It’s easy for buyers of ERP systems to overlook (and for sellers to undersell) some of the so-called ‘hidden costs’ of a system implementation. A recent article from Compare Business Products reminds us of a few of those costs that buyers should be aware of – in both on-premise and cloud solutions. We’ll reprise a few of their comments in our next two posts, beginning here with on-premise systems.
Training. Most companies we find commit two mistakes here: first, they underestimate the implications of the changes they are making. It’s not just learning the new software, it’s often about learning new was to do peoples’ jobs. Secondly, companies too often think they can shave costs from a project by skimping on training. The ensuing employee frustration, coupled with the additional errors that usually occur later – often requiring expensive correction and further training – make the case for ensuring that your employees themselves feel they were adequately trained.
Consulting. It’s not just showing how to press a few keys to get the results you’re after. Consultant costs are linked to training needs, the article notes. The hard part comes from shoehorning the software into the way that you work. But without that, you have exactly the opposite, and that’s usually a recipe for disaster. It takes experienced and knowledgeable consultants to understand how your current processes flow, how they could flow better, and how to allow the software to help you get there. Budget accordingly.
Customization. Most companies, and good consultants, advise trying your best to use the software out-of-the-box, at least initially. But the reality, studies show, is that a very high percentage of systems are ultimately modified or customized to match the user’s requirements – and that’s a good thing! It ensures that the software works the way you do, and that you take advantage (by capturing in your process flows and your software) of the competitive advantages that make you better than your competitors and/or improve your operating margins. But here again, plan carefully and budget accordingly. Good consultants will step you through this carefully and thoughtfully, not prescribe numerous modifications haphazardly, and then help you design the right ‘user story’ to ensure you’re doing the right mod for the right reason at the right investment value.
Integration & Testing. Systems usually need to be integrated with other systems to be fully effective. And not only does the consultant need to test things like integration, new modifications and expected workflows, but you do too! This takes time from your people, and reduces short-term productivity. And it’s usually a two-steps-up-one-step-back process.
Data Cleansing. If you’re integrating to legacy systems, or porting forward a lot of old data to the new system, this obviously increases costs (sometimes by a lot) and must be accounted for. As the paper’s authors note, “Invariably, businesses will underestimate the costs of cleaning and managing their data before it can be used by the ERP.” We would tend to agree based on experience.
These are a few of areas where businesses can underestimate the full costs of a successful (important word there) implementation. But forewarned is forearmed, right?
In our next post, we’ll take a quick look at the corresponding hidden costs to be found in cloud implementations. Stay tuned…