budgeting for erp white paper

Budgeting for ERP

May 2014

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Table of Contents

1 Introduction .......................................................................................................... 3

2 ERP Budget Elements ......................................................................................... 3

2.1 Technical Costs ....................................................................................................... 3

2.1.1 APPLICATIONS SOFTWARE .............................................................................. 4

2.1.2 HARDWARE ..................................................................................................... 4

2.1.3 DATABASE AND OPERATING SYSTEM .............................................................. 4

2.1.4 INTERFACES ......................................................................................................

2.1.5 CUSTOMISATIONS .............................................................................................

2.1.6 NETWORK AND TECHNICAL COMMUNICATIONS...................................................

2.1.7 MAINTENANCE AND SUPPORT ...........................................................................

2.1.8 HOSTING ...........................................................................................................

2.2 People Costs ............................................................................................................. 2.2.1 TRAINING ..........................................................................................................

2.2.2 PROJECT MANAGEMENT ...................................................................................

2.2.3 CHANGE MANAGEMENT.....................................................................................

2.2.4 EXTERNAL CONSULTANCY SUPPORT ................................................................

2.2.5 INTERNAL TEAM ................................................................................................

2.3 Data Migration Costs ................................................................................................. 2.3.1 EXTRACTION .....................................................................................................

2.3.2 COLLECTION .....................................................................................................

2.3.3 CLEANSING AND TRANSFORMATION ..................................................................

2.3.4 LOADING AND TESTING .....................................................................................

3 Calculating estimates and building the budget .......................................................

3.1 Estimates ...................................................................................................................

3.2 Building the budget ....................................................................................................

3.2.1 WHEN TO BUILD THE BUDGET ............................................................................

3.2.2 CONTINGENCY ..................................................................................................

3.2.3 BUDGETING FOR LARGER PROJECTS .................................................................

4 Conclusion .............................................................................................................

About Lumenia ........................................................................................................... 5

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1 Introduction One of the criteria used for measuring the success of ERP implementation projects is actual costs versus budgeted costs. The first step in achieving this goal starts before the implementation project with the creation of a comprehensive and realistic budget.

Preparing a budget for an ERP implementation is no different to preparing a budget for any other project: all potential costs should be examined and those that are relevant included. The difficulty is ensuring that all costs relating to an ERP implementation are considered and that the estimates are realistic and based on sound assumptions. This white paper examines those elements and the steps required to build a good budget.

2 ERP Budget Elements One approach that will ensure nothing is missed is to break the costs into three categories: Technical, People and Data.

2.1 Technical Costs

Technical ERP costs encompass all software, hardware and related technical consultancy costs. These are the costs that are usually considered when preparing an ERP budget and they can be broken out as described in Figure 1.

Figure 1: Technical ERP Costs

TechnicalCosts

Application Software

Hardware

Database

Operating System

Interfaces

Customisations

Network &Technical

Communications

Maintenance &Support

Hosting

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Not all ERP implementations will have requirements in every area; however it is still useful to examine each one.

2.1.1 APPLICATIONS SOFTWARE

There will always be a need to budget for ERP user licences and these costs may be categorised as once-off or recurring depending on whether the strategy is to implement a ‘traditional’ on-premise, full SaaS (Software as a Service) or hybrid on-premise/SaaS solution.

Licences for ancillary modules or applications may also be required, for example:

Business Intelligence/Reporting user licences

Customer Relationship Management user licences

Portal Licences for customer and/or supplier web-access

2.1.2 HARDWARE

Unless a full SaaS solution is envisaged there will be a requirement for servers. The number required and their specifications will depend on the scale and scope of the project as capacity will be required to support the application, database and presentation layers of the solution. Any previous investment in virtualisation technologies should be taken into account and requirements relating to disaster recovery (DR) should also be considered. The implications for the DR strategy can be a very big area in its own right and many companies take the opportunity of reconsidering their DR strategies in the context of significant investment in ERP infrastructure.

Other hardware requirements may include mobile devices, scanners, printers and, in some cases, PCs and laptops. Installation and commissioning services will also need to be factored in where external expertise is required.

2.1.3 DATABASE AND OPERATING SYSTEM

All ERP systems use a database and will therefore require database licences. Likewise, a provision needs to be made for operating system licences. The way these licences are purchased can vary if the budget is for a SaaS solution.

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About Lumenia

Lumenia is a boutique management consulting organisation, specialising in the development of business systems strategy and the selection and implementation of enterprise applications – particularly ERP and CRM systems. Operating from offices in Ireland and the UK we have delivered ERP or CRM projects in well over 100 organisations across the world.

To download the full copy of this report for free, visit our website and register at: http://www.lumeniaconsulting.com/resources/reports-white-papers/budgeting-erp

Copyright BSM Ireland 2014. Lumenia Consulting is a registered Business Name of BSM Ireland Ltd. All rights reserved. No unauthorised reproduction without the Author’s written consent. All references to this publication must cite Lumenia as the author and include a link to Lumenia’s website. Lumenia is not liable for any errors contained within this Report.

Lumenia Consulting Ireland (HQ)

Parkmore Business Park West Galway, Ireland T: +353 91 746940 E: [email protected]

Lumenia Consulting UK

71-75 Shelton Street, Covent Garden London, WC2H 9BP, UK T: +44 207 4708766 E: [email protected]

For more information, please contact Lumenia at:

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