Investing in ERP Software in a Down Economy

With unemployment still high and consumer spending erratic, many businesses are putting off IT purchases, uncertain of where the economy is heading. Investment in ERP software is often times seen as unnecessary to top management, who are concerned with cash flow and meeting immediate business needs. But this recession will come to an end, and as we have seen in the past, businesses that fail to plan for that turn around continue to flounder once the recovery is under way. With that in mind, is it wise to put off ERP upgrades right now? Consider the following:

Your competitors are investing, you need to keep up.

A recent survey for CIO Magazine found that 48% of IT professionals say their overall budgets will increase in the coming year – compared to 14% who said that a year ago. Half of that was predicted to go to application software. If your competition is investing in better business intelligence and better reporting for their ERP needs, they are going to gain an advantage over you as far as efficiency is concerned. Are you going to be able to keep up? If other businesses can generate price quotes faster than you can, will that put you at a disadvantage?

Despite the doom and gloom, businesses have cash.

The Wall Street Journal reported that businesses have record amounts of cash right now. The article notes that this due in large part to concerns from the credit crunch in ’08, but the bottom line is that businesses are sitting on cash, and have few ways to earn interest on that money. Eventually businesses will re-invest that money in themselves in the form of increased purchasing. When this increased spending hits, it should further fuel the recovery. Simply put, when the economy turns around, will you be ready?

It’s a down economy for software publishers as well.

Software implementers too! Now is the time to look for bargains in software purchases. Even giants such as Microsoft have had to bow to economic reality – they recently launched a campaign that essentially gave software away. Similar offers like that are sure to follow – and even when they are not, now is the time to ask for discounts. Deep discounts.  Similarly, ERP implementation partners may be much more willing now to reduce their rates, or offer services for free that may have otherwise been billable. When the economy picks up, software vendors and partners will be much less likely to offer the discounts they offer now. Now is the time to look for bargains

The clock is ticking on Government incentives.

The Economic Stimulus Act of 2008, the Recovery Act of 2009, and the HIRE Act of 2010 provided certain businesses with the ability to deduct the full purchase price of qualifying software purchased or financed during the tax year, rather than depreciate it over time. This incentive runs out at the end of 2010. If your business qualifies, you only have a short window to take advantage (please contact a tax advisor to see if this applies to your business). 

While an investment in ERP software during slow times may run counter to the conventional “get more done with less” philosophy, there are many compelling reasons to act now. By considering wisely now, you may find that your decisions today put your business in a much stronger position a couple of years down the road.