Even ERP systems that have been correctly selected and implemented have opportunities for optimization. As business requirements change, organizations frequently become dissatisfied with their ERP systems. This can occur following merger or acquisition activity, introducing new products and services, customer demand, or other reasons.
Periodic optimization of the ERP systems can deliver benefits, including cost reduction. The following steps can help determine what is working and a plan for what is not.
- Identify Where Issues Occur.
Problems with ERP fall into four categories: the software, the installation, how it is used, and where the organization is not using it and missing benefits as a result. Understanding where the problem occurs will help with the remediation strategy.
- Outline the Fix Strategy.
Understanding where issues occur can help form a proactive strategy for making corrections. If the problem is with how the software is used or not used, prioritizing an optimization plan can help the organization avoid the expense and disruption of selecting and implementing a new system.
- Look at the Cost Savings.
The majority of ERP costs is in maintenance, not the up-front implementation costs. Optimizing the ongoing ERP support costs can lower TCO over time.
- Create and Commit to an Optimization Roadmap.
Prioritize what needs to be done and when. Approach it with the same amount of discipline as the initial implementation.
Proactive ERP optimization can extend the life of a current system and progress the business into the future.
How to Budget for a New ERP
When evaluating the cost of ERP, there are several factors to consider, i.e., number of users, required applications, and the amount of customization needed. Understanding the needs of the business can help you make an informed evaluation. When evaluating ERP, consider the following:
- Annual License Subscription Per User
- Annual Maintenance of Legacy Systems
- Data Center and IT System Support of Legacy vs. Cloud/SaaS
- Term of Contract
- Support, Maintenance, and Upgrades
- Services Fees
- Change Management
- Cost to Add Users/Functionality
- Project Team Allocation, i.e., Time and Resources
- Customization vs. Configuration
- Post Go-Live Support
- Managed Services
There are also soft costs to consider when embarking on an ERP implementation. The average project duration is more than 14 months, while upgrades are typically shorter duration. According to a 2019 ERP report by Panorama Consulting Group, ERP projects use between 12-24 internal resources, resulting in lost employee productivity.
Read our full article titled “Why Your Incumbent ERP May Be Your Best Path Forward.”