So, you have decided to buy a new ERP system and are now gathering quotes, or already have them in hand. The next thing you’ll want to do is make sure that you have accurately budgeted for the purchase and implementation of your new software system. When drawing up an ERP budget, there are many costs to consider. First, the obvious ones.
Obvious costs to include in your ERP budget
- Hardware, (pcs, servers, printers and networking equipment, etc.)
- Software license fees
- IT staff (space for them and the hardware)
- Software and hardware maintenance costs.
- Internet service provider (ISP) fees
- Initial implementation and data conversion.
- Initial training
- Initial customization and integration with other systems
It is important to note, if you are choosing a cloud, or SaaS (software as a service) ERP package, your monthly subscription fees will replace, the upfront costs for most of the items listed in italics above. The only exceptions to this would be your PCs, local printers, ISP fees and networking equipment. Generally, experts suggest calculating these monthly costs over a period of 5 to 7 years to develop a fair ROI analysis.
Now, that we’ve gotten the more obvious costs out of the way, let’s move on to talking about some of the items that may not spring to mind right away when you sit down to write your ERP budget.
Hidden costs to include in your ERP budget
- Your staff’s time – How long will it take them to get the system up and running, learn to how to use it, and then develop and record the new procedures? For your ERP project to be a success, you want the best people on your team working on it, and their time is valuable. So, don’t forget to consider the cost of the work that either won’t be done, or will take more time than usual, while they focus on implementing the new system. If you think you might need extra, temporary help to take up the slack during the ERP project, the cost of that must also be included.
- Your project champion’s time – If you’ve ever done any research on keys to a successful ERP project, you know that it is critical to have the full backing of a member of your company’s senior leadership. Think about how much time the project champion will need to devote to leading and motivating the ERP team, and include that cost in your budget analysis.
- Creation of new procedures and workflows – ERP software is designed to help you manage your business more efficiently. And, as such, many of your employees across a variety of departments will use it. So, you will want to put together a cross functional team that includes individuals from each of the affected departments to map out, test and document the new procedures that employees will follow once the system goes live. Like the other two list items that came before this one, it will move some of your staff away from their usual activities, and hidden costs occur as a result. Also, if you have some people (or departments) who are resistant to change, you may need to plan some change management activities for building cooperation and acceptance of the new system.
- Employee training – Obviously, you will need to offer a first round of training, where everyone who is going to use the system daily learns the ropes. However, in addition to that you are probably going to want to offer advanced training that goes beyond the basic functions for the employees that will use the system the most, and/or remedial training covering any important skills users do not quite master the first time around. Also, don’t forget that new hires or people switch departments will need system training specific to their role.
- Future system adjustments or customization – An ERP system is a long-term investment; one that your business will hopefully have for many years to come. And, it’s only natural that over that time, your company and its needs will change. Think ahead, and try to figure out (at least a rough dollar estimate) for what other applications, customization, or training you may need in the future.
Want more advice on hidden costs to include in your ERP budget? Please
If you have questions about finding the right ERP system for your business, or how to properly budget for it,
By: Laura (Heinbockel) Schomaker, Intelligent Technologies, Inc., a NC Acumatica and Microsoft partner