetary gain — cost of investment ) / total cost of ownership .
This is one of the method and there are a lot of different methods are available for ROI calculation..
The impacts of time & the processes that consumes money can be checked by estimating the ROI before purchasing and implementing ERP systems . Nowadays the market contains a number of different ERP systems , so selecting the appropriate ERP system is very difficult from the above mentioned points you now have some of the tools and also you can get a clear idea about selecting proper ERP with the help of estimation of ROI .
All benefits from the ERP implementation and ROI can be achieved only after the implementation go live . All objective of ERP implementation is achieved if it is done by experienced hands. A good ROI can only be obtained after 2–3 years .
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