One of my recent blogs outlined 10 reasons to implement ERP systems in an economic downturn. One of the items on the top 10 list was that ERP and other enterprise technology can help companies increase productivity. Ever since I posted that entry late last month, many of our current and prospective clients have underscored just how much ERP and CRM sytems can help companies withstand economic pressures.
Although it may seem counter-intuitive to think that companies may invest hundreds of thousands or millions of dollars in new ERP software in times like this, we are finding the idea is not far fetched for many companies. In fact, the economic realities of layoffs and hiring freezes at many of our clients is underscoring their need for world class enterprise systems.
For example, one of our recent business case analyses for a large software selection client about to implement ERP reveals that a $4M investment in a new ERP system will likely (conservatively) yield $11M in savings over the next five years, primarily through decreased headcount and increased inventory turns. Another business case justification in progress shows that a high-growth SMB client (yes, some companies are still growing despite the reports of economic doom and gloom) will be able to use an ERP investment of just under $1M as a surrogate for increasing headcount, resulting in short- and long-term savings of many multiples the initial investment.
On the other hand, we are also working with a company that is getting hammered by the recession because their business is directly correlated to the health of the housing and construction industry. In late 2008, they were planning on selecting and deploying an ERP system. However, due to their drop-off in revenues, they determined that their greatest and most immediate need was a CRM system to help them sell more effectively to stop some of the hemorrhaging of revenues. Because they are looking at Software as a Service (SaaS) CRM options, they may be able to deploy a CRM solution at a lower initial cost with a strong return on investment.
Clearly, the economy is forcing companies to rethink how they invest their money in capital projects such as ERP software. However, the smart and aggressive organizations are finding that ERP and CRM systems can be an effective way to weather the storm and better position themselves for growth in late 2009 and beyond.