“The more we move forward with this project, the more we realize the shortcomings of this package (or these packages).” As a reminder, at this point we’re still discussing ERP Replacement, we haven’t decided to buy or implement. Now the realizations of price, scope and fit are beginning to look a whole lot different. So all you have to do is get a price on how to modify the software or change your business to “best practices” and you’ll have a good project plan with costs to present to executive management?

It’s a well-known fact that service after the sale is more expensive that the actual hardware and software costs regardless of what package you buy. However, it’s difficult to get the “real price” from the vendor but again, it’s not really their fault. You told them what you needed, sometimes with an RFP, they told you how much that will cost. It’s so simple??-HA! What you didn’t tell them is how and why it was needed. So we look at the price and, as all vendors do, they come in somewhere between 1x – 3x the price of the software for services. Sounds logical, all the vendors did the same so it must be correct?

Once again, studies prove that the real cost of an implementation is actually 3x – 7x the cost of software and it can go significantly higher. What’s worse, you’re still only at 85% – 90% fit. Using the “80% rule” of fit, that will actually cost somewhere around 2x the cost of the software, plus or minus (some of the larger packages will be more). If you try to get to 95% fit (an additional 15% fit) the costs and time will easily double and to get that last 5% will triple or quadruple the cost. You have to ask yourself, “Is it worth the cost?”

You begin to ask yourself how this could have been avoided and “next time” you’ll know better how to buy software. Unfortunately, this has been going on the same way for decades. Definition of insanity anyone?? …anyone?? …anyone? The only way to stop the insanity is to do it differently and that was mentioned above. It’s not good enough to tell a vendor what you need, you need to tell them how and why. The only way to do that in short order and without significant costs to both sides is to take a process driven approach to selection.

We’ve mentioned process driven approach a few times in the previous articles but we’ve never really defined how to do that, what tools are available and how to make sure this isn’t a long dragged out ordeal. In part 10, we’ll begin that discussion. This is a long series, but I hope that you’ll find that the information will be worth the read.

Categories: ERP

Clark Green

Clark brings a deep level of experience with ERP companies to KnowledgePath Consulting. He has strong leadership skills, and demonstrated success in manufacturing, supply chain, business unit, and operations performance in multiple industries.