Implementing an ERP solution can be pricy. Here are a few ways to reduce your ERP implementation costs.
An enterprise resource planning (ERP) system is the backbone of your organization as it manages and integrates all your critical business processes. If properly implemented, ERP solutions result in higher efficiency, lower operating costs, and improved visibility and reporting into your financials. And if you're a distributor or manufacturer, an ERP solution can optimize your supply chain and give you a significant edge over your competitors.
Implementing an ERP system is an investment, and implementation costs can add up. Occasionally, ERP projects go over budget or over-schedule. So, what can you do about this? Luckily, there are certain ways to minimize or reduce your ERP implementation expenses. We've rounded up some helpful tips in this article.
1. Plan and Budget Carefully
Without a thorough plan and budget, ERP projects either rack up costs or go beyond the original scope. Many times, companies miss some essential components of ERP implementation while building the project roadmap. What will be the cost of your software? What is your change management strategy? What will be your approach for data transfer? Will there be any hardware and network costs? Which consultants would it take? Who will work on the project, and how will their common job tasks be covered through the project?
If these questions are not answered at the beginning of the project, the end result is disorganization and increased costs in the future. If your actual costs go over your budget frequently, find areas where you can bring it in line with what you have to spend on the project or by considering alternatives. Careful planning and budgeting are crucial to controlling implementation costs.
2. Select ERP Software Based on Your Business Needs
Selecting an ERP solution with considerable forethought is crucial to reduce the costs of implementation. When you choose an ERP system that doesn't meet your business needs and challenges or makes you purchase more functionality than you need, it will cost you money. For keeping the cost in control, select an ERP system that is easily customized according to your organizational needs, flexible enough to adapt to changing business requirements, and modular, so you only purchase the functionality your business needs. But make certain you'll be able to extend the functionality in time to come, and it has a long-term roadmap, so it offers value for money.
3. Avoid Needless or Excessive Customization
Companies often fail to consider their business requirements and add on different options to enhance their ERP system, which is not a good approach. While some customization is needed in an ERP implementation, it can be costly and inessential at times. Excessive customization can also make upgrades difficult – the custom code typically needs changes whenever the vendor issues a new release. So, focus on your most immediate business needs and learn how to use different processes within the system. After bringing out the most important ERP functionality, you can consider additional features too. Note that customization should be kept as minimum as possible since it increases implementation costs and the timeline of the ERP project.
4. Focus On Long-term ROI
There should be an established plan for the best- and worst-case scenarios for ERP spending during the implementation process. You should determine your ROI (return on investment) prior to project initiation and consider the long-term effects of your decisions on your organization. This has to be a significant part of your ERP business case. Sometimes, the most budget-conscious firms end up paying a great price for their ERP implementation as they focused on low, upfront cost savings and ignored long-term goals. When you cut corners, you might face problems and miss out on higher ROI.
To cut a long story short, ignoring best practices might be of use in reducing upfront costs, but to enhance your software value and lower the risk, your project strategy should be developed around generating long-term ROI.
5. Make the Most of Your ERP Partner's Expertise
If you hire an ERP consultancy to implement your software, make the most of your consultant's time. You should rely on them not only for their technical expertise but for business prowess as well. Ideally, they should be involved in all aspects of your ERP project, from the selection, process management, implementation, and change management. You can also maximize their expertise by getting help in training and ongoing support with the product. Hiring the right ERP partner is a key element in ensuring your implementation goes off without a hitch.
6. Consider the Cloud
Have you considered a cloud-based ERP solution? Cloud ERPs solutions are more cost-effective than their on-premises counterparts and cloud ERP has a lot of benefits. The upfront costs are lower, as most charge on a subscription model, monthly or annually. You'll also save on infrastructure as you don't require any hardware or servers as the vendor hosts the system. Cloud ERP implementations are also typically quicker and less expensive compared to on-premises. According to a Forrester Total Economic Impact (TEI) report, companies who moved to the cloud reduced their deployment costs by an estimated 30% to 50% compared to on-premises ERP.
7. Select the Right Implementation Plan for Your Business
Set yourself up for ERP implementation success by selecting the right type of implementation for your business, whether a typical time-and-materials implementation, lean implementation, or fixed-fee implementation. There are advantages and disadvantages for each type, based on your business and needs. For instance, if you are a smaller company or are upgrading from an accounting software, a lean or fixed-fee implementation might help you constrain the costs and the timeline of your ERP project.
Final Thoughts
ERP implementations can be pricy and go off-budget, but it doesn't have to be like that. By developing a realistic budget, planning the project in line with the unique business needs, and following the best practices for ERP implementations, your company can enjoy the benefits of an ERP solution while setting your business up for long-term success.
Got questions? The team at Kwixand Solutions is happy to help and guide you through the ERP journey. We're a Microsoft Dynamics 365 Partner, and our consultants bring over 25 years of experience helping businesses across North America digitally transform.
We also offer KwixStart implementations for small and mid-sized businesses that want to adopt D365 Business Central. These fixed-fee lean implementations have a set price and timeline and include a discovery process, data import, training, and support. Get in touch with team for more information.
More Resources
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