3 ways to save money on ERP implementation
There are no two ways about it: ERP systems are large investments. Unfortunately, 58% of businesses surveyed by Panorama Consultancy experienced project costs overruns. Keeping your ERP implementation costs as low as possible is one of the key components to achieving the biggest return on investment from your implementation.
It is clear from the survey and our own experience that there are common pitfalls that many CIOs make. Here are three ways to reduce your ERP implementation costs as much as possible.
1. Buy an off-the-shelf product: your business processes may not be as bespoke as you think
When you speak to most business, they all believe that their business processes are unique. The truth is, in the majority of the businesses we encounter this isn’t the case with most of their business processes. Once the layers are stripped back there are common functions required in any businesses and common sector-specific functions. It is now generally accepted that ERP implementations have the best chances of success when they don’t attempt to over-customise the software.
For more bespoke functionality, there are sometimes off-the-shelf software applications developed that use best practice methodology. You benefit from efficiencies of scale, as 1000s of hours of initial development and bug fixing are shared across global users and such software applications are often made to integrate already with an existing ERP system. For example, SAP B1 have over 500 industry-specific add-ons for different industries, such as manufacturing, engineering and distribution processes.
In addition to the increased development costs, for a bespoke development to work the communication of requirements is essential but it is harder when faced with so many possibilities. There is also a longer implementation time, with the associated business costs that can come with this.
Off-the-shelf customisation can also save you money in the future too when you come to upgrading. Standard add-ons are developed continuously in line with the ERP provider’s upgrades, whilst bespoke products have to reconfigure the existing code every time there is an upgrade. By selecting a standard add-on you also have the flexibility of changing suppliers instead of taking the riskier route of relying on the current partner.
Custom development does ensure that the application is a complete fit for your business and there are a few businesses where their processes are, in fact, relatively unique and require custom development. This quite is rare, however, and typically arises in businesses where the business process is quite unique and more commonly where there is a heavy reliance on the labour processes rather the traditional stock management.
2. Don’t go for an all-encompassing “big bang” implementation
Quite a few of the businesses we work with are initially daunted by the prospect of the implementation; they view the ERP implementation as a one-off chance to improve their business processes to increase efficiencies and profit. This is probably related to the fact traditionally ERP systems were changed every 10-15 years.
However, it is now becoming widely accepted that the best approach to an ERP implementation is to adopt in stages. This allows the key stakeholders to concentrate on each phase to ensure a thorough implementation is achieved in the key areas. By focusing on the areas that generate the biggest efficiency benefits first, it frees up further time to be devoted to the later stages and therefore reduces the overall implementation time.
The take-up from employees is also likely to be much greater when you implement in phases. It is common knowledge that employees do not always react in the best way to change; in their minds they have been doing a process for a number of years and it has been performing adequately. By generating the largest “wins” with the least initial burden on employees, we have found that employees are much more engaged with the process going forward as they can see that the effort is worth the rewards.
Businesses should also be mindful of the future. Technological advances and disruption to markets is now so common that businesses need to adapt quickly in order to survive and stay ahead of the competition. Instead of resting on their laurels after an ERP implementation, the best business leaders realise the need constantly innovate. With this, business processes often need to be adapted. That is why we offer a Lifetime Application Methodology, so that your ERP system supports your business needs both now and in the future.
3. Ensure that you have clear business requirements
Many stakeholders know what they want but they sometimes struggle to communicate the requirements to their implementation consultant. It is the responsibility of both the stakeholders and the consultant to ensure that there isn’t a mismatch in requirements, otherwise this can lead to extra costs and missed timescales arising from heavy customisation that wouldn’t have been needed if business processes were clearly defined at the start.
We recommend that you start with a checklist such as that provided by SelectHub to focus you on the ERP requirements you require and to give you an insight into some requirements that you may not have considered or thought possible.
However, you need to feel confident that the consultant has the expertise to ask the right questions. Your consultant should probe deep into your existing business processes, your goals and resources prior to sign-off. They should be able to suggest solutions that you may not have considered possible, instead of relying upon you to simply tell them what you want.
We find that SAP B1 works best with the mid-market clients that require a cost-effective ERP solution offering advanced standardised customisation. If you want to find out the best way to implement SAP B1, download our guide for more costs saving tips.