Microsoft offers zero percent financing on Dynamics ERP and CRM. Given the economy and the credit crunch, it must make a lot of sense, right? Not really. In ERP, licensing the product is far from being the most significant cost. Training, implementation, change management, additional hardware, additional software (like database), third party software components that goes with the new package (add ons are common addition to ERP implementations) make the money you spend with Microsoft the smallest part of your investment.
According to AMR research, only 20% -25% of ERP cost are actually invested in software licenses (this includes third party licenses like order management add on to the core product)
So, if you took Microsoft on their offer and purchased MS-Dynamics ERP for $200,000, you will pay only $5,000 per month for the software, but you are likely to spend $800,000 more during the course of the implementation- meaning that the cost you will pay before going live with your new product is likely to be 850K or so, which is equal to an 85% down-payment. You can try to finance the service fees as well, but you will have to pay high interest rates, and you are also unlikely to get everything covered (e.g. third party software)
It all gets back to my “reducing the risk” post. On premise ERP happens to be high risk/strategic IT decision. People are happy to make these decisions when things are going well, and a new ERP product is critical to support growth plans. Now when prospects are declining, companies will think twice about buying a new ERP product, with or without Microsoft’s generous offer. Customers are much more likely to make small, low risk investments on the edges of the enterprise. SaaS utilities, that are paid monthly by design, and usually requires much less professional services, are likely to be the winners of this shift in priorities.