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Understanding Total Cost of Ownership for Manufacturing Sales Software

Posted by Leo Boon Yeow on Apr 1, 2021 2:15:00 PM
Leo Boon Yeow
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In the manufacturing industry, “digital sales” does not end with CRM software. It does not start with it either. Your manufacturing sales process is incredibly complex, and CRM is sitting somewhere in the middle. It is essential, but it is not the only tool you need.

Here is a simplified breakdown to help you understand the customer journey.

Your customer:

  1. Needs products
  2. Does research online
  3. Finds your business
  4. Asks for a quote
  5. Receives the quote
  6. Specifies more requirements
  7. Negotiates terms
  8. Agrees with the offer
  9. Purchases the solutions
  10. Receives the solution
  11. Needs aftersales support

 

Your sales process—be it your direct sales team, distributors, or an online shop—needs to meet your customers at each stage of their journey. The concept is simple enough, but the reality is this: You need digital technologies for this.


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You need software for managing quotes (CPQ), software for managing customer data and communications (CRM), and software to open new buying channels or enable self-serve buying (E-Commerce).

Manufacturers tend to find the gaps in the sales process and attempt to plug them using individual digital sales solutions. This plug-gap approach often causes more problems than it solves due to poor integration that results in asynchronous data.

The costs of this approach can rise quickly, especially with out-of-box solutions by leading enterprise technology providers that need customization later.

Getting them to fit your business can be frustrating at best and futile at worst.

 

 

Total-cost-of-ownership (TCO) of digitalizing sales

Below, we charted out a list of costs that can come with an off-the-shelf solution. However, there may be other hidden costs that occur along the way.

  1. Selecting the vendor

    • Getting enterprise-grade solutions is an exercise that costs more than you would think. Businesses need to spend time (which equates to money) to identify, evaluate, analyze, and create contracts.

  1. Buying the solution from vendor

    • Once the vendor has been selected and the contract signed, manufacturers need to fork out upfront costs to purchase the software and any user licenses. Additional charges may apply as well.

  2. Buying and running additional hardware

    • You may need to bolster your existing IT infrastructure with additional on-prem hardware to support the software and its users. You will also need to include running costs (power, cooling, security, maintenance, management, etc.).

  3. Adding IT resources

    • If your solutions are on-premise or using a hybrid cloud approach, you would also need to get additional IT resources to set up and support the new software.

  4. Implementing the solution

    • Getting off-the-shelf means high implementation costs. Getting it ready for use requires integration (with your ERP and the other solutions) configuration, testing, backups, etc.

  5. Performing data migration

    • If you upgrade your infrastructure, you will need time and resources to move your existing data to the new system. This step also includes high risks of budget overruns.

  6. Licensing for users

    • Licensing is a cost that can get incredibly complex. Besides user licenses, expect to set aside a budget for remote access licenses, integration licenses, on-premise licenses, and more.

  7. Training new users

    • One of the most significant barriers to successful digital adoption is the users. Training is essential to ensure users (new or existing), support, and administration are fully capable of using your new software.
  8. Customizing to fit

    • Getting off-the-shelf software to fit your business requires deep customization. You need to hire developers to create custom code during implementation and after every software upgrade.
  9. Supporting the software

    • Running the software includes ongoing costs from maintenance and support. You may also incur charges from accommodating security or bug-fix patches and upgrades.

  10. Planning for downtime and recovery

    • When the software is not available, your business incurs costs. To lower the risk of downtime, you would need to invest in disaster recovery and availability measures.

  11. Upgrading the software

    • Off-the-shelf software needs frequent upgrades. It is a resource-intensive exercise and can even cause downtime. If your software is customized, the costs could add up exponentially.
  12. Moving to the cloud

    • If your software is not cloud-based, there is a very high chance that you will need to retire it for new software or when moving to cloud-based solutions. Costs can come from data export or data storage in the old system.

 

Conclusion:

Many of the costs listed above are unavoidable in any IT initiative. In the case of manufacturing sales, it also means that these costs are multiplied by three or more—because you need multiple solutions to digitalize the process completely. This causes your journey towards a more effective and efficient manufacturing sales process, to become more costly than it needs to be.

The most obvious question then becomes this: Do you really need multiple solutions to digitalize the sales process?

The answer to this problem lies in looking at things from a customer-centric perspective, and the adoption of Industry 4.0 technology. In our next post “Minimize the total-cost-of-ownership of digital manufacturing sales,” we share some insights on how you can harmonize the customer journey, eliminate unnecessary software, and ultimately reduce costs.


Get a head start in digital sales with our digital sales guide for manufacturing companies. You can also download the full guide for offline reading or use it to build a business case.

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Leo Boon Yeow

Written by Leo Boon Yeow

Boon Yeow – is passionate about all things tech. His background as a journalist helps him understand complex B2B technology. His mission is to translate it into fact-based, comprehensible stories that help manufacturers do business better.

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