Small to medium-sized businesses often face a myriad of challenges with their ERP solutions.
With companies dealing with increasing costs and the complexities of non-quantifiable issues like user and customer experience, running an on-premise ERP solution – one which is likely dating as we speak – can throw up a host of challenges for businesses.
In this blog, Advania Sales Consultant David Foster offers a modern alternative to traditional ERP platforms for the SMB market – Dynamics 365 Business Central.
The challenges of on-premises ERP solutions
One major issue for businesses with outdated ERP systems is the operational cost associated with on-premises setups. The need for physical space to house servers and other equipment, deliver ongoing maintenance and carry out on-site employee training can make IT expenses soar without a clear end. These high costs often prevent businesses from providing users with the advanced tools they need for optimal functionality and efficiency, resulting in user frustration and an increased expenditure of time and effort.
Additionally, companies struggle with the fragmented nature of legacy ERP systems. With a multitude of systems managing various business aspects, interoperability is minimal, forcing decision-makers to work with incomplete and siloed information. This lack of integration also leads to redundant tasks for users who cannot access consistent data across different systems. Despite these manifold challenges, the burning question for business owners and decision-makers remains: “What will it cost to replace that solution, and how will this financially benefit the business in the long run?”
Determining the value of your ERP solution
Return on investment (ROI) plays a pivotal role in any organisation’s financial decision-making as it offers a precise and quantifiable method to evaluate the effectiveness of an investment. By measuring returns against costs, organisations and individuals can determine the financial feasibility of prospective opportunities. Understanding and quantifying the true ROI of an ERP implementation, however, can be very challenging.
Fortunately, Microsoft recently commissioned a Total Economic Impact study by Forrester Consulting, aimed at providing a comprehensive framework to evaluate the financial impact of deploying an ERP system. The study analysed the benefits, costs, flexibility, and risks associated with implementing Microsoft Dynamics Business Central for an SMB customer with a $15 million turnover. Though the study was undertaken for an American market, the results are worth examining.
How unoptimised ERP negatively impacts operational efficiencies
Before adopting Business Central, the composite organisation referred to in the study used a custom-built suite of on-premises ERP solutions that led to overlapping functionalities, IT complications, and higher expenses. Customisation and integrating legacy ERP systems required substantial internal or third-party effort, which added to the operational budget and time required to be invested in the product.
Scalability was another issue; as organisations grow, their ERP systems need to scale accordingly, but the existing disparate and largely on-premises ERP deployments led to increased costs and higher personnel requirements for maintenance. These factors all led to an increase in technical debt.
Additionally, decision-makers often had to rely on incomplete and outdated information due to inconsistent interoperability and information sharing between various ERP tools. This resulted in suboptimal decision-making, particularly in supply-chain forecasting and budgeting.
Organisations sought solutions that could scale cost-effectively, be deployable in the cloud, provide real-time visibility into key information, and reduce the burden of manual reconciliation efforts on finance and operations staff.
Return on investment of Dynamics 365 Business Central
The study found several key benefits to implementing Business Central. Organisations using Business Central reported up to an 18% improvement in productivity for finance and operations staff. There were significant reductions in costs related to maintaining disparate on-premises solutions, including savings on third-party reporting and consulting fees.
Cloud deployment reduced complexity and costs compared to traditional ERP systems, and enhanced data visibility allowed better decision-making, leading to additional revenue opportunities that were not possible with legacy systems.
Over three years, the study found that the ROI for implementing Business Central was a significant 172%, with a Net Present Value (NPV) of $306,000.
Organisations have seen significant staff productivity improvements, with finance staff saving 15 hours per month on finance reporting and 20 hours per month on VAT reporting. Operations staff saved 30% of their time through automation, and the time to generate sales quotes was reduced by 75%.
With Business Central’s functionality, organisations could avoid hiring additional specialised staff for finance and operations. Additionally, they were able to cut out the costs of previous solutions and support, consolidating ERP functions on Business Central and reducing deployment costs to about 25% of what they were previously. Retiring legacy servers also meant that hardware and maintenance expenses could be avoided.
By removing redundant vendor costs, license fees and infrastructure costs, and by handling upgrades and platform implementations internally, the business cut 60% of its external consulting fees and thousands of dollars annually.
How Dynamics 365 Business Central transforms unquantified challenges into opportunities
Beyond these quantifiable benefits, new market opportunities emerged. Companies have seen a $2 million revenue increase by connecting additional sales channels via Dynamics 365 Business Central, with the existing customer base doubling through automation and horizontal visibility across customers. With improved decision-making, the organisation can make better material utilisation, fewer stockouts, and higher profitability for production planning.
The introduction of modern technology and optimal tools has improved employee experience by enhancing the quality of life for finance and operations personnel and answering a critical employee need that the business had to address. By onboarding a solution that integrated seamlessly with other Microsoft products, it added greater value to the entire business infrastructure, resulting in happier and more engaged personnel.
The study also noted the flexibility of Business Central to scale users and capabilities according to business demands during growth periods. Typical migration took about four months, often staged in phases with varying levels of partner support that ranged from initial Microsoft partner guidance to internally led efforts.
Your ERP potential unlocked with Dynamics 365 Business Central
Understanding the true ROI of an ERP implementation is never simple. Nonetheless, this shouldn’t discourage business leaders and decision-makers from analysing the underlying numbers and potential costs and benefits of implementing a new system.
Many customers have increased efficiency and productivity across their organisations, and even if now is not the right time to undertake an ERP implementation, an internal analysis allows businesses to understand where gaps and challenges reside. When these challenges are the direct cause of failings in your IT system, a new ERP solution should always be considered as an option.
Our Business Applications and Dynamics 365 experts are waiting to hear how Advania can help you achieve your ERP goals today.
