How can you tell if your B2B integration strategy has been implemented successfully? One of the ways you can measure positive outcomes is by looking at return on investment. Yet, when companies look at B2B integration costs, they tend to ignore a crucial aspect of ROI: total cost of ownership (TCO).
Measuring B2B integration success has a direct impact on your company’s bottom line. And to effectively manage and reduce B2B integration costs, you have to understand the TCO. By taking a good look at scalability, efficiency and overall performance of your B2B integration processes, you can spot areas for improvement and/or opportunities for cost savings. This ultimately gives you a more profitable business.
In this post, we will explain why looking at TCO matters, what hidden costs are a part of TCO, and how an expert can help you choose the right technological investment.
Why Does TCO Matter in B2B Integration?
When you are considering B2B integration costs, why does TCO matter? You have to think about TCO when you are creating your B2B integration strategy because the purchase price is not the last thing you will be paying after you sign on the dotted line.
The TCO reflects all of the lifetime costs associated with owning a particular asset. Those costs include the initial purchase price, the maintenance, deployment, hardware and software upgrades, and how much you will spend operating the same asset over the course of five to ten years.
What Are the Hidden Costs of TCO?
During the budget planning process of a B2B integration strategy, many decision-makers focus on the price that the vendor has given them. However, if you only look at those B2B integration costs, you are missing out on a bigger picture.
There are costs you do not necessarily think of when you are first looking at B2B integration costs because they are "hidden" costs. Here are some of the hidden costs of TCO to keep in mind:
- Software generally has licensing fees attached as well as finance charges.
- Hardware requires servers and storage, not to mention backup and recovery expenses.
- Implementation fees, which include setting up, configuring and testing software so it can be used in production are also a factor.
- Training for users to learn how to utilize B2B integration solutions adds to the cost.
- External system interfaces so that your B2B integration solution can “talk” to other systems is another cost add.
- Data migration, so that B2B integration solutions have access to legacy data (this can also include format changes) represent additional costs.
- Customization allows the B2B integration solution to fit your workflows, rather than the other way around, but it comes with a price tag.
- Software maintenance and support enables your users to get help when they need it, for a price.
- Patches fix vulnerabilities in software but do come with costs for you.
- Data center costs, which include electricity, cooling, floor or rack space, security, maintenance, and management can add up quickly.
- Downtime can be expensive. (How much does it cost the company when the software isn’t available?)
Common B2B Integration Pitfalls
Finding your way in the B2B integration space isn't without its pitfalls. One of the most common of these is the failure to foresee your scalability requirements. As you grow, your integration needs often expand exponentially, and neglecting to plan for those evolving needs can mean expensive system retrofits and overhauls, which can spike your B2B- integration costs.
Another potential risk is underestimating the importance of your data quality and control. Poor data quality can lead to mistakes, delays and compliance problems, which can inflate your B2B integration costs over time. To reduce these expenditures, prioritize data accuracy and put in place strong, comprehensive data-governance processes so that your organization maintains data integrity throughout its integration journey.
How to Reduce B2B Integration Costs
Reducing your total cost of ownership in B2B integration can help you achieve long-term savings. One effective strategy is optimizing your integration architecture. Streamlining various systems and using standardized protocols can make your infrastructure easier to use and maintain. This will save money on both hardware and software and minimize system complexity. (Complicated systems frequently translate to higher support and operational charges.)
Using cloud-based solutions is another way to reduce TCO in B2B integration. These platforms offer you flexibility, scalability and lower infrastructure-investment costs. Pay-as-you-go models offered through the cloud can help your company reconcile spending and usage, eliminating the need for a lot of upfront capital and ongoing maintenance for services you may not be using.
Automating manual processes can also lower your TCO. A lot of integration work – such as validation, data entry and mapping – can be automated with modern integration tools. Less reliance on human-performed tasks means reduced labor costs and improved accuracy, which means less money spent on pricey corrections.
Ongoing monitoring and proactive management of your integration system can keep costs down, too. Closely tracking performance and identifying system bottlenecks allow you to respond to any problems quickly, and this will help you avoid high-priced emergency fixes and will contribute to a reduced overall TCO of your B2B integration initiatives.
ROI Calculation
In B2B integration projects, TCO is inherently linked to return-on-investment calculations. Here are the steps to take to determine the ROI of your integration project:
Define Your Goals: Clearly outline the goals of your integration project and what you hope to achieve by undertaking it (for example, improving operational efficiency or expanding your customer base).
Calculate TCO: In determining the TCO, include your initial setup costs as well as ongoing operational and maintenance expenses over the life of the project.
Estimate the Benefits: Identify the benefits the project will bring (cost savings, boosted productivity, etc.).
Timeline: Establish a timeline for realizing these benefits, including both short- and long-term gains.
Calculate ROI: ROI (%) = (Net Benefits - TCO) / TCO X 100. Your net benefits are the benefits minus the costs.
Review Regularly: Regularly and frequently monitor your project's performance and reassess the costs and benefits as the integration matures. Then adjust your ROI calculations accordingly.
How Can You Navigate B2B Integration Costs?
Unless you specialize in B2B integration, determining the TCO of a B2B integration solution is not your expertise. That is okay; your core competency should be your business. Turn to a trusted expert to guide you through this process.
Remedi has 25 years of experience in helping clients choose the right solutions to drive their businesses forward. We understand what goes into a B2B integration strategy, and what B2B integration costs you can expect to come across during such a project. Calculate your cost. Download our free EDI Calculator to see how much you can save.
