An ERP system is one of the most effective tools for improving the efficiency of business operations in companies of different sizes. However, as per the business software review platform Software Path, the average budget allocated per ERP user in 2022 was $9,000, while ERP implementation costs ranged from $150,000 to $750,000. Needless to say, even some large enterprises cannot afford such expensive projects, let alone small and medium-sized companies.
Are there ways to reduce ERP implementation costs? Find recommendations for cost optimization in this article. Choose the right ERP system and appropriate functionality First and foremost, select the right ERP system. These recommendations will help you make the right decision.
1. Understand the exact requirements of your business
Conduct a thorough analysis of your company’s needs and goals. This will give you an accurate understanding of the demand for certain features and avoid overcomplicated, unnecessary expensive solutions or inadequate software that will require excessive customization in the future.
2. Opt for a cloud-based solution
In certain cases, on-premises ERP suites may prove to be less expensive in the long run, despite the upfront investment in hardware and infrastructure they require. Sometimes this is also the only choice a company has due to strict industry-specific data protection requirements or insufficient Internet bandwidth.
However, if this is not your scenario and you are looking for ways to minimize your expenses, you can opt for a cloud solution, which comes with significantly lower upfront costs compared to on-premises software.
Note that some ERP systems, such as Microsoft Dynamics 365 Finance and Supply Chain Management, are available as both cloud and on-premises solutions.
3. Evaluate the total cost of ownership
Estimating the total cost of ownership (TCO) is also critical when choosing your ERP system. Carefully consider various components of the final price, including support, training, upgrades, and maintenance. This will give you a more accurate picture of the costs you can expect from your chosen ERP solution.
Cleansing data of redundant, duplicated, and outdated values is critical to the health of the processes supported by your ERP system. Data preparation requires a significant amount of time and effort, so you can start improving its quality before the ERP implementation project even begins.
Save during the implementation process
Prepare for the ERP system implementation process to identify opportunities for cost savings.
1. Prioritize critical functions
Some ERP systems, for instance, Microsoft Dynamics 365 Finance and Supply Chain Management, offer companies flexibility in selecting their desired features. Microsoft’s ERP system comprises two applications, but it can also seamlessly integrate with CRM modules.
It may be tempting to use as many features as possible to boost your company’s productivity, but you should not forget the costs it will involve. Companies with particularly tight budgets may consider starting with the most important application and gradually expanding the functionality with phased implementation.
2. Choose from standard configurations
Many ERP systems offer their users a set of standard configurations that are already optimized for a particular industry or business scenario. One way to reduce ERP implementation costs is to use off-the-shelf configurations as much as possible. This approach allows you to tap into software best practices, avoiding the time and costs associated with searching for the optimal solution.
3. Avoid customizations
At the same time, customizations should be avoided at all costs. Unless it is critical to your business, you should refuse to customize your solution as it will make maintaining your ERP system much more expensive in the future. Excessive testing requirements and additional manual effort to handle upgrades issued by the software development team are just some of the issues you may face due to customizations.
4. Work with an ERP implementation partner
Partnering with an ERP implementation service provider comes with additional costs, but choosing a suitable partner can help you avoid further unnecessary costs.
A qualified and experienced ERP implementation service provider, such as XPLUS, will guide you through every step of the process, ensuring that the project stays within the planned budget, meets deadlines, and your employees get comprehensive training, which will help them avoid costly mistakes.
5. Conduct effective role configuration
Some ERP systems, such as Microsoft Dynamics 365 Finance and Supply Chain Management, have a security role system based on roles and permissions. Proper configuration is not only essential for the security of your data but also one of the major ways to optimize implementation costs. The reason for this is a subscription plan based on the number of users and the extent of their access to the system’s features. The more permissions you grant your users, the more you will have to pay for the software.
Let your employees help you
Your employees play a critical role in cost optimization. The better prepared your end-users are to work with the new software, the faster and smoother the process of its adoption in your company will be.
To prepare your employees for the new software and enable them to reduce ERP implementation costs, consider providing adequate training to help users avoid mistakes, use the software efficiently, and resolve many issues without expensive outside support. Increase adoption and usability by using mobile and self-service features provided by your software.
Optimizing ERP implementation costs – the bottom line
With a cost-conscious strategy, you can significantly reduce the cost of implementing your ERP system. If your company cannot allocate a large budget for this project, start small by implementing the most important features and standard configurations.
Make sure you optimize licensing costs through effective role configuration and provide your employees with the necessary training to improve software adoption and get the most out of its features.