Let’s start by making things simple.
Lowest Price = How much you save
Best Value = How much you gain
As you will see “Lowest Price” doesn’t always mean it’s the cheaper option. Value is an investment, which means that something with good value will pay off over time. In this article we will discover how value is much more important than price as it relates to cost, uptime/downtime, and functionality of an ERP system.
Most people view cost as a very one-dimensional thing. The price on the tag is the only cost we truly consider before we purchase. In most cases we can get away with this, as the value factor is fairly indiscernible between brands. Think about buying a can of tomato soup at a grocery store. With 10 brands that all look the same, cost becomes the determining factor. When considering something a bit more complex, say an ERP system that manages your entire business, cost should become a very three-dimensional consideration that is weighed against the true value of the software.
In the ERP world true value is represented in upkeep, reliability, and usage. We will get into reliability and usage later, but for now let’s focus on upkeep. Looking at cost as a three-dimensional factor, we must consider the long-term expenses of running an ERP. While some options may be cheap up front, over time you may end up spending more than other options. Upkeep, which we will define as the yearly cost to run your ERP system, is probably the easiest factor to extrapolate when considering cost. Take a look at the graph below.
When determining the terms of your ERP options, you can fairly easily predict their costs over time and determine the best value for your organization.
When it comes to reliability, time is probably the best determining factor of value. To start, let’s define reliability as uptime, or time spent functioning properly. Though reliability does have costs associated with it that are strictly expense based (i.e. repairs, support, etc.), the main cost to the organization is in downtime.
Reliability is probably the hardest factor to relate to cost or value as there is no way to predict downtime. The best method to predict downtime in an ERP system is to evaluate the complexity and workload of that system. Take a look at the two examples below.
Option A is cheaper and technically gives you everything you want, but because of the complexities of integrating an add-on system and a third party system you can predict that the system will run slower and will probably have more downtime than Option B. It is your job to determine what that downtime is costing your company and how much you would be saving by choosing an option more tailored to your needs.
As you may have guessed, functionality is directly tied to usage when determining value. In this instance let’s define usage as capability over time. How you can use your software and what you can use your software for are obviously important factors when purchasing an ERP system, yet you’d be surprised with how many organizations choose the “good enough” option. The “good enough” option is good for one thing, a stationary company just looking to get by. No growth comes out of the “good enough” option because it sets a bar for your capabilities.
I believe that most companies would define their own value by their capabilities over time, yet they hinder themselves by not opening the door to new possibilities. The possibility to do more and the possibility to get more done are both directly tied to the functionality of your systems.
The old adage, you get what you pay for, is never truer than in this instance. You are not just paying for a better baseline product; you are paying for the potential of that product to improve growth, efficiency, and capabilities. There is no greater value than that.
I understand that there are a lot of options to choose from when considering an ERP system, and hopefully these points will help you consider the true value of each.
In conclusion, let me leave you with an example of what “best value” looks like. At CRI we have well over 20 years of experience working with ERP systems and have seen and heard of just about all of them. We’ve done all of the calculations, run the numbers, and gotten our hands dirty in these systems and only a few have consistently passed our “best value” test.
Over the past 34 years Deltek has been perfecting the value of their ERP systems. Today their Costpoint ERP is not only the leading project accounting software on the market, but is also one of the “best value” pieces of software available today, and here’s why:
Please feel free to contact us to learn more. We’d love to share our knowledge with you and help you realize the “best value” for your organization.