Q

Keeping ERP costs in check

In this expert response, learn how to avoid going over your budgeted ERP costs.

I'm concerned about our upcoming ERP project going over budget. What are some areas of the implementation that we should watch out for when it comes to surprise ERP costs?

You have good reason to be concerned. While many ERP budget items are somewhat predictable or fixed -- such as computer hardware, system software and ERP software licenses -- two of the biggest budget surprises that commonly occur are software consulting costs -- including project management and application consulting -- and customized software development.

If you want to control ERP costs, my advice is to closely manage your consultants. This starts by selecting the right consultants and clearly defining the project scope, consultant responsibilities and deliverables. Next, develop a realistic budget for each consultant with the number of hours planned per week. Also, realize that with a little coaching, many tasks that consultants typically perform can be accomplished by employees on the project team. This also helps support the cause of software knowledge transfer.

The time and cost for outside contractors to perform software modifications is almost always underestimated. For this reason, software modifications should be avoided unless the changes are business-critical and approved by the executive steering team.

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About the author:
Steven Phillips is an ERP professional with more than 27 years of implementation experience, and the author of the book Control Your ERP Destiny. His background includes senior management education, software selection, project management, application consulting, process redesign, systems design, testing, training and post-go-live support.

Steven has a degree in production and operations management, with advanced studies in industrial management. Previously certified by the American Production and Inventory Control Society, he has written articles appearing in APICS publications. He also runs the popular blog Street Smart ERP.

This was first published in March 2014

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