With cost management being such an important factor for any small-to-medium-sized business, it’s vital for them to make sure they are aware of all costs related to their cloud ERP system. If they don’t, costs can quickly begin to add up. Luckily, you can get it under control in a few simple steps. . .
The typical components of most cloud ERP options today include licensing, support, and upgrades. However, a multitude of options arise when it comes to choosing an ERP system from a vendor. Any and all of the following primary aspects of an ERP system can vary from vendor to vendor:
- Licensing
- Training
- Upgrades
- Support
- Ongoing Maintenance and Services
- Data Migration and Implementation
That being said, it can be difficult to find the ideal and most cost-effective vendor/ERP system for your company.
One major thing that helps achieve the lowest total cost of ownership (TCO) is to ask vendors which fees for the above six aspects of their ERP system(s) are going to be recurring and which are going to be non-recurring. In other words, which will be included in a subscription and which will be paid separately.
Typically the more that is offered by a vendor in a recurring subscription will yield the most stable investment and often provides the lowest TCO.
To make a well-educated decision about which ERP solution is right for you, here are four questions to 
- Do you trust the provider and do they seem reliable? It’s never a bad idea to get references seeing that this is an important investment. If the vendor cannot provide a few references, they may not be very reputable.
- What is the length of each vendor’s subscription terms? The longer subscriptions extend the predictability of the expenditures and lower cost.
- Which of the six aspects above are included (recurring)?
- Is the vendor providing you with a less powerful version? Vendors often offer a less powerful version of the on-premises offering that a company has. This offering will downsize your cloud power. The reasoning behind this is to streamline and allow for a solution to be repeatable for new cloud offers.
These four questions can serve as guidelines for companies to choose the cloud ERP solution with the lowest TCO. There are some other things that a company should do in order to ensure the lowest TCO possible:
- Know what you truly need in ERP software. Do you need a fully integrated ERP software or best-of-breed software? Cloud ERP systems with fully integrated ERP software often have significantly lower TCO as opposed to best-of-breed solutions.
- Invest in ERP software for the long-term, not the short. The idea behind selecting an ERP is to vastly improve and enhance your business. The investment you are making should be thought of as one that is long term. With that being said, the solution that is cheapest up front may not be the one that yields the lowest TCO long-term. If an offer from a vendor appears to be significantly lower than that of other providers, it should signal a red flag.
- Minimize the work your people have to do internally. This will help to minimize future errors.
- Make sure to be attentive and persistent when implementing new ERP software. Oftentimes additional costs can come about during the implementation process that are unforeseen. This can hinder or even worse halt the implementation process due to lack of funds. Part of the provider’s responsibility is to help you achieve a better way of doing business and accomplish primary goals. This cannot be done without a well-documented and understood implementation process.
Overall it is important to do your research when choosing an ERP provider. In order to get the best results with the lowest TCO, ask questions, invest wisely, consider hidden costs, and choose a vendor/ERP that is right for your company.
Topics: cloud ERP