As we continue our review of Panorama Consulting’s survey of ERP implementations, we come to the critical component of Cost.
As their summary states:
“There are many considerations that factor into total cost of ownership. Many companies underestimate these costs and ultimately go over budget as a result. Understanding all of the items that make up total cost of ownership will help guide organizations into making better financial projections.”
There are several cost categories implicit in an ERP implementation, and we’ve seen ranges of estimates that are all over the map. But from experience, we can certainly capture the key ‘categories’ which include:
- Software licenses and their annual publisher maintenance fees
- Implementation costs (and / or upgrade costs) to go-live and support
- Staff costs and displacement
- Hardware costs
- Planning and consulting (pre-implementation) costs
- Software customization, integration and add-in enhancement costs
- Travel and miscellaneous costs
- Management time, oversight costs, organizational change costs, etc.
In Panorama’s survey of companies who had implemented ERP, the results are telling:
One-third of projects came in “on budget” (another 10% came in under budget)
56% went over budget (!)
Of these, 35% were 0-25% over budget
15% were 25% to 50% over budget
6% were more than 50% over budget
It’s important to note here that these were large company, high dollar implementations. The cost overruns averaged two million dollars. To put that into better perspective, in the SMB market space, entire projects are completed for far less than that amount. Here, project costs ran on average over ten million dollars.
The key takeaway? While the scale of Panorama’s survey projects was larger than the typical SMB ERP deployment by a factor of ten or more to one, still, the lessons and the cautions and the project success factors are largely the same. In other words, what the big guys learned is of equal value to the little guys.
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