In a recent survey of companies the number of respondents who answered that their ERP project had been completed within budget shrunk from 37 percent last year to 30 percent in 2015. In other words, more projects were blowing their expected costs for design, installation and implementation than the year before, an accountant’s nightmare come true. No surprise, the average total pricetag for an ERP solution has jumped in one year an average increase of $1.7 million. In a lot of ways, ERP is a lot like a home repair – don’t do it right the first time and you will end up spending five times as much trying to fix the mistakes after the fact.
When examined in detail, the number one reason that respondents gave for the project cost jump was a change or increase in project scope. Something was missed and had to be included when the project was already engaged, a spec change. Additional problems included not having the right staff or enough manpower in general as well as having the wrong technology on hand. Again, both items can drive costs up at the last second when demand is high and the ability to compare quality is extremely limited.
The best way to budget correctly for an ERP project is to do the planning the right way from the start. And this begins with a thorough mapping of one’s existing processes as well as a detailed explanation of what’s desired. Too often everyone involved wants to jump into creation and building. However, a premature start almost always ends up with a financial mess. Instead, every process to be covered, however mundane, needs to be thoroughly mapped in detail and in flow chart. This existing analysis then needs to be objectively compared with the desired goal and a full gap analysis has to be prepared, i.e. what does it take to get from what we do now to what we would like it to be. No process or module should be left out. When that gap analysis is complete, then and only then should the scope of the project be written based on all the findings.
The scope doesn’t have to be perfect in the sense of covering every issue. Scope writing is oftentimes the point when priorities are given and desired packages are chosen over less than needed items. However, all contingency and downstream requirement should be identified and included at this point to avoid the “surprise” spec change later on. When complete, the scope should be fully vetted and critiqued. This approach will then ensure a solid project plan.
Once engaged in the build phase, the project scope should be aligned to consistently without deviation. Only in an extreme case that would severely hamper or kill the project if not addressed should a change be allowed. There will plenty of internal political pressure to address every new issue, but that should be resisted. If done right from the beginning, the needs should already be met.
Following this approach is the simplest way to stay in budget, but it can be extremely hard from a management perspective. So top support is critical. Without it, don’t bother trying because the project will end up an expensive bungle with multiple changes injected along the way.
A simpler way to stay on target and on budget is to go with packaged implementation services. Some implementation partners with significant experience have been able to apply the best practices that they have developed into a standard implementation methodology and created packaged service offerings that ensure that you get exactly the services that you need at a set price that you know up-front that you can afford. Discover what these package options are for Microsoft Dynamics GP ERP implementations with Socius.
By Socius, an Ohio ERP Partner (www.socius1.com)