If you’re concerned about all the possible costs involved in a new accounting or ERP system implementation for your business – you’re not alone. On average*, the cost of ERP software for small businesses is between $10,000 to $100,000. With such a broad range, we understand the stress experienced when organizations don’t know up-front about the hidden fees that can pop up in the process of migrating to new software.
After decades in this industry, we have found that the two biggest factors behind this result are 1. An incorrect definition of the scope of the project, and 2. The initial project cost estimate is inaccurate. Let’s look closer at these factors as we dive deeper into this topic.
Poorly defined scope
The scope of a project is made up of the expected features and benefits that will be provided by the new business management system to the company. For example, the new system could provide a new manufacturing capability, or promise to shorten the month-end invoicing cycle from 30 to seven days from month-end. The number of features and functions that can be included in the possible scope of a project are almost limitless. They can also depend on the industry sector your organization is in and your individual day-to-day requirements. Limiting the scope is as important as outlining its definition. Very often, once a company begins the implementation of a new ERP or accounting system, inevitably the end users always ask for more capability or for the new system to mirror the old system in some way. This is where boundaries and limits are required for a successful project.
Your organization’s executive and management levels must control the scope and resist the temptation to add to it mid-implementation. This is not easy to do. Managers, in particular, work with end users every day and it can be difficult to say no or make them wait for certain features until a future phase. If you don’t prioritize controlling the scope of your implementation project, you are going to have an out-of-control budget and/or user dissatisfaction. Make sure that everyone involved, from managers to system users, knows the specific features they will receive after implementation and what can be considered for future phases.
Inaccurate project estimates
During a new business management system project, we have seen that there are often two groups with very different objectives (and sometimes the software partner’s salesperson can get caught in the middle). The customer wants their new system as cheaply as possible with the maximum scope in the least amount of time. The partner implementation team wants the budget to be able to cover any risks or delays that may pop up during the project. This scenario sometimes leads to a “time and materials” project, which means that each hour booked will be billed, regardless of whether it is in the budget or not. The salesperson understandably wants the sale to close, which means giving as low an estimate as possible, while wanting to keep the implementation team happy. As you can imagine, it is practically impossible to always satisfy both sides, especially if the customer has never been through an implementation project before.
Are fixed fee budgets a realistic alternative?
For larger, more complex projects, it is difficult to propose a fixed fee budget that is not ridiculously high to protect the implementation team from unknown risks. One best practice is to conduct an extensive requirements review and analysis process, which is both expensive and time-consuming.
Organizations that are anxious to start working with a new business management system will find it difficult to sit through this process that can take three to six months. But once a review has been completed, the implementation team is better equipped to propose a very detailed project scope and fairly accurate cost estimate. Without a detailed project scope, a fixed fee budget is not possible for more complex organizations.
For smaller organizations or those with more simple business processes, a fixed fee project is also a good option, if approached correctly. This approach relies on standard business processes and provides a limited project scope. Customers can choose to expand the scope for additional charges or add these features in a future phase. Our company, Open Door Technology, has designed a straightforward process for equipment rental companies that provides options for fixed fee and packaged offers on implementations of financial, rental, and service functionality.
Packaged offers
Packaged offers are a great option for larger, more complex organizations. Here’s why:
- In a packaged offer scenario, the requirements analysis relies on full completion of industry standard questionnaires – not extensive analysis of every possible feature end users may require. This approach relies on the software partner having thorough knowledge of the industry, such as equipment rental, therefore knowing the right questions to ask during review.
- In a packaged offer scenario, to reduce the budget, there is rarely a separate project manager (in addition to the implementor) on the software partner implementation team. However, because the number of hours is limited in the budget, project success relies on the assignment of an experienced implementor, capable of both implementing and managing the project.
In a packaged offer scenario, the scope is limited and defined before the project starts by the standard description of what will be included. Customers can not expand the scope in exchange for the ability to use a standardized implementation process and fixed fee. It is rare to have any customization included in this scenario.
Summary of Packaged Offers from Open Door Technology
Please note: These packaged offers assume the financial, rental, and service functionality will be provided by Open Door Technology. There are additional packaged offers when the company works with Microsoft Dynamics 365 Business Central resellers or non-rental companies.
Functionality within each area increases as the package moves from the first level to the third level. As an example, the first level includes a basic general ledger, bank account management, accounts receivable, accounts payable, and basic equipment rental with industry standard day/week/month rental terms. The second level adds the service module plus additional financial and rental functionalities. The third level adds further capabilities as needed.
There is also a fourth level, which is specifically for companies with unique requirements. For more advanced functionality, our group of technical experts can customize the features to adapt to your specific business needs which take you off the packaged levels to a more tailored approach.
If your outdated business management system is holding you back and you’re ready to consider a move to a more modern system, we’re here to help. Let’s chat about your software needs to determine if a packaged offer is the best route for you.