Is ERP an Expense or an Investment?

June 3, 2014 Dave Cavan

Having been in the IT industry long enough to remember when the idea of "ERP" first started making the rounds, I have watched with some fascination the struggle that organizations go through to decide how to justify an enterprise solution strategy.  At the same time as a business owner or manager decides they must acquire the latest automated machinery with the  belief that it will improve the business; often a decision about enterprise software is  put on the back burner because the cost seems higher than anyone knows how to explain in the context of the overall business. Although it is obvious that I'm biased on this discussion, there is often a compelling case for understanding  your business inputs, processes and outcomes more fully that is ignored, and opportunities to make the business function better are passed up. 

Perhaps we as ERP providers spend too much time describing the details of our solutions when we should be helping our prospective clients step back to see the key changes that will improve customer service and profits. If a decision-maker can see these improvements, the decisions become easier to make, and the commitments to assign resources to implement solutions become clearer and more specific.  Once decision-makers understand the solution, they can properly recognize the people in the organization they can depend on to make the business project happen.  

That is the context for considering any enterprise software solution in the light of an investment, as opposed to an expense line-item.  I have seen ERP firmly embraced as a set of tools to grow the business, and when this occurs business process improvements are often discovered along the way to reduce the time to get a positive return on investment.  

We had an example in the recent past of a client who discovered a business process that reduced waste of raw materials and paid for the entire system in less than a year due to that single process change.  If they hadn't proceeded with the system this discovery would likely not have been made because the available tools would not have been there to ask the right questions as part of the systems investment. 

There is no doubt an organizational expense to proceeding with ERP (or Big Data, or CRM, or other complex technology) needs to be discussed as part of the decision-making process.  This conversation should also include the upside, and the duration of the system investment.  

These are long-term decisions with long-term payback potential, but if the decision is questioned in terms of a short-term expense consideration only,  an organization can miss the opportunity to leverage these 21st century tools to grow to the next level (and to quote Buzz Infinity, and beyond).  

OK, perhaps a shorter term than Buzz’s proposal should be considered, but it can be a strategic advantage and should be approached from that perspective.


About the Author

Dave Cavan

Dave Cavan, Manager, Business Development, SYSPRO Canada. Dave’s background is education, accounting and information technology. He joined SYSPRO in 2012 bringing 30 years of experience with large enterprise solutions, including ERP solutions for a broad range of clients, helping to sell and implement some of the largest public sector ERP and human services projects. Dave’s expertise and experience enable him to effectively identify business challenges and organizational impediments to moving

Follow on Twitter
Previous Article
Managing Technical Debt - Part 1
Managing Technical Debt - Part 1

Technical debt is a term coined by Ward Cunningham in 1992 to describe the software engineering phenomena o...

Next Article
ERP Systems Can Help Small Companies, Too
ERP Systems Can Help Small Companies, Too

People often assume that ERP systems are only for larger companies. But, consider this - if you run a small...