ERP Buyers Guide: Budget
ERP purchases are complex transactions with several elements impacting costs. Not understanding the key drivers can lead to an undercooked budget and create problems both on the client side, who may have to go back to the board seeking additional spend, and for the implementation partner, with increased cost pressures on the delivery.
Here’s what you need to prepare for, to ensure internal expectations are aligned with reality, and to make sure the quality of delivery is kept high.
Software License
Of course you’ll need a license for the software, but who do you buy it from, and what determines the price? Licenses are generally available directly from the software provider, however, more often you’ll be buying from a partner (i.e. reseller). This won’t affect the price you pay, and if you get a good partner, they’ll help you understand the details of the contract and advocate for the best deal. Contracts vary in length but typically are 1 – 3 years, however, because of the broad range of use cases for ERP (industry, company size, project scope etc.) pricing can get complicated.
For modular, cloud-based systems like Oracle NetSuite, pricing is affected by several factors including
modules required (i.e., functional areas)
numbers of users
numbers of subsidiaries and the countries they are registered in
volume of transactions.
It helps to have someone with experience to take you through the details, so put the onus on the partner and don’t hold back with your questions, as the saying goes, the only stupid question is an unasked one.
Implementation
Once you’ve bought the ERP software, you’ll need to implement it, and for that you’ll need an implementation partner. At this point, time is money, not only as the direct cost for the consultants who implement your solution, but also the cost of your internal teams contributing to the project, which is critical.
Depending on the complexity of your requirements, an implementation can take anything from 3 months for the most basic and straightforward implementation to several years for large and complex projects.
Even if you think you are the most simple and straightforward business, it is wise to give yourself a minimum of 6 months from project kick-off to going live with the new system.
Also be prepared to break the project down into multiple phases, with high priority or foundational process areas being implemented first (e.g. core finance) and additional modules or integrations being added over time. This radically increases the probability of a successful project.
Implementation activities include requirements gathering, solution design and configuration, user acceptance testing, end user training and business cut over with an often-quoted rule of thumb for implementation costs to be in the region of 1-2 times the license cost. While this rule of thumb is generally true, it will always depends on the complexity of your requirements and the suitability of the solution selected (see next two points).
(Oracle NetSuite do also offer industry specific variations on the core product to reduce implementation times and shorten time to value.
Customisation
For complex requirements which do not fit standard out-of-the-box process, customisation of the product will be required. In this regard, not all ERPs are created equal and depending on the extent of customisation and the ease with which the platform can be customsied, this can add significantly to the implementation cost. Not just in the development of the customisation, but in documenting, maintaining and providing training on the bespoke solution.
Be prepared to adjust your practices and reduce the need for customisation, as often with a small amount of encouragement this can be avoided, and budget can be reallocated to have greater impact elsewhere.
In this regard, the short-term pain of a process change produces the long-term gain of a system that is cheaper to install and support, easier to maintain, and able to leverage standard training materials provided by the product owner.
Integrations
The goal of ERPs is to provide as much core business functionality as possible on a single system, and while there are undoubtedly benefits to this approach, it can also require trade off’s in user experience, functionality and increased disruption to end users.
Often integrating an existing best-of-breed system maintains the benefits of a single point of truth without the tradeoffs in user experience, and so can be a great contribution to a successful implementation.
Costs can be off-set against savings in license, implementation and training, however, as with customisation, the more complex an integration the higher the costs will be. Consider
Is the flow of information between systems in one direction (i.e. only into NetSuite), or two directions ( to and from NetSuite)?
Will the information need to be manipulated or transformed between systems?
Can updates between systems be made asynchronously or are they required to be ‘real-time’?
What volumes of data are being transferred between systems?
At 3EN we have experience of integrating all manner of systems with NetSuite - CRM, WMS, 3PL etc. and have even developed a middle-ware product to support multiple system integrations into Oracle NetSuite.
Ongoing Support
As mentioned previously, comprehensive end user training is a key part of the implementation process, however no partner knows your business as well as your end users. As such, once a new system goes live and your colleagues get their hands on it, they will undoubtedly find new ways to leverage the increased functionality to their benefit. A dedicated account manager and certified support team like that provided by 3EN, will allow you to make the most of implementation and for ongoing improvement and ultimately help maximise the impact of your investment, and while there is of course a cost to be factored into your year 1 and ongoing budgets, it is generally delivered at a lower cost per hour than implementation, and can be tailored to your specific needs.