We often get the question, “how much does it cost to implement a new ERP system?”
This is akin to asking how long is a piece of string and depends on a load of factors from the obvious (the cost and complexity of the software) to the very subjective (the cost of the disruption to the business) and everything in between.
Coming soon a White Paper :
Planning and Estimating the internal cost of your system implementation
That said, this article states that the average ERP system costs $8,265 per user over a 5-year period.
Before you all panic, note that this is the total cost (so presumably includes licenses and consulting services) and is over 5 years.
So what are the main costs when implementing an ERP system?
The biggest cost, and the one that is almost never incorporated in the calculations, is the cost of the time of the agency’s employees. In other words, the time that they need to give up throughout the implementation process. I like this article on LinkedIn because it uses the simple rule of 5 to calculate the cost. The total cost will be about 5 times the software cost. It’s simple and backed up by years of imperial evidence.
Next is implementation cost. This is the focus of this blog and it is the cost of the consultants who will assist in the implementation.
Many ERP system vendors will say that the implementation costs are approximately 1:1 with the total software costs but the reality is that it’s more. This is because most vendors (and I know it sounds ironic that we are saying this as software resellers ourselves) will lowball the fees to encourage the clients to sign.
We often get asked why it’s so expensive so let’s look at the components of the implementation fees.
Like it or not, implementing a new system is a project and therefore needs to be managed like one. Just as you plan work for your clients, a system implementation project needs:
- A scope – what is being implemented, what objectives are being met, what constraints do you have, what are the risks, issues, dependencies, etc.
- A plan. What will happen, when it will happen, who needs to be involved, etc.
Every business is different. Of course, businesses from the same sector will be similar but they will not be the same, particularly agencies! And rightly so. Agencies need to have differentiators to stand out against the competition
That’s why implementation has a requirements analysis phase. This is when the consultants match the business requirements to the software functionality, as the name suggests.
It helps to select software that has a close strategic fit with your business because it means that the software will need little configuration or customization to work ‘out of the box.’ The consultants will also have a lot of experience with your business and can genuinely add value. For example, WorkBook is a total agency system that has been built by industry veterans so you can be sure will meet 95% – 100% of an agency’s requirements out of the box. Our team also has years of experience working in advertising.
The ERP system needs to be configured and installed once the requirements have been agreed upon and documented. Installation is now typically in the cloud and that is absolutely the way it should be for modern agencies. This avoids all the cost and hassle of installing the software on-premises.
The team needs to be able to use the software. Some people are ok with instructional videos, and some prefer to have a consultant do it. The latter is obviously the more expensive.
Your agency needs to be sure that the ERP system meets your requirements. You need to run a bunch of different projects and project types through the system to replicate as many real-life situations as possible before you go live.
Granted, most of this work will be internal but you will need the consultants to be on hand to answer questions and confirm the process. They will also need to make any tweaks to the configuration based on your feedback.
Once again, the majority of the work will be done in the agency. However, you will need assistance in extracting data from your legacy systems and loading it to the new system.
Go Live support
Going live on a new system will be a big change for the business. Users need to be trained, they will have questions and the agency’s internal team will need assistance to manage this and assist them. The internal team also will need help to familiarize themselves with the administration of the new system.
Your agency probably has project managers so perhaps this is self-explanatory. The project manager is required to ensure that the project stays on track and on budget.
There is a lot to implementing a system as you can see above. This is why you need to budget for these costs as well when selecting a new ERP system. The overall cost of the implementation will vary from system to system based on its complexity. The higher costs of each of the above steps, the more complex the system. That means that it’s sometimes better to select a bespoke system that meets the majority of your agency’s requirements right out of the box.
Selecting the right system for your agency- Go to Market
This is the 2nd in a series of articles related to ensuring that you select the right ERP for your agency. In the last article,
Selecting the right system for your agency
Selecting the right system for your agency might be a challenging process. We’ve seen it in many of our clients and are here to help.
Why don’t more ERP’s have client & vendor portals?
Client & vendor portals are essential to take full advantage of shared service centers. They keep back-office lean and efficient. But most ERP tools don’t