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How to keep costs down while replacing your ERP software

By Martin Craze, founder and Managing Director of Applied Business Computers

One of the biggest reasons businesses avoid transitioning to a new ERP (Enterprise Resource Planning) software are the costs involved. The average lifespan of an ERP system falls between 7-10 years – how long has your current software been kicking around?  Considering that 77% of businesses relying on technology to streamline processes, increase operational efficiencies and achieve success, ensuring that your ERP software is kept up-to-date could make a critical difference in your business’ profitability.

Naturally, upgrading to a new ERP solution will require both a financial and time investment as your organisation implements the new software, trains staff and conducts sufficient testing. How can costs be reduced? What steps can your company take to get the best of both worlds – a new, more efficient ERP software solution that suits the present day and future needs of your business and a minimal time and financial investment that will yield a successful implementation? With this in mind, here are five ways you can keep costs down while replacing your ERP software.

Explore Deployment Options Thoroughly

The amount of flexibility with regards to selecting ERP software has increased. Nowadays, many ERP systems can be purchased on a rental agreement via a subscription service. With this type of deployment a minimal integration cost would be quoted in advance and a monthly subscription fee would follow.

Through this option, your system would exist in the cloud meaning your company would not require a dedicated server nor incur operational costs, such as security and back up. However, it is worth remembering that while less expensive overall, opting for this software solution as a method of deployment is only suitable if your business requires little or no levels of software customisation.

Alternatively, open source ERP systems are also available which allows you to access the source code of the software and comes with a license to use and modify it with relative freedom – you do not use the software under a license from an ERP provider. Most open source ERP systems can be downloaded free or at a low cost. You can usually begin using the ERP software whilst making your evaluation and continue when the system is live. This can lead to much better evaluations than trying software in a limited, controlled, environment with a professional sales person stepping you through the evaluation.

Avoid Several Licences

Whether you’re using an on premise ERP system or are working in the cloud, limiting the amount of licenses purchased is essential. ERP licenses are concurrent, so determine the highest number of people who might need to log on at the same time, remember – you don’t require as many licenses as you have staff.  For example, if you have 200 employees who may log onto the software, but fewer than 20 users are likely to be logged on at any one time (either on work premises or the cloud), then you only need 20 licenses.

Searching for limited licenses is also worth considering. An ‘MES only’ (manufacturing execution system) license might permit a user to enter transactions such as PO receiving, or time and quantity completed on a production job, but not updates such as a new sales order.

Purchase Modules in a Timely Fashion

Understanding the specific needs of your company can save your business from overspending when replacing your current ERP software. Most ERP systems such as Pegasus Opera are sold as packages featuring individual modules to suit your requirements. It may be possible to get a more simplified and less expensive ERP solution if that’s all your business will use. Ask yourself – does your business need all of the modules within your package, or merely a select few?

Likewise, you might realise that although you will require a specific, highly customised module in the future, it isn’t a necessity right now. To save on your upgrade expenses, focus on the modules that you do need presently and add the specialised module(s) later.

Reduce Training Costs

Sadly, the training of users is likely to be a substantial cost when replacing an ERP system and, although training cannot be avoided, you don’t necessarily have to use your ERP provider for all the training. One technique some companies use to minimise their costs is to train only a few employees and then and use them to train everyone else. This is not only less expensive, but it can be more efficient. Your trainer employees will learn the system inside and out, giving you the advantage of having several employees who are well-versed in the new system. Also, as they will be teaching their work colleagues, relaying information will become easier and they will always be available for questions and guidance.

Author bio: 

Martin Craze is founder and Managing Director of Applied Business Computers, a UK business management and accounting (ERP) system consultancy. Martin is passionate about helping business owners and directors improve their businesses through the imaginative use of business management (ERP) systems.  Martin is extremely proud of Applied Business’s 100% success at ERP implementations over the past twenty-five years.