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SOFTWARE SELECTION WITH SHELDON NEEDLE

Evaluating and choosing the optimum ERP solution is as challenging as it gets. Is this challenge affecting your competitive edge?

  • Are you looking at the right systems?

  • Is your organization ready to select and implement a new solution?

  • Have you made a business case for the cost involved?

  • Have you defined the steps to validate your decision?

Afterwards, we’ll email you our justification for the recommended vendor(s) and additional steps to consider for a successful outcome. We’ll also include the CTS Best Practices e-Guide -- how to define your manufacturing requirements, prepare an RFI, get the most out of demos, validate references, negotiate best price, and more.

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Cut Your ERP Software Implementation Costs: Use A Jointly Managed Approach
by Sheldon Needle, CEO/Founder of CTSGuides.com

If you are about to embark on a serious ERP software implementation project for your company, you will want to reduce implementation costs as much as possible. One of the often overlooked issues when acquiring a new ERP system is choosing the implementation model that you (the buyer) and the seller (vendor) will use. In other words, who will do what and when. The more your company is able to do in-house, the lower your costs will be.

These labor costs have a major impact on the ratio of software to implementation costs. Usually this will be about 1:1 for mid-market ERP systems but can range up to 1:2 depending on the scope and timeline required. (Tier one products like Oracle and SAP can have ratios like 1:4) The application modules themselves give a hint but there are implementation choices within given modules that will significantly affect the time required.

In an ERP Implementation that is cooperative, the vendor and buyer work together to determine the planned scope, timeline, mode of implementation desired and then compute a budget for the expected costs. When the project is cooperative, and not simply handed over to the vendor, the buyer can assume reasonable responsibilities and cut the costs of the project significantly.

There are three general types of software implementation projects:

  • Client Managed - involves the client reading the implementation guidelines and engaging a consultant to assist in specific tasks, Q&A, etc.
  • Turnkey - a scope is determined up front, consultants do all the work and then deliver a complete system.
  • Jointly Managed - a scope is determined up front, consultants do all the work and then deliver a complete system.

The majority of ERP Implementation projects are Jointly Managed. Turnkey is rare and Client Managed is even less rare. Even in a Jointly Managed project, a significant part of the cost of ERP implementation is dependent on the availability of buyer resources. Generally speaking everyone already has day jobs (so to speak) and availability to take on a significant project and complete tasks on a timely basis is a serious challenge. So allocating in-house resources requires commitment, a reasonable time line, and patience. It will also save a lot in consulting fees.

How much are consulting rates for ERP Implementation? The rates vary depending upon the resource. Generally speaking rates are in the range of $175 an hour and 1/2 rate for travel time plus actual expenses for hotel, auto rental, flights, etc. IRS Per diems may be used to cover meals.

Data Conversion costs also varies greatly. ERP vendors have good built-in tools to import master tables. For example they can import suppliers, customers, stock codes, bill of materials, etc. However, if you are willing to commit your own employees and time to the project you can save a lot of money. Data conversion is not such a difficult task to manage. For the most part data needs to be exported to Excel, massaged as needed and organized into columns that match a sequence of columns that the ERP software expects. You then just copy the Excel data and paste it into your system. The software validates it to insure the data types are right, data widths fit and required fields are populated. Then the data is imported. Summary historical data can usually be easily imported, but long, detailed history is generally more difficult.

With such a simple set to tools, data conversion can often be done using the buyer’s own resources. Of course consultants can do the work if necessary. This is just a by-the-hour type of project.

Conclusion

The complications and cost of implementing a new ERP system can be greatly mitigated with thorough planning and a buyer who is willing to commit the necessary staff resources to assist in the implementation and training phases of the project. If you are able to commit your employees to work on the project, you can significantly cut the cost of ERP implementation.


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