Implementing ERP systems can be a sound decision for your business if you are willing to streamline your processes, automate your workflow, and enhance efficiency. Before you choose an ERP vendor, and decide buying ERP, it is essential to understand TCO (Total Cost of Ownership).
Evaluating your TCO can help you optimize your decision to invest in ERP software. It allows you to make a strategic decision and enables you to stick with your budget while buying ERP software.
As stated by Gartner while evaluating TCO, most of the organizations focus on the vendor’s side i.e. their product and solution. But they miss the actual part i.e. organizational decisions which can have an impact on ERP TCO.
In this blog, we will understand the organizational decisions that can impact your ERP TCO. Before we navigate, let’s get a thorough understanding of what ERP TCO is, and why you need to consider it before making an ERP buying decision.
What is ERP TCO?
ERP TCO is a method of measuring the direct and indirect cloud implementation costs including subscription cost, customization level, end-user training fee, upgrades, and integrations.
In the case of on-premises ERP implementation, you need to include maintenance costs as well. However, when you decide on cloud ERP, you do not need to worry about your maintenance part.
As your ERP vendor takes care of it in terms of features or system upgrades over the cloud and the costs are included in your ERP subscription.
At LionOBytes, we provide cloud ERP for small businesses wherein we take care of your system upgrade, and maintenance part over the cloud network.
Why consider ERP TCO before going for ERP
implementation?
Having an exact idea of TCO can help you make a strategic investment decision for your ERP implementation. Here is how:
Budgeting
Every company comes up with a different budget for every aspect of their business. Out of which they decide their ERP costs or implementation budget and the same you do. Here having an idea about the total cost of ownership can help you stay within your budget and ensure considerable investment for ERP implementation.
Vendor Selection
Since you may have different process flow and operational needs. Thus, your ERP feature requirement may vary. Moreover, you also need to consider your budget and ERP pricing as different vendors offer different ERP features and subscription plans.
Comparing the TCO for each ERP offering can also help you make a decision that can fulfill your functional needs as well as suit your budget.
Risk Management
Having an extensive understanding of TCO can also help you manage potential risks in terms of change management resources such as additional user license costs, customization in ERP features, future upgrades, etc.
Things to consider while calculating TCO
TCO can be calculated by summing the value of required key elements. So, let’s get an eye on those elements:
Purchase Cost
The initial element that you need to consider and sum up with the rest elements is to come up with the purchase cost. Now, let’s understand how to come up with purchase costs:
First, you need to determine your hosting need - whether you want an on-premises or cloud-based ERP implementation.
Further, finalizing the number of user licenses you require to support your ongoing workflow is the next element, to sum up.
The last element that you need to determine is choosing the subscription plan out of the available ERP pricing and plans offered by different ERP vendors.
Integration Cost
It could be obvious that you need to connect your ERP system with your existing system such as Outlook, email marketing tool, Finance, eCommerce, etc.,
Depending on your requirements, your integration cost may vary. So, it is important to consider and sum up your integration cost with the purchase cost (as mentioned above).
Upgrade Cost
As your business grows, you come up with system upgrades to support growing process flow and scaling needs. Adding your upgrading cost to the above-mentioned ERP costs such as purchase cost and integration costs can help you reveal your total cost of ownership for the ERP system.
Thus, it is clearly revealed what elements that you need to consider while calculating your TCO for ERP software implementation. All you need to do is evaluate your business needs and consider ERP implementation accordingly.
However, by connecting with a trustworthy ERP implementation vendor, you can reduce your TCO as they can review your core business needs and suggest the best potential solution to reduce your TCO.
Connect with LionOBytes to Reduce Your TCO
LionOBytes can help you effectively evaluate your business needs and suggest the best potential solution addressing your unique operational flow. This in turn can help you cut down your total cost of ownership.
This is how you can minimize your TCO with LionO360 ERP for growing businesses at LionOBytes:
LionO360 ERP is a cloud ERP solution that runs over a browser wherein maintenance, updates, and upgrades are done automatically from the ERP vendor side. This also eliminates the cost of hardware and networking infrastructure and thus reduces your TCO.
The LionO360 ERP system comes with user-side customizable functional capability that minimizes the need for high-end customization and hence, reduces your TCO for ERP system implementation.
With built-in modules such as Finance Management, Custom reports through Saved Searches, AI Chatbots, and Generative AI for email writing, the LionO360 ERP system minimizes your cost in terms of third-party integration. Eventually, it reduces your TCO.
Frequently Asked Questions
What are the objectives of Total Cost of Ownership (TCO)?
The total cost of ownership is calculated to come up with the actual cost or investment of purchasing the product from the vendor irrespective of the basic purchase model.
How is TCO (Total Cost of Ownership) calculated for ERP systems?
TCO (Total Cost of Ownership) is calculated by considering the potential investment in your ERP implementation. Such potential investment is calculated considering the ERP software pricing, integration costs, and future upgrading costs.
To understand your total cost of ownership, we are ready to evaluate your need for cloud ERP software. Connect with us or schedule your demo today.
Why is it important to consider TCO while buying ERP software?
Considering TCO while buying ERP software can help you assess which ERP vendor is offering the best-suited solution at the lowest total cost of ownership.
This can also help you to stick with your determined ERP implementation budget. You can also prevent unexpected expenses and can effectively control financial risks.