ERP system implementations are typically long and complex projects that tap into resources across multiple cross-functional groups. The majority of these large-scale efforts also carry a significant price tag.
For some organizations, an ERP platform could be one of the most expensive digital transformation projects they undertake. And though your team may have deep experience budgeting for other types of initiatives, there are some potential gotchas lurking within these high-visibility—and high-dollar—projects.
If your internal team needs support on identifying and remediating technology project budget risks, an experienced project management consultancy can provide valuable guidance. The right partner can help to ensure your team gathers and assesses all the potential budget impacts that could derail your ERP implementation.
Plans to allocate more funding later can come back to bite you. Given the investment necessary to execute an ERP implementation project, some companies opt to budget in phases to get the effort moving forward. The expectation is that additional funding will be released later or that new funding sources will become available to pick up where the initial budget leaves off. This approach can create a tricky situation for the project team later. If economic factors or market conditions degrade, for example, your business may be in a less favorable financial position when additional funding is needed. You should closely monitor your budget forecast against actual expenditures and be proactive about securing money for each project phase well ahead of time.
Beware unfounded expectations. Another problem with budget plans that hinge on future funding allocations is that your budget approvers may be operating under the misguided assumption that you will somehow need less money than forecasted. Perhaps they expect you to negotiate lower costs for materials or find more economical sources of labor. You might even encounter senior-level stakeholders who think technology prices will drop over time. Unless you can guarantee a reduction in future expenditures, these unfounded expectations could be problematic when the next budget cycle rolls around. Avoid issues by being very clear during the initial funding approval process. Assure stakeholders that your team will seek out appropriate and available cost-saving measures while at the same securing firm approval for the project’s full funding amount.
Don’t get caught out by rising prices. Over the course of an ERP implementation project, resources may become more expensive. Along with rising hardware and service costs, labor rates may also increase. In an inflationary environment, this can be particularly difficult to control. Even in favorable market conditions, you may still discover that competition for resources, expanded capabilities of your planned technology solution, and routine price adjustments all result in cost increases over the life of your project. Rigorous attention to each contract’s pricing terms and realistic estimates for non-contract resources are vital to staying on budget as your ERP implementation moves from planning to design to the cutover.
Don’t forget about ongoing costs. Maintenance, administration, updates, audits, and cyber protection are common elements in any modern technology platform. Unless your internal teams will oversee all aspects of your ERP’s operations, these ongoing costs could add up. And though the funding to cover these important activities may not be part of your implementation budget, they’re still expenditures your company needs to fund. Some ongoing services may be negotiated as part of the contract with your ERP provider, while others are likely to fall under recurring operational costs. Work closely with the owners of the various ERP processes as well as with your IT group to understand, forecast, and pay for the services and software needed to keep your system healthy and secure.