How to Control ERP Costs in a Cloud World
How to control ERP costs with Microsoft Dynamics Business Central? The issue of ERP implementation cost overruns is rampant, especially with Manufacturing ERP implementations. This hasn't really changed despite the introduction of very modern Clould ERP systems like Business Central. Keeping a Dynamics Business Central ERP project under control, and thus ensuring control of ERP costs is what I want to touch on in this article.
Since the introduction of cloud ERP to the market, the expectations of end users are changing. This new technology should have lead to new methods and processes for implementing ERP as well, but that's not been the case. There are a few companies that are embracing the implementation of Microsoft Dynamics remotely, and the . That said, ERP implementations have tended to stay the same and remain a scary prospect for many customers.
How do you, as a customer go about fixing the problems so that you can control ERP costs and keep implementation cost overruns way down?
I am an expert with Microsoft Business Central, and so I'll focus on that product.
As a customer, be very careful that you don't try to dictate the process. The process your Dynamics Business Central Partner (such as ) will follow is based on what we have confidence and experience with. Trying to bend our process to your approach is a bad idea. The best bet is to find a partner that already follows an approach that will work for you. Here are some things to watch out for:
1. Avoid the “Everything Is Easy” Sales Pitch
If you have gone through an ERP sales pitch, and absolutely everything you’ve asked for is “easy” and won’t be a problem, be wary. I have almost never gone through a sales cycle where there were ZERO risks. If the salesperson makes it sound a little too good to be true … it probably is. There are a number of areas here where control of your ERP costs can completely fall apart. Typically it occurs when the sales person meant "we can customize anything you asked for" without explicitly telling you how much extra that would cost. Since most Dynamics Business Central projects are time-and-material, asking if something can be done without qualifying "will that cost me extra" is very dangerous.
2. Check the Team’s references
When you start implementing, you will be assigned a Dynamics Business Central training and implementation team that will basically run your project. When you check references, you may call 3 or 4 companies that used 3 or 4 different teams. You’re not going to get a sense of the repeatability of your Business Central Partner’s process if every reference used completely different people. Ask for references that used the same team they propose you will use. One other thing about these teams, find out how many businesses in the same industry they have implemented in the past year or two. Sabre does almost exclusively manufacturing implementations. Don't worry about the reference's market (don't try and find another company that makes beach balls if that's what you do - how many of them are there even?) To control ERP costs, we want to make sure the references are in the general category that you are in. Repetitive manufacturing like Make to Stock; Engineer to Order; Job Shop; Graphics Arts Manufacturing; Field Service; Professional Services; Wholesale Distribution ... these are the kinds of general categories I'm talking about.
3. Get a Transparent Estimate
The estimate you get for your training and implementation should clearly describe all the modules and functions you will be trained in. Almost more important, it should list the excluded items! Sabre provides fixed fee Dynamics Business Central implementations now for almost all customers, and these are based on pre-created "packages" that are manufacturing specific. Some customers are suspicious of coming with an "out of the box" solution. As far as ensuring that we control ERP costs, our fixed and prescriptive approach forces US to control the costs. Most partners do not do this. In fact, most partners want you to drive and steer the project into more complex features and therefore more billing. If you have a very clearly defined project with clearly defined boundaries - and a commitment from the partner to push back on scope creep - that is going to really help.
4. Do They Have Skin in the Game?
Does the partner you have chosen have any kind of incentive or reason to achieve the estimate they have provided? Is there a penalty for exceeding their estimated hours? Do they have a rate adjustment? Is there a bonus for being on-time and on-budget? Is the project fixed fee, with clear rules of engagement? Implementing a product like Microsoft Dynamics Business Central is a very complicated process, and there are a fair number of risks associated with the process. If you look at the contract and you are taking on all the risks and responsibilities to control ERP costs in this project, then you have an asymmetrical agreement. You are accepting the risks of project cost overruns. They are not willing to cap or constrain their project. Ask them why.
5. How do They Implement?
And this is the most important part. How does the partner implement Dynamics Business Central? Do they follow the old “we train you so you can set up the system” or do they use an approach of “we will set up the system based on our understanding of your industry and best practices?” If the former, you need to be sure your staff has extensive (8-10) ERP implementation projects under their belt so they understand the risks. If the latter, then be sure part of the process involves your staff testing their setup and assumptions - and be prepared to do some tweaking. In our experience, partners that "train you so you can setup the system" often do so because they don't actually have a lot of experience in your industry. They are not experts in your business, they are experts in the software. This is important. Being experts in the software is critical to success. That being said, it is necessary but not sufficient for ensuring success. To control ERP costs you need to make sure that YOU are not training THEM. Of course every consultant needs to learn your unique business elements. They should not learn things that anyone in your general industry would know.
Sabre's Approach to Control ERP Costs
At Sabre, we’ve radically changed the way we do Microsoft Dynamics ERP implementations. We did this because the boss (that is, me) decided that we owed it to customers to put our money where our mouth is. We have entirely switched to fixed fee ERP implementations, with only on-site and programming time being extra. We have also switched to entirely remote ERP projects and have been doing so for several years. This is not new to us, and we've learned our lessons and now have a process that is repeatable and efficient. Find out more about our .
This has made us a better ERP Partner because now we have a real motivation to stay on budget. Our Project Management and our process is improved. We hold ourselves and more importantly our customers accountable - which most ERP Partners fail to do (in my humble opinion).
For some of the reasons why I believe ERP partners don't hold their customers accountable, read by Patrick Lencione
I've recorded the following video (with many others following):
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To find out more about implementation costs, take a look at my blog You can also take a look at , and visit our website.
