How to minimize the total cost of ownership of your ERP program
We spoke about the elements that make up the underpinnings of a company's stock price – including future growth potential, economic factors, and market psychology. My son decided to invest a small amount from his piggybank into the AMC movie theater chain – believing the company would significantly increase in value once things start returning to "normal." Little did he know the short squeeze resulting in unprecedented market activity was only a few short weeks away. Now that he has more than quadrupled his investment, he's become an advocate for the stock market and is educating his classmates on investing.
I occasionally correlate life to my passion for state and local government ERP systems. As I spoke with my son about the importance of understanding a company's overall value, I couldn't help but think about the many parallels to the importance of understanding the total cost of ownership (TCO) for an ERP investment. No one could have predicted what happened to Gamestop or, in this case, AMC. In contrast, multiple elements play into an ERP purchasing decision, and they are far more predictable than choosing a stock. Let's first discuss the importance of your ERP's total cost of ownership and then steps to better predict that you'll achieve the lowest total cost of ownership.
Measuring the total cost of ownership and ROI of your government ERP System
There are multiple ERP options and even more methods to select the right solution. Total cost of ownership (TCO) is an essential component of any investment, and – with the pandemic and reduced public sector budgets – the TCO of your ERP solution is more critical than ever. Similar to the concepts applied to assessing a stock's valuation, there are multiple quantifiable and non-quantifiable elements (challenging to estimate) to consider in determining your ERP's total cost of ownership.
ERP quantifiable elements
- SaaS fees
- internal and external implementation costs
- ongoing operational costs
ERP non-quantifiable elements
- costs associated with critical changes (e.g., Federal Regulation impacts)
- continuous innovation costs
- opportunity costs.
Risk. It's another core cost element that is difficult to measure before starting a project. By selecting a less mature, unproven solution, organizations increase their risk of project delays. That can be costly both in impact to employee morale and their ability to focus on other strategic initiatives. Additionally, there is the risk of identifying gaps in the solution even after go-live, further increasing costs.
6 steps to lower the TCO of your ERP Solution
Let's take a look at what I call the STOCKS approach (pun intended) to achieving the lowest TCO:
- Select the ERP system that is right for you.
- Team up with experienced leaders in state and local government.
- Optimize your cloud investment.
- Choose the right vendor, considering innovation and resources.
- Knowledge of internal and external ERP costs is crucial.
- Success is a team effort.
Select the ERP technology that is right for you.
Technology designed for your current needs and factors in potential future needs (e.g., legislation, unions, grants, etc.) will lower your TCO. Without the right technology solution, organizations must heavily customize their software, create costly workarounds, or buy niche solutions. All of this results in a less efficient and more expensive solution.
Team up with experienced leaders in state and local government.
Public sector organizations need domain experts that understand their industry, including the unique challenges, requirements, and legislation. With this knowledge comes reduced risk, more efficient project management, and streamlined processes, decreasing TCO by reducing the probability of costly delays.
Optimize your cloud investment.
Selecting a cloud with managed services means you are optimizing your solution with a purpose-built infrastructure. By selecting one partner for both cloud and software services, you gain end-to-end accountability while lowering your total cost of ownership.
Choose the right vendor, considering innovation and resources.
Investing in a solution that continuously innovates is important, but it's even more important to have the talent and resources in place to support maximum product utilization. Choosing a vendor that supports both aspects, a solution paired with resources to implement client-relevant innovations will measurably increase ROI.
Knowledge of internal and external ERP costs is crucial.
Understanding all aspects of your internal and external ERP costs, including SaaS fees, implementation and ongoing post-operational costs, is essential when taking steps to lower your TCO. The right information at the right time is as important – such as knowing your implementation costs before you pick a solution being key to understanding the total cost of ownership.
Success is a team effort.
From an implementation and continuous improvement perspective - selecting a partner that is committed to your success reduces risk while delivering a better result. With your ERP purchase, you will be joining a community and hence should not be treated as a commodity. Without a committed partner, you will end up spending more to achieve sub-par results.
How CGI Advantage can minimize total cost of ownership
Ultimately, reducing costs enables you to focus your time, effort, and critical dollars on initiatives that impact your constituents. Choosing the right partner with strong domain experience that delivers a purpose-built solution and an optimized cloud leads to the best value and lowest total cost of ownership.
As for my son, while he's not quite as excited about public sector ERP as I am, we've been having fun learning about the stock market together and watching his "portfolio" grow. But neither one of us is retiring yet!
Learn more about how CGI is transforming the user experience in state and local government with CGI Advantage®