Select an ERP System – Part 5 – Saving Money and How to Pay For It.

Select an ERP System – a free series to guide you. 5 – Saving money and how to pay for it.

This is part 5 of a series of blogs designed to help you choose and implement a new ERP system.

 

In this blog, we look at how you can save money on the system but also warn you why potential suppliers might choose to walk away. Previous blogs covered the selection process, ballpark costs implementation and basic checks and are available at our blog page.

 

Once have chosen your solution, when you buy that solution can have an impact on the price you pay. It’s important at this stage to understand the psychology of the ERP vendor. I don’t mean the reseller here, I mean the company behind the software. Whether you’re SAP, Microsoft or Sage, the name of the game is sites – the more the better!

 

This is because the first year value of the sale pales into insignificance against the ongoing revenues that can be generated from updates e.g. more users being added, updates to the software and, most importantly, annual support revenues. So, the supplier will regularly offer incentives to potential customers to buy the licence but generally never offer a discount on the ongoing support charges. When is this most likely to happen? As you might find in any retail environment, as the end of a quarter, half year or at the company’s year end. So, if nobody offers you a deal, ask!

 

Other reasons for suppliers offering delas might be because you are a charity or because the competition on a particular deal happen to be viewed as someone they particularly want to target.

 

Most ERP resellers can access finance for you and most like to do so, for two reasons. The obvious one is to ensure that lack of money doesn’t stop the project proceeding. The second is that the finance company will check out the customer’s creditworthiness and will quickly advise the reseller if the potential customer has money problems. The reseller can then avoid wasting time on a project doomed to failure.

 

Finally, don’t forget that many local business gateways or enterprise companies can offer support in the form of grants for the training, consulting and/or development costs associated with the project. The main criteria here will be the extent to which staff will be retained or more staff employed; or that the system will allow the business to sell more products outwith its current geographical area. And, speaking to these funders is another excellent way of confirming whether your potential supplier has a history of delivering cost-benefits to its customers.

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How to Select an ERP System – Part 3 – Implementation Costs

In parts 1 and 2 of the series, we looked at the selection process and ballpark costs. In this 3rd part, I’d like to consider implementation issues and, in particular, how the user can contribute to the process and save costs.

There are some basics which are often forgotten.

First, make sure that the project team is representative of the business users. Too often the MD says “This is how we do things here” only to find later in the project that the users at the sharp end have a wholly different way of processing data.

Second, customers tend to be over optimistic about how much time and effort they can put into the project. Take a good look at things like holidays, other projects, is this the busiest time of the year… and so forth.

BUT, remember that you don’t have to wait to the start of your financial year to go live on the system. If anything, that’s a terrible time because there is so much else going on. Pick a quiet (or the quietest) time.

AND, if you have taken more time than you expected to reach that crucial decision on which system to implement, be flexible about you ‘go live’ date. It would seem obvious to all that you have less time but it’s amazing how many businesses are determined to stick to that original date.

Third, it’s YOUR project and not the supplier’s. I have blogged elsewhere about suppliers who hijack the ownership of the project, move the goalposts and end up costing you more. Stay in control and ensure any changes are your changes. This does mean that you need to stay 100% involved and don’t allow the supplier to dictate the project direction.

What will implementation cost?

As a rule of sum, expect to spend the same amount of money on the implementation as you spend on the software. But you can save money in a number of ways.

Don’t be precious about some of the requirements. Always consider the cost-benefit. Is it really that important? Most suppliers will say something can be done but a good supplier will point out the cost and question whether it’s justified.

If you have a lot of staff, consider ‘train the trainer’ as the way forward for training users i.e. a select group of staff are trained, and then pass on that training to the majority. We had one customer recently where a very large number of users were given training by viewing a webinar recording of the training. This also means that new users can be pointed to this as part of their induction.

Take responsibility for data cutover and reconciliation. We provide our customers with spreadsheets formatted with the appropriate columns for customers, suppliers, open invoices and so forth. It’s always a great way to ‘cleanse’ your data as well. Compare deleting an old customer from a row in a spreadsheet with deleting the record in an accounting system. The latter can be time-consuming or even impossible in many systems.

Reconciling financials, customer and supplier balances by checking the trial balance on both systems and comparing aged debtor and creditor reports will save cost and ensure comfort that everything is as it should be.

How to Select an ERP System and Not Get Badly Stung in the Process!

A couple of years ago, out of sheer frustration at the number of prospect companies who had chosen to proceed on a clearly misguided software acquisition path (in my humble opinion and clearly not at all sour grapes!), I put together a ‘Guide for Business Advisers’.

 

I hoped that this guide would help many avoid the worst or most obvious mistakes. It has subsequently been utilised not simply as a guide for those terming themselves business advisers such as IT consultants, the local enterprise company’s ERP expert or a business’s accountants; but also as a useful set of hints for the poor sod in the prospect company who has been handed the poisoned chalice of finding the next ERP system. We’ve met everyone from the CEO or CFO down to the new graduate given this as his or her work project!

 

Things that had inspired me to write the guide included finding a prospective client who had committed to an unbreakable 3 year support contract with a supplier on the basis of a single presentation. It cost a five figure sum to release them from the contract but was worth it. More commonly, we find a prospective  client fails to carry out some basic due diligence and ends up purchasing from a company which looks great on the web and turns out to be no more than ‘one man and a dog up a close’ (as we say in Scotland).

 

Over the next few blogs, I plan to summarise the contents so that readers may have an insight into a process which I have observed in my 30 years operating on both sides of the fence – as IT consultant advising clients when I was in the accountancy profession as a ‘Computer Audit Manager’ and more recently trying to be as objective as possible while selling ERP systems on behalf of IT companies.

 

In the next blog, we’ll start with the ‘Selection Process’ and subsequent blogs will consider ‘Ballpark Costs’, ‘Implementation’, ‘Things You (or your Client’) Should Check Out’ and ‘New Technologies Worth Considering’.

 

As the guide was originally published in February 2011, this affords me a great opportunity to update the Guide and, who knows, have a runaway eBook success on Amazon!