Purchasing a Traditional ERP Software
Traditional ERP solutions are software packages that are purchased as a whole and implemented
and managed by a team employed by your company. In addition to purchasing the software, the
company must either already have the hardware necessary to run the software or purchase, setup
and maintain the hardware. There are several factors to consider when deciding between a
traditional ERP implementation or a SaaS implementation. The initial costs of deploying a
purchased ERP software is much greater than a SaaS method. These costs include the servers
and hardware necessary to support the software. The cost of the software itself as well as the
cost of hiring a technical team or training the current staff to implement, configure, and maintain
ERP software and hardware. Purchasing an ERP software can offer more flexibility and control
for the company. SaaS method is generally less flexible than a purchased ERP software.
Midsize to large companies will often find a greater level of flexibility and control advantages to
their business needs.
Accessibility to the software and data are especially important for companies that their processes
are extremely time sensitive. SaaS is a cloud based solution, it relies completely on an internet
connection. With purchasing an ERP software, we do not necessarily rely on an internet
connection. If the internet goes down the company will still have access to their data and
software. In case issues occur with the company’s hardware or servers, the company has direct
and immediate access to fix the problem. In SaaS method the company has no control over
fixing outages and getting the software up and running. Information security can also be a
concern with companies that use SaaS method since there is a third part that keeps the data
In analyzing the pros and cons of both purchased ERP software and a cloud based SaaS, the best
solution for Tesla is to purchase a traditional ERP software. For several significant advantages
like higher security, faster bandwidth/response time, more flexibility, no frills, and more business
focus, the most ideal option will be purchasing the ERP software as opposed to the SaaS method.
Cost and Time Estimates for the ERP
Based off the complexity of the legacy system and the wide reach of Tesla across the globe, we
predict the project to cost roughly over 75 million. The figure below displays our cost
breakdown, displaying how the funding is being allocated. Since Tesla plans to reinvent the car
buying experience along with revolution the world with the rest of its product line, we want to
future proof the hardware as much as possible. With that being stated, we plan to finish having
the project completed in about a year, from start to end.
The hardware for the modules will be quite costly since we are going to use the latest in
components to future date their SAP up to the extent that we can. The software will be the next
costliest option of the project, it will require a solid amount of the time. Followed by the
customization of the modules and the expense for consultation to make sure everything fits
Tesla’s business needs. Further financial information is shown below with the cost benefit
analysis of the project for the next 5 years.
The return on investment diagram above, projects the break even point is at year 5. At this point,
we can also start to see the company benefiting from an integrated system within Tesla. After
year five we expect Tesla to have a gain of over 11 million. We expect the benefit to increase as
more time passes beyond year 5.
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