What exactly are the costs of an ERP project? At Cegeka, we get this question regularly. Which is understandable: the investment in ERP is so significant that having a clear understanding of the cost structure and return on investment is crucial. In this article, we will focus on the complete picture. Besides the obvious costs, such as licenses and services, there are also several (hidden) costs that are often overlooked or underestimated during an ERP journey.
Primary costs of an ERP project
When budgeting for an ERP implementation, it's essential to understand the different costs that make up the total expense. We can divide this into primary costs and ‘hidden costs’ that you might not think of right away.
Let’s start with a list of the primary costs:
- Software costs: the software costs depend on the type of software you choose. Some ERP systems have a one-time license fee (often on-premise), while others have a subscription-based model (often in the cloud). When it comes to Microsoft Dynamics 365 ERP software, the costs can vary depending on the specific products, number of users, the subscription plan, and third-party add-ons.
- Hardware & infrastructure costs: there may be a need to purchase new hardware to support the ERP system. This can include buying or updating storage devices, servers, and other equipment. Additionally, you need to consider things such as data storage costs, extra data volume costs, and additional security measures.
- Consulting, project, and implementation costs: ERP projects often require the help of experienced consultants to manage the project and ensure successful implementation. This cost can vary depending on the size of the project and the specific needs of your business. Also, you should not forget the impact of training sessions, internal resources, and change management. Overlooking these aspects can lead to unexpected costs if you are not fully prepared for the change.
- Support, monitoring, and maintenance: when incidents occur, you have the option to resolve them in-house or seek support and maintenance assistance from a partner. Of course, both options come with a price tag. When working with a partner, it’s essential to look into the details of the Service Level Agreements - which can often harbor hidden costs that you might overlook.
The one thing that no-one talks about: the potential to fail
When embarking on a new project, especially something as complex and resource-intensive as an ERP implementation, the focus is naturally on the many benefits that successful completion will bring to an organization. And although no one really talks about it, there is always the potential to fail and the significant costs associated with it. There are several financial risks that nobody wants to talk about, but that everyone needs to understand:
- The project can fail: with money spent on software licenses, consultation fees, resources, loss of productivity, and business disruption.
- The software doesn’t work (properly): which can have an impact on operational disruptions, data loss, reputation damage, remediation costs, and more.
- Wrong partner and/or software: when there is a mismatch this can for example cause migration and reversal costs, operational inefficiency, lost business opportunities, and more.
How to tackle your ERP project from strategy to go-live?
Up to 2 in 3 ERP projects fail or take longer than expected. Want to be that 1 in 3? Then you’ll need two things: a solid preparation and a reliable, experienced partner. This series helps you find all that and more. Because after all: it takes Two to Tango!
We are a fan of surprises…but not when it comes to ERP costs
The cost of an ERP project can vary greatly: depending on the size of your business, the industry that you are in, the specific needs and complexities of your business (for example, multiple countries or the required customization), the scope of the project, and the specific software and/or modules you choose. At Cegeka, we are fully committed to giving you a transparent image of the possible expenses, so you can make well-informed decisions and don’t get 'surprises' in the end.
Ready to embark on your ERP journey? Contact us today to get a comprehensive understanding of the costs and benefits of implementing an ERP system for your business.
