There are many activities that will take place in the delivery of an ERP and multiple moving parts.
In this article we will work through the difficult topic of ERP project budgeting.
To start off with you need to know the scope and scale of the system. This can be very top level (as per our price calculator) or more detailed and refined.
Scoping an ERP Project - Top Level
Using a broad-brush approach, we can take a view on the estimated cost of a project by selecting modules of the software to cover functionality, user numbers, and the business geography that will be included along with the hosting options. This is a rather blunt tool but is useful for indicative figures.
Will the software be required to manage the following areas? Finance, CRM, Sales, Purchasing, Inventory, Manufacturing, Quality, eCommerce.
Each of these will add additional cost of licence and configuration of the solution with varying degrees of influence. Controlling a wish list and implementing functionality in a phased manner is a good way of controlling project costs.
- Organisational Complexity
A single entity organisation is very different in its requirements to a multiple entity one. Additional ledgers, sites, processes, and reporting consolidations all add up to the complexity of a solution. Whether there will be operations in a single currency or multiple currencies will affect the inter-ledger activity and the overhead of reconciliation within the system.
- Business Geography and Legislations
Operating in the UK is a known quantity, with flexible account structures, simple tax rules, and detailed reporting functions which most businesses are familiar with. When operating in multiple legislations a multitude of tax rules, reporting standards, fixed asset treatments, charts of accounts, and other variables can come into play. Each additional legislative area can add intricacy to the project and an overhead to the implementation.
- User Numbers: Named vs Concurrent
Quite simply, some software is based on named users (non-transferable licences – assigned to an individual) and some is based on concurrent licences (transferable licences operating in a “pool” for use as required). This makes comparing 2 systems costs somewhat challenging as their licencing structures may vary and without a clear concurrency metric it is difficult to ascertain which is providing better value. However, despite this, based on a number of users a vendor can provide a licence cost of the software.
- Cloud, Hosted, or On-Premise?
As is explored in the article ERP Hosting Options, there are many choices available for ERP hosting and these each affect the solution available. Likewise, they each have associated cost implications, with on-premises being the most capital intensive and a traditional ownership model while both the hosted and cloud options are revenue costs in the form of a subscription (typically annual).
Having the information above will give an ERP implementation partner enough information to “ballpark” a few figures. But this will be highly speculative and will include a good bit of guess work. In order to provide more accurate proposals a partner will need to undertake further investigations, usually referred to as a “deep dive” or “discovery” phase. These will involve investigations into the following:
- Detailed functional requirements
- Preferred and suitable implementation methodologies
- Data migration requirements
- Document management
- Localisations (multi-territory and group requirements)
- Integrations and Modifications (Development)
- Other ERPs
Without the above information it is not reasonably possible to propose a solution. Nor is it reasonably possible to qualify or disqualify the suitability of the solution for the prospective customer. The discovery phase of the purchasing cycle is vital to ensure that the project is scoped adequately, information is captured, and all parties are aware of what is being proposed as included and excluded. A proposal for an ERP solution should be accompanied by a detailed document of specification which all parties agree.
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