What do you need to know before evaluating Cloud ERP solutions for your business? We explore knowledge every CFO, CIO & Project Manager should be...
How to: Reduce ERP Implementation Costs
In this article, we discuss some of the methods that are commonly used to reduce or control the cost of ERP software ...
In this article, we discuss some of the methods that are commonly used to reduce or control the cost of ERP software implementation and licensing.
Feel free to use some of our free resources to help you control ERP software costs:
Compare ERP Software Costs
The best way to save money on your ERP project is to ensure that you compare at least 3-4 ERP partners and vendors during your ERP evaluation process.
Perhaps you’ve used Netsuite or SAP at a previous company and you already know which ERP software you’ll buy, but the last thing you should do is tell an ERP vendor or partner that. Instead, make sure that you always create competition during your evaluation to ensure that all suppliers put their best offers forwards.
Negotiate your ERP Contracts
Many ERP software vendors have list prices that are 2-3X the actual final negotiated rates they sell for. Negotiation during your evaluation process won’t just save you 5%, put potentially 50% or more depending on the ERP vendor or partner. For the smallest company, negotiating properly can generate $10,000 or more per year of savings - for larger organizations purchasing Tier 1 or Tier 2 ERP software, the savings can be in the millions of dollars per annum.
Choose a Pre-Configured ERP Solution
As well as reducing ERP software costs, reducing your ERP implementation costs is the biggest Year 1 ERP investment cost, so saving money here is key. To do this, we recommend evaluating and selecting pre-configured ERP solutions where possible. Needless to say, you aren’t the first food manufacturing or professional services firm that has implemented ERP software, but you could be the first to implement a particular ERP solution. If you are, then the costs and risks of doing so will be high. You’ll essentially be paying an ERP implementation partner to build you a solution from scratch.
The best way to do this is to look for ERP software that is already used by others in your industry or peer group and to look for pre-configured ERP systems with industry templates that offer a high degree of fit to your business processes out of the box. In this scenario, instead of building an ERP solution from the ground up to meet your company and industry needs, you’ll be paying for trimming and finishing to meet your very specific company differences instead.
Choose Cloud or On-Premise ERP
There is a rhetoric that Cloud ERP is cheaper than On-Premise ERP, but here at ERP Research our honest opinion is that it truly depends.
If your organization already has an IT Operations Team in place, its own data centre set up and the right skills in place, then Cloud ERP probably won’t save you any money. On the other hand, if you’re a startup or scale-up company or have no existing IT operations, skills, people, or infrastructure then Cloud ERP is likely to be the best choice for your business.
Get the Right Resourcing Mix
On shore, local resources are typically more expensive, whereas offshore ERP development centers can reduce the day rate of ERP projects by 50-80%.
So does that mean you should completely offshore your ERP project to reduce your costs? Probably not! Getting the right resourcing mix will ensure that you don't compromise on quality, by assigning the right project roles to the right professionals.
For example, having a local ERP project manager may enable you to more easily articulate the needs of your business and ERP project to your ERP implementation partner, therefore increasing the time to value of the project and reducing error. On the other hand, it probably makes sense to outsource more straightforwards ERP build tasks to offshore resources.
Manage ERP Integrations & Interfaces
Integrating your ERP software with other systems can be one of the most expensive elements of an ERP project, so controlling this is crucial to reducing your ERP project costs.
Integrating your ERP system with another application or data source often requires custom coding and work to be undertaken and that work and intellectual property then have to be maintained as each integrated application is upgraded or changed.
Many ERP solutions provide out of the box integrations with 3rd party applications such as CRMs, HRIS platforms and more, which can reduce the cost, but even in this scenario some custom work may need to be undertaken to provide the exact capabilities you need.
When considering integrating your ERP platform with other systems, then make sure you calculate the return on investment before committing to the cost and time.