Controlling Costs on ERP Implementation

PostedOn: 2016-08-02 11:45:50

An ERP implementation is expensive. It’s even more luxurious if you let costs get out of control. Ballooning costs are one of the major reasons for ERP implementation failure.

Fortunately there are things you can do to keep the cost of your ERP system under control. It’s not necessarily easy, but it is very important to a successful ERP implementation.

Budget carefully and stick to it

Before you start implementation, you need to draw up the best budget you can. It won’t be exact at this stage because there are too many unknowns, but estimate as carefully as possible.

Now compare that budget with what you can spend. If it adds up to more than you can afford, you need to consider what you can do to bring it in line with what you have to spend on the project or you need to consider alternatives. Worst case, the project is simply too expensive for you and it needs to be abandoned.

More commonly you can sharpen your pencil and go through the budget cutting things until you can afford the price. You may want to reduce the scope of the work, for example, or trim costs where you can.

It’s important that the project still be doable under the revised budget. You don’t gain anything if you cut the budget to impractical levels.

Still you can typically find areas where you can cut. This often means a less capable ERP implementation so you need to make sure the revised work plan will still meet your major needs.

One way to cut up front costs is to go to Software as a Service (SaaS) option. These typically cut up front costs significantly and replace them with a monthly fee. This reduces capital expenses and eliminates cost for servers and other on-premises equipment.

Don’t be afraid to be creative when it comes to budgeting. Try to think outside the box when you’re considering how to cut costs.

Decide what you really need

Most ERP systems today are composed of modules implementing various functions. That way you can pick and choose what part of an ERP system you want to implement.

It’s important to carefully consider what ERP functions you really need, what would be nice to have, and what modules you really have no interest in. In the interests of controlling costs it’s important to only enable the modules that will be useful to you.

How many of the nice-to-haves you decide to implement will depend on your budget. If it is tight you may want to go with a bare-bones system.

Minimize customization

While some customization is inevitable in an ERP implementation, try to keep it to a minimum. Not only is customizing an ERP system expensive, it increases the uncertainty of the project.

Distinguish between customization and configuration

Configuration is the software equivalent of throwing switches. Customization involves making changes to the software. Configuration is necessary to any ERP implementation, customization is much less so.

Avoiding customization not only reduces the cost of implementing ERP, it also has a major impact on maintenance costs. This saves you money in the long run as well.

The other reason for avoiding customization is that in many cases it is less efficient. Most ERP systems codify best practices and it is likely that customizations will not be as good as the way the software was originally written.

This will usually mean making changes in your workflow. However it’s important to balance the problems caused by doing things a different way against the expense and hassle of modifying the software.