We have worked with many businesses on the acquisition and implementation of cloud-based Enterprise Resource Planning (ERP) solutions. Our customers are eager to embrace Cloud ERP, in part because the technology cuts out some of the more tedious and costly aspects of ERP setup and management. There’s no hardware to buy, no server software to stand up and so forth. However, the ease of deployment sometimes leads people to overlook some essential, unavoidable costs. It’s a wise practice to think through potential ERP costs at the outset of the cloud ERP acquisition and implementation processes. The costs are going to come up, whether you plan for them or not. As we tell our consulting clients, getting savvy about ERP costs is always a good move.
Understanding your ERP Total Cost of Ownership (TCO)
The purchase price of ERP cloud software can be a sizable investment, savings on capital expenses notwithstanding. The questions to ask, however, are “What am I leaving out” and “What is my total cost of ownership?” or TCO for cloud ERP? It’s not the fees for the software. That’s part TCO, for sure, but there’s a lot more to it. Calculating your TCO comes from understanding your implementation plan. The plan, and its estimated costs, should come out of a thorough communication process with every relevant team in the company and due diligence through references from other companies which have been on the same journey. It is essential to ask questions along the way and to record all answers.
Individual ERP Costs
There are a number of individual costs rolled into your company’s overall cloud ERP investment. To get at them, have your operations, legal and IT teams vet the service level agreement and validate your budget estimates for the ERP solution. For instance, you might have budgeted one full time employee (FTE) to manage the cloud ERP environment, but IT thinks you need 1.5 or 2. Or, have you chosen the right support plan? The faster service level agreement (SLA) may cost more, but your business might need it if your company competes by offering round-the-clock ordering and rush deliveries.
What other factors are relevant regarding customer support availability, especially important during the first few months of the rollout? Regarding the rollout, your approach can affect costs. A staged rollout may require less overtime than an all-at-once switchover to the new cloud ERP. It is important for these and any other issues to be documented by time spent and cost.
Learn more in How Much Does ERP Cost?
Training is an unknown until all possibilities are discussed and put in writing. Will your provider include onsite training based on your operations? Could online classes be enough? Are classes free? Is there a sliding scale? Are you depending on your in-house staff to get the others up to speed? How will you negotiate if you need something more, or different? These are questions that need to be answered upfront, with projected costs if circumstances change as your company grows.
Time is a big one. Your C-Suite, department managers and anyone who needs to be part of the buy-in for the ERP cloud software implementation will be taking time from their daily responsibilities in order to properly plan and be trained for a smooth transition. Their time represents an expense for the business even if it’s intangible. It is especially important to note that if people invest their time in the beginning to “get it right,” there will be fewer chances of workarounds, system downtime and maybe a general fear by staff of moving to something new, yet better. Take into account the costs of getting it wrong and the efforts to be organized will pay off.
Software and growth
Is your business going to grow in the future? You hope so, right? Thus, it makes sense to build contingencies into the contract for add-ons, upgrades and unforeseen factors. Growth-friendly pricing would be ideal and would have to be negotiated up front. Many suppliers offer caps on annual pricing. Circumstances such as additional software users and system access are unexpected costs that “you don’t know if you don’t know.” Did the word “unlimited” get written into the agreement? There may be additional training for new hires, upgrades suggested by the vendor and possibly changing needs for software maintenance releases and more or different support. This should all be discussed and end up in writing.
Learn more in Benefits and Cost Savings of Cloud ERP Adoption.
As you can see, getting your TCO right for cloud ERP requires attention to detail. It’s only partly about money. Understanding ERP costs has a lot to do with grasping how the software will affect the organization—and getting opinions and buy in from key stakeholders on what they expect out of the technology. We can help you navigate the planning and cost estimation processes. Contact us for what promises to be an informative dialogue about planning and budgeting for cloud ERP. Watch our Acumatica demo to learn more.