ERP implementations and digital transformations more often than not cost more money than expected. However, there is a secret recipe to save a ton of money on your ERP implementation costs.
To set the stage for this common-sense solution, below is an excerpt from a manufacturing company’s recent financial results. In the company’s comments to investors, the CFO cited its SAP implementation problems for $5M in extra costs to expedite shipments to customers following go-live. He also points to some of the supply chain disruptions caused by the rollout:
Though this company is not a client of ours, I suspect that they did not factor in this $5M of additional costs in their initial project estimate. Worse yet, I suspect that they could have avoided these extra costs simply by investing a fraction of that time and money in doing the project right.
Here is another case study of the hidden costs of not doing things right the first time. When I first started my last independent ERP consulting company, one of our first ERP implementations was for a mid-size industrial product manufacturing company. They were implementing Epicor Vantage, but as most projects do, the project was taking a bit longer than expected.
The CEO and I had a very good relationship, so we discussed options to address the increasing time and costs. We suggested that an additional 30 days and $100,000 of consulting costs would have adequately prepared them for a successful implementation. He didn’t want to let the timeline or budget slip, so he insisted that we pull the trigger and go live as planned – despite failing the go-live readiness assessment that we had completed for them and their software vendor.
Shortly after go-live, the client could not ship product for several weeks. Order backlogs skyrocketed. Customers were irate. When all was said and done, the CEO shared that they had lost roughly $10M in lost revenue, which is a lot considering their $100M in annual sales. With the benefit of hindsight, he acknowledged that it would have been much more prudent to spend the extra 30 days and $100,000 to get the project right before going live.
This brings us to the answer to how to save money in your ERP implementation costs. The good news is that it is a pretty simple recipe.
To summarize, investing in an effective implementation is much less expensive than screwing it up. These are some of the things that you will want to invest in to ensure that your project is ready for go-live:
These few things may not solve all of your risks and challenges, but they sure will go a long way to setting you up for success. If you don’t have these fundamentals in place, it may make sense to call a timeout to regroup before moving forward with your technology transformations.