ERP (Enterprise Resource Planning) solutions are powerful tools that can transform a business by integrating key functions such as finance, HR, manufacturing, and supply chain. The promise of enhanced efficiency, improved data visibility, and smoother operations makes an ERPP system a compelling proposition.
Most organizations budget for obvious costs, such as software licenses and implementation partner fees. However, there can be several hidden costs that can push back timelines and inflate budgets. Make sure you include the following seven potential expenses when planning your budget.
1. Training and Change Management
Your new ERP system will likely change the way many of your employees do their jobs. Without proper training, you won’t be able to get the full benefits of the system. People don’t just have to learn which buttons to press. They also need to learn new workflows and how their role fits into the big picture.
This involves writing custom training materials, scheduling sessions that take employees away from their daily tasks, and, in some cases, hiring specialized trainers.
Change management is a broader process that prepares your organization for the transition. It takes a dedicated effort and budget to manage communications and employee expectations effectively.
2. Data Migration and Cleansing
Transferring crucial data to the new ERP is a significant element of the project. You can’t just copy and paste the data. It has to be extracted, transformed, and loaded to match the new system’s format.
This is also an opportunity to cleanse your duplicates, fix mistakes, and remove outdated information. This can be a time-consuming process and may require specialized tools or expertise. All of this adds to the cost. Poor quality data can undermine an ERP launch, so this is not an area where you should cut corners.
3. Customization and Integration
To meet your unique business needs, you will likely need to customize your ERP to some degree. You will likely need to integrate the system with other core applications that aren’t being replaced.
Software upgrades will require testing against every new customization. Many needs can be met out of the box with a flexible platform like Microsoft Dynamics 365 software, minimizing the need for extensive custom code.
4. Infrastructure Upgrades
Your new ERP may have hardware and software demands that compel you to invest in an infrastructure upgrade. That can include new servers, faster networks, or even updated operating systems.
To prevent bottlenecks, ensure your internet connectivity is stable and fast. Don’t forget to account for possible upgrades to individual workstations if the new system will be used more frequently over time.
5. Ongoing Maintenance and Support
The go-live date is just the start of your ERP journey. Besides the initial investment, there are recurring costs to keep the system up to date and maintained. These can be an annual percentage of the initial license costs and include services such as software updates, security patches, and bug fixes.
You’ll also need to select a technical support plan. Vendors typically offer tiers of support, ranging from basic to premium 24/7 support with a dedicated account manager. Skipping this might leave you open to many problems when technical issues arise.
Don’t forget to consider how many resources will be required to manage the system and support users over the longer term.
6. Internal Project Team Costs
You can’t outsource an ERP implementation entirely. You’ll have to assemble an in-house project team of your best and brightest people who will work with the implementation partner.
These are people who know your business inside and out. Their work on the project is a significant indirect expense as they have to be removed from their standard responsibilities. You may need to pay these team members overtime or hire new staff to cover their vacated roles.
7. Business Process Re-engineering
Implementing an ERP is an opportunity to improve all your business processes. In fact, to get the full value from the software, you will have to make changes to leverage the best features embedded in the ERP. This type of “process re-engineering” may take the form of workshops, analysis, and documentation. It may even call for outside consultants.
While this ultimately creates a more efficient, streamlined organization, the process of analyzing, mapping, and redesigning workflows can be a significant time and resource investment.
Account For All Possible Expenses
A successful ERP project is not merely a question of technology. It involves a whole series of changes to the way your business operates. There is also the time, communication, and training it takes to get people to adjust to the new system. All of this requires thoughtful planning and establishing a clear understanding of the total investment.
