6 Ways to Gain Control of ERP Costs
The question of whether organizations need enterprise resource planning (ERP) has been answered. For an organization to remain competitive, ERP is an absolute requirement. Now organizations are struggling to maintain control of ERP budgets both at the implementation stage and throughout the life cycle of the application.
As competition tightens, however, companies need to find ways to gain control of ERP costs or see their investments in the technology continue to increase without return. This brief article outlines specific ways to control costs both before and after implementation.
Cutting Implementation Costs
Implementation costs are the subject of much discussion because that’s the first place organizations encounter overruns. Without careful control, implementation teams can find that the ERP timeline goes awry, deadlines are missed, and the project becomes more complex.
To reduce the chance of overrunning the budget from the outset, ERP implementation managers should identify and plan for several stages of implementation, including:
- Choosing the right consultant: Interview several candidate companies to help guide the implementation process. The wrong choice will lose both time and money.
- Managing the scope of the project: This includes getting buy-in from all stakeholders before the project begins. Managers and users need to have time to adjust or they will refuse to adopt the ERP.
- Limiting customizations and modifications: Only the most critical aspects of the ERP should be customized. Modifications are expensive and can quickly overrun the budget.
- Planning for data cleansing and storage activities: If these activities are listed both as a budget line item and a manpower issue, companies are less likely to underestimate them.
Managing Long-Term ERP Costs
Even more surprising than unexpected implementation costs is the way in which long-term ERP expenses can balloon out of control. Most organizations don’t anticipate outlays on strategic application integration and maintenance and upgrades after those integrations have been made. But they must plan early or spend later.
To overcome these long-term costs of ERP integration, organizations must:
- Build an application integration plan: This must include the cost of maintaining the ERP system as well as integrated applications that can affect the ERP system when they are upgraded.
- Consider a third-party maintenance provider: This may be a cheaper way to upgrade and maintain the ERP system as well as integrated apps that could affect performance.
As market competition increases, ERP is becoming an area of cost-cutting focus for all organizations. ERP applications must operate as lean management tools, allowing companies to focus their budgets on other areas.
To do that, organizations should plan from the beginning to create a lean ERP environment. That means not only cutting costs during implementation but also finding ways to keep ERP maintenance costs lower over the long term.