Enterprise resource planning (ERP) is a system of integrated software applications that brings together your business processes across HR, finance, procurement, distribution and other departments on a single database.
The desired result is streamlined and standardised processes that improve enterprise efficiency and effectiveness and enables greater collaboration and agility.
Sounds amazing. But ERPs are not for everyone and shouldn’t be entered into lightly.
Here are the things vendors won’t tell you about implementing an ERP into your organisation.
Average costs of an ERP project
- The overall project cost of an ERP will be equal to 3-5% of your company’s total revenue.
- ERP project implementation cost is approximately 5x your software license costs.
- You’ll need to dedicate five full-time employees for the project duration and at least two FTEs for ongoing support post implementation.
- Annual ERP vendor support is 22% of product/license cost.
Business hurdles of an ERP project
Select the right Tier because 1 isn’t always best
There are 3-4 tiers of ERPs. Vendors may say that Tier I is the best. In reality, only very large, global enterprises will ever use more than a small percentage of the functionality available in a Tier I ERP.
Process changes mean less efficiency
Bringing your business processes together means new systems. Staff need time to learn how to use them, and businesses often see a dip in productivity in the early stages of implementation. 51% of companies experience operational disruption when they go live.1
Change management is non-negotiable
If your ERP project is to succeed, you will need an organisational change management program that brings employees on the journey and helps them embrace the changes.
Don’t underestimate data migration
Not prioritising data migration can be disastrous for a project. ERP software data quality was a contributing factor to the eventual bankruptcy of Target Canada, for example. Most enterprises have weak editing rules and overlapping databases. An ERP system requires tighter editing, and this can often increase data migration time.
Custom code should be avoided
70% of enterprises require some or significant customisation2, yet it increases implementation and ongoing costs, voids the warranty and makes future upgrades difficult.
Budget future costs into your ROI
Aside from the annual ERP vendor support fee, over time you’ll be forced to move to new and unproven platforms as vendors withdraw their support for your version of the software. Ensure you factor in continued rising costs throughout your ERPs lifecycle.
Why do some ERP projects fail?
When you’re spending up to 5% of your annual revenue, you want guaranteed success. In an ERP implementation survey, 33% or organisations said they considered their project to be a partial success.3
Some of the reasons ERP implementations fail
- Selecting the wrong Tier ERP
- Lacking a strong business sponsor
- Unaligned or undefined program goals
- Poor project management
- Inadequate resources
- Substandard data cleanup
- Staff or leadership resistance
- Disillusioned supporters.
Still think an ERP is the right solution for your business?
Before you commit, contact us. There are plenty of alternative options that can deliver similar results for a fraction of the cost.
