Cloud ERP R.O.I. Simplified

Any residential solar panel salesman knows that one of the most powerful sales pitches is the Return On Investment pitch (R.O.I.)

A simplified R.O.I. calculation in the residential solar panel industry is to divide the total price of installation by the monthly average electric bill. That typically computes to anywhere from 5 to 7 years. “Think about it”, the salesman says, “in 7 years you will be free and clear.”

If you Google ERP (Enterprise Resource Planning) R.O.I. Calculation you will get over 100,000 results. They take into account many variables and plug them into a mathematical formula, which gives you an idea on the R.O.I.

There are obvious costs, such as: the price of the software, implementation, data conversion, employee training.  Then there are secondary costs such as: learning curve, human errors, efficiency, employee enthusiasm, or lack thereof, motivation, and more.

Now, let’s simplify the R.O.I. calculation for a typical midsize company, moving from an in-house to a cloud solution

Current yearly expenses In-House or On Premise

• IT Infrastructure: Maintaining Server hardware, software, updates, backup, anti-virus, anti-malware, plus more. For a mid-size company on the yearly contract, prices can range between $6,000 – $24,000.  Then you still have to add in the price of the hardware and software.
• Yearly software vendor’s maintenance fees: Typically 17 – 25 percent of the retail price of the software. So that equates to anywhere from $2,000 – $20,000.
• Install yearly updates: $3,500 – $10,000
• Average Total: $32,000 per year this does not factor in loss of productivity due to server down, malware attacks, or other.

Current yearly expenses SaaS

• SaaS (Software as a Service) yearly: Starts at $15,000 for an accounting, distribution and CRM (Customer Relations Management) solution.
• Installation, implementation, and training: Starts at $25,000.
• Human factor: Varies from company to company – We will plug in an arbitrary $50,000.

R.O.I Calculation

First Year = $90,000 – $32,000 = $58,000

2nd Year = ($58,000 + $15,000) – $32,000 = $41,000

3rd Year = (41,000 + $15,000) – $32,000 = $24,000

4th Year = ($24,000 +$15,000) – $32,000 = $7,000

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