Cost of Saving Money during ERP Selection
A new ERP system is expensive! Can you save money by doing your own ERP system selection and evaluation? After all, the various software companies are happy to provide lots of information and spend as much time as you’d like showing you how the products work. You also have all the information that Google (or Siri or Bing) can provide simply by typing in the potential system names.
The catch is, each ERP vendor will focus on what their system can do for you, not what they cannot, and they will hit the target every time! What gets missed may be critical, and you won’t find out until you’ve signed on the dotted line and the implementation gets started (can you say “customization”?). It’s not that they are necessarily trying to mislead you – how can they know what makes your business so special? Isn’t that one of your trade secrets?
OK, so once you have picked the right system for your business and are ready to move into implementation, can’t you then bring in experienced ERP consultants to help implement your new system, thereby avoiding paying them to help you figure out what you can do on your own? What will they bring to the table that you cannot do yourself? Does the ERP version of a personal shopper ever make sense?
Sure you can save money! Sometimes. Depends on (1) how complex your business is, and (2) how much time you are willing to devote. If your business is simple, exactly like all of your competitors and you have tons of spare time, you don’t need to read any further. But then, if your business were really that simple an ERP system would be a waste of your time and money.
One “secret” that doesn’t get mentioned when the ERP companies are wooing you is your implementation project should really start before you send out your first RFI (Request For Information) or call the first sales rep. Remember the old mangled saying “Ready, Fire, Aim”? That’s what you are doing if you start calling for demos before documenting exactly what the new system needs to do for you, the top priorities and showstoppers.
Too often, we get called in to help a company with an ERP implementation project only after they run into trouble or they have a failed start (see our Q1 newsletter case study). The key to success that gets missed is two-part: (1) understand what your business processes will look like in your vision of the future, (2) document those processes in a way that you can use to compare ERP packages and implement your chosen system.
Unfortunately, doing that documentation can take time to develop on your own. An outside ERP consultant has already done this multiple times before, which means only having to concentrate on the 10-20% of what makes your business different from the others in your industry (your competitive advantages). They will also look at what you really need to buy, since the number of licenses will very likely change (the new system is going to make you more efficient, right? But in what departments, and by how much?).
Most ERP sales contracts we see (after the fact) contain at least 10% of wasted dollars, either modules that won’t get used (“but it sounded like we needed it”) or having too many or the wrong kind of licenses. On top of that, remember that you just signed up to pay for maintenance and support on those wasted dollars too (so make that 20% over the next 3-5 years).
Getting back to all that spare time that you don’t have, your ERP consultant should help you get to your decision faster. After all, you and your employees are already busy running the business, right? Among the reasons why you started thinking that you need a new system is probably the existing system won’t let you grow fast enough, breaks down, has errors, lacks tools to run more efficiently, and so on. Real dollars in terms of lost revenue and higher costs, and getting the right new system sooner will let you make more money sooner. The best and highest use of your time is running your business, not evaluating ERP systems, or you would be doing that for a business.
Bottom line – add up the 20% you didn’t need, getting the system you need with fewer customizations, getting it in faster, and spending your time on making money in your business. Maybe it costs more if you hire the ERP consultant after you pick a system…
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