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There is no doubt that an ERP system is necessary to run a business. You need to go through multiple vendors and check the features, price, technical requirements, and implementation cost before signing a contract with your preferred vendor. Creating a sample budget before going for the final implementation is mandatory. But do you know that there are several hidden costs of ERP implementation that you may haven’t thought of?. Research tells that the average ERP implementation has grown from $7,200 in 2019 to $9000 in 2020.
This article sheds light on the critical points you should take care of before making the final purchase.
1. Labor costs
You need to ensure that the legacy ERP system’s business-critical data is safely shifted to the new one. It requires employees to work overtime as they have to manage their daily tasks as well. Moreover, you will also need people with hardcore technical skills to carry out a few operations. To reduce the unnecessary pressure on your full-time employees, you may consider hiring temporary staff. You can also save a lot of time and effort by filtering business-critical data from unnecessary ones.
2. Training cost
Before the final stage of ERP implementation, you need to ensure that your workforce knows how to operate it. They will require regular training for a few weeks, only after which employees will feel comfortable operating the new ERP system. Since an ERP system is an enterprise-wide set of tools, people belonging to different teams need to learn how to use even those modules that don’t directly relate to their work field. When different teams understand and appreciate each other’s work, it becomes easy to collaborate and work as a cohesive force.
3. Employee resistance to change.
Employees react in three different ways to an enterprise-wide change:
a. They accept the changes and become ready to educate themselves about the new changes.
b. They are neutral about the upcoming changes, but they accept the changes with a few handholding sessions.
c. They reject the changes and try to sabotage the company’s efforts.
Categorize your workforce in the three categories mentioned above. You may also hire a change specialist who understands human psychology and is well-equipped to provide effective solutions.
4. Testing the ERP system multiple times.
While we are talking about the hidden cost of ERP implementation, it’s essential to mention the role of testing. Testing helps you recognize errors and correct them at the earliest. Begin by running single scripts that test one operation at a time — for example, measuring the time taken to do a job or converting data from a single table into multiple tables. Rate each process on a scale of 1 to 10, where 1 means failure and 10 represents outstanding performance. Then slowly move forward to automatic testing, where algorithms run tests in multiple areas 24/7.
It’s better to do away with all the technical problems before the final implementation; otherwise, you may have to entail high costs later.
5. Customization and upgradations.
A new market opportunity or customer feedback may motivate you to upgrade your ERP systems. Customization provides you extra features to perform a task conveniently without wasting a lot of time and effort. But upgrades and customizations may sometimes become very expensive. It’s wise to ask your ERP vendor whether they provide a particular promotion for free or as an extension to a service. For example, new ERP vendors provide e-commerce facilities for free. So if you plan to take your business online, you need not pay for the online transaction feature.
Numerous factors contribute to the hidden cost of ERP implementation. Before signing the contract with a vendor, you must run through all the terms and conditions and only then proceed. Keep in mind that the more informed you are, the fewer expenses you will make.
At Sage Software Solutions (P) Ltd., we are home to world-class ERP software and CRM software that will solidify your business tech support fundamentals and enable you to build a customer-centric organization. To know more about it, SMS SAGE to 56767. You can also write to us at firstname.lastname@example.org
Disclaimer: All the information, views, and opinions expressed in this blog are those of the authors and their respective web sources and in no way reflect the principles, views, or objectives of Sage Software Solutions (P) Ltd.
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