The Challenge of Estimating Implementation Time and Cost
Bias and lack of independence are two the biggest reasons why companies struggle to create accurate estimates for their SAP S/4HANA, Oracle Cloud ERP, or Microsoft Dynamics 365 implementations. CIOs and CFOs too often rely too much on sales proposals to determine their “final” implementation time and budgets.
There are a number of problems with this over-dependence on sales proposals in determining the implementation time and cost:
- Vendor and system integrator sales reps typically assume best case scenarios in creating their estimates
- Sales reps have no financial incentive to give you a realistic estimate, but they do have an incentive to err on the side of lowballing the estimate
- Implementation assumptions are often flawed or incomplete
- Estimates often don’t take critical complexity factors into account
This last point is perhaps the most important. Not enough system integrators, consultants, or project teams accurately take these factors into account when planning their projects. This is one of the major reasons why so many projects take more time and money than expected. This planning and estimation process is even more than important than your comparison of SAP S/4HANA, Oracle Cloud ERP, and Microsoft Dynamics 365.
Leveraging the Complexity Factors in your Implementation Time and Cost Estimate for SAP S/4HANA, Oracle Cloud ERP, or Microsoft Dynamics 365
Your implementation time and cost will largely be driven by factors outside the realm of your technology. Instead, time and cost are more a factor of your own internal situation and competencies than it is the software itself.
Below are the factors most likely to impact your implementation time and cost:
Magnitude of business process change. The magnitude of change between your current and future state business processes will have a significant impact on your implementation time and cost. It also has a large impact on your implementation risk profile. The larger the change, the more time and money it will take.
It is important to assess the maturity of your current business processes and compare to the level of maturity required in the future. Be sure to ask, “how much change are we really willing to tackle?” when scoping and planning for your project.
Impact on people. Similarly, the magnitude of change on people will have a significant impact. The more cultural and organizational change required, the more time and money it will take. For example, a company moving from a loose confederation of independent business units to a highly coordinated, standardized business will spend more time and money than on making more incremental changes.
For this reason, an effective organizational change management plan needs to be factored into your overall implementation strategy and plan. This will help determine how much time and money your project will ultimately end up costing.
For example, an organization migrating from a legacy AS/400 system to SAP S/4HANA or Microsoft Dynamics will spend more time and money than one migrating from a Y2K ERP system to a more incremental improvement. Conversely, simpler ERP upgrades will take less time and money than the larger, rip-and-replace projects.
Functional expansion. If you are simply automating functional processes already automated by your current legacy system, then your implementation time and cost will be less than one adding new functionality. The more extended functionality you wish to add to your scope, the more time and money you will spend.
For example, implementing core financials and accounting will be much less complex than implementing advanced planning, machine learning, and other functionality that you do not currently have. These extended functions will also increase your implementation time and cost.
Geographic considerations. Simply put, the more geographically diversified your end-users will be, the more time and money you will spend on your project. Implementations spanning multiple countries and diverse cultures are the most complex, followed by multi-site domestic implementations. Single-site implementations are the least complex from a geography perspective.
Internal team experience. If your internal team lacks past implementation experience, then you will probably spend more time and money on your deployment. You need not have the qualifications of an outside consulting firm, but some past experience among team members always helps. This is a qualitative factor that can be assessed by independent consultants such as those at Third Stage.
Learning how to estimate the implementation time and cost for SAP S/4HANA, Oracle Cloud, or Microsoft Dynamics is an art as much as it is a science. The important thing is to create a realistic plan and budget grounded in realistic assumptions and based on accurate benchmarks.
Learn more by reading about lessons from 1,000+ ERP implementations over 20 years.