Most organisations don’t buy an ERP system for fun. They expect benefits for this, and the benefit of course must outweigh the costs. So they start with making a cost benefit analysis. Unfortunately, this is more difficult than it sounds. But it does pay off.


Capturing all the costs can be daunting. Besides the obvious costs, such as infrastructure, training and licenses, a lot more costs are hidden. But with some work and some guesstimating, a fairly complete picture can arise. Costs can include:

  • Procurement costs
  • Training of key- and end users
  • Hardware and infrastructure costs
  • License costs
  • Data migration costs
  • Testing costs
  • Documenting, both business processes and technical  details
  • Updates and upgrades


The benefits seem a lot less easy to express in money. We can include such things as:

  • Better decision making through better data
  • More efficient business processes
  • More reliable processes and information
  • Less work for correcting errors
  • Less manual work

These are all less tangible. But they can usually with a bit of effort be turned into hard euro’s. For example, it could be that your finance people are spending three days creating financial reports at each month end. In the new system, this will take half a day. At an internal rate of 40 euros an hour, that’s an 800 euro benefit. Same goes for mistakes. Perhaps you can estimate that your current manual order entry system leads to two late deliveries per month. And per 5 late deliveries, you lose one customer. And a customer leads to 5,000 euro net profits per customer. If you can halve the number of late deliveries through a new system, that  means that you prevent at least two customers per year from leaving. That’s a 10,000 euro’s benefit per year.


Making this kind of cost benefit analysis before you start the procurement of a new system is a very valuable exercise. Not only does it validate your decision to buy the system in the first place, but it also makes communicating your goals with the ERP vendor a lot easier.