How To Be Accurate With Your ERP Implementation Cost Estimations?

Marketing Team
Published on December 8, 2020

What Do You Want Your ERP Software To Do For You?

Before you estimate how much the ERP implementation would cost, ask why you are planning to switch to a new system at the first place.

Before you estimate how much the ERP implementation would cost, ask why you are planning to switch to a new system at the first place.Unlike rigid project plans that come with definite price tags, there are several factors that could influence the final cost of the ERP implementation. In order to get a clear idea of all the prices involved in the project and delineate the budget accordingly, get in touch with an ERP expert near you. Apart from the rudimentary costs, your ERP partner will offer insights into the other expenses that could add on down the line.

ERP Implementation Is Not About Software License fees Alone

What most companies do not realize is that their budget should include the maintenance fees, hardware costs and implementation services costs as the software licence fees.

It wouldn’t be very difficult to calculate actual licensing cost of your ERP software. As for the maintenance fees, it is usually 18% of the software list price. The hardware cost would vary according to the upgraded workstations or SQL server licence you want to opt for. The implementation services costs, on the other hand, can be decided only when you have clear answers to questions that we would be taking up later in this document.

Know What You Are Paying For

Even if you don’t see some fundamental factors listed out specifically in your budget proposal, chances are, your ERP partner has still incorporated them in the final plan.

Generally speaking, there are a few areas in the ERP implementation process that cannot be skipped whatsoever. The costs of the stages starting from installation, configuration, integration with the existing applications and data migration to reporting, testing, training and documentation are included in the basic project plan itself. Some ERP partners prefer leaving room for customization and outline the budget with those extras added so that the clients aren’t handed a bill that they weren’t ready for. To be on the safer side of things, ask your partner for written clarifications and a detailed break-down of the things that you are being charged for.

How Accurate Is Your ERP Project Budget?

Without an experienced ERP partner helping you, you will only have an approximate window of budget to wrap up the implementation project within.

The rule of the thumb is, whatever the list price of the software is (including the desired number of users and licenses), the final amount is its double. If you feel the final range is a bit too steep, you can review your plan and look for areas that can be compromised. However, if you are going for the basic plan and the final price still seems to be out of your budget, determine whether or not it would be worth it to invest in this ERP system and the value it would add to your business in the long run. Financing the project or starting out with monthly subscriptions too would be a feasible recourse.

Can the ERP Implementation Project Price Be Guaranteed?

Guaranteeing the final price could be a bit tricky as market conditions fluctuate constantly and a few changes could come up during the ERP implementation process.

Except for the “out of scope” work which could also be referred as customizations, chalking out a budget beforehand will work in your favour. Fixed fee quotes will safeguard your company from catering to the untimely demands of making changes in the plan by your partner. Additionally, a pre-delegated budget will help your partner mitigate risks early on. If you collaborate with an honest partner, the prospect of spending more than what you have actually used will be ruled out.

Calculate the Software Price To Its Services Ratio

Another way of effectively evaluating the budget would be by treading over the potential additional costs and calculating software price to its services ratio.

Needless to say, the more users you have, the more will be licensing and services cost. Also, if you are open to changing a few operations to comply with the software processes, the overall charges can be reduced. Similarly, if you have large quantities of data that needs to be migrated into the ERP software from other applications and the supply chain processes are somewhat complicated, the project price would be higher. If you aren’t just picking the basic services of the plan, we would suggest you set your budget window to 1.5x the software charges. Bear in mind that there should always be some grey area in your budget to accommodate customizations.

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