There’s no getting away from the fact that ERP (enterprise resource planning) software is a big investment. Not just in terms of the cost of the system, but also in terms of training, staff adoption, internal resource and time. Things that you can’t put a price on, but which eat into day-to-day operations all the same.
The many benefits are well-documented, but not many talk about these “hidden” costs of ERP implementation. They’re not necessarily about spending money, but they are all things that could affect your business, team and day-to-day operations, whether that impact is large or small. Many businesses focus on the quote, but then are taken by surprise when the project takes longer than planned, or when there are additional costs for updates, customisation or training.
So, it definitely pays to be aware of these costs when planning your ERP implementation – you’ll avoid any nasty surprises and your project will run a lot more smoothly.
Hidden costs are costs which are not immediately obvious at the time of purchase or which are not accounted for in a business’s budget. The “total cost of ownership” of an ERP solution takes into account these costs and gives an overall picture of the true cost of implementing ERP.
For an ERP system implementation, the most common hidden costs are:
Hidden costs can’t always be seen on a spreadsheet, but they can quietly, and quite easily, add up, affecting your team, project timeline and budget. Next, we’ll take a closer look at these costs, what causes them, what the implications are for your business, and what you can do to keep them from derailing your ERP project.
Here, we’ll look in more detail at the hidden costs of ERP projects, how they come about, and what to do to mitigate them.
In most cases, an ERP system will require some degree of customisation and configuration to ensure that it’s the best fit for a business, and to work with existing systems and processes. But the more customisation is needed, the greater the cost, and the longer the project.
Impact:
Mitigation:
To reduce the chances of this, most organisations will opt for flexible ERPs with industry-specific functionality that are built to suit their processes and systems. NoBlue2 offers industry-specific solutions for both Microsoft Dynamics and NetSuite, and we have the industry expertise to back this up.
A new ERP system will naturally introduce disruption to established processes and routines, which can cause resentment and, therefore, resistance among team members.
Added to that the complexities of learning a new system and it’s hardly surprising that many businesses struggle with user adoption. The cost of training can be significant, especially in larger organisations, and businesses should not underestimate the time and effort needed for onboarding, and the impact this can have on productivity.
Impact:
Mitigation:
Choosing an ERP partner that offers role-based training and support throughout the project will ensure users feel supported throughout their journey of using the new system. It’s also important to ensure that changes are well-communicated throughout the project and that all users know why change is happening, what is expected of them and what they should expect.
Data is your business. So, moving your data to a new system is a risky and complex operation that requires very careful planning and implementation. You may be pulling data from multiple systems using different formats or dealing with large volumes of outdated or duplicate information. All of this means that you’ll need to cleanse your data prior to migration to ensure that any inaccuracies or issues don’t persist in the new system. Again, this can come with a cost.
The impact:
Mitigation:
Working with an ERP partner who is experienced in large and complex data migrations is vital. They will be able to provide the tools, methodologies and expertise to help you throughout the entire process.
Most modern businesses operate using more than one system. Whether it’s a CRM, product database, warehousing system, ecommerce platform or banking interface, ERP can only offer its full value when it integrates seamlessly with the other software you’re using. But mapping data and processes across systems is highly complex – often these systems don’t use the same formats.
When integrated well, ERP will make running your business so much easier, offering real-time visibility, automated processes and faster decision making. If not, you may end up back where you started, using manual workarounds to get what you need.
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Mitigation:
A specialist ERP partner will help you avoid any hidden costs associated with system integrations through a thorough understanding of your technology stack, and your business processes. They will also have a team of expert developers who will use standard NetSuite connectors or build bespoke ones if needed, to ensure integration best practices.
Our NetSuite-certified developers bring an unsurpassed level of knowledge when it comes to NetSuite integrations. See what we can do.
During an ERP project, key figures within your business will spend a significant portion of their time in meetings, mapping processes, gathering information and requirements and troubleshooting. While this is happening, they won’t be spending time on developing other areas of your business, such as new products or markets, or training new employees. Meanwhile, your team are continuing to use manual workarounds, slowing down productivity.
Impact:
Mitigation:
Working with the right ERP partner will help mitigate this impact by taking ownership of the project and its management, reducing the number of meetings, approvals and troubleshooting sessions needed.
They’ll work to a proven, efficient methodology which will help prevent scope creep and delays, and they’ll bring huge amounts of industry knowledge and ERP expertise to the table, enabling them to translate your requirements without constant intervention.
Once your ERP system is live, the work does not end. Your solution will need ongoing maintenance to ensure it’s kept secure and up to date. Processes change, regulations are updated, you bring in new products or open to new markets… Then there are the costs of licence renewals and support contracts.
If your ERP is to remain aligned with your business, it will need to evolve with you. And if it was not built correctly to begin with, over time the costs to fix any issues will only increase.
Impact:
Mitigation:
An ERP partner will always implement your system with future upgrades in mind, as well as offering transparent, tiered ongoing support packages to help you avoid ad hoc consultancy fees. They should also offer periodic reviews of your system to ensure you’re getting the most out of it, taking into account modules, new features, best practices and upgrades.
But not implementing the right ERP software for your business comes with its costs too. Legacy systems, fragmented data and disjointed processes can all carry their own risks to organisations. These costs and risks are often easy to ignore, but are just as important to take into account as the cost of a new solution.
Legacy systems often feel “good enough,” but beneath the surface, they drain time, money, and opportunity. It’s easy to just tick along as you always have done, but all the while these issues are weakening your business, for example:
A new ERP solution can revolutionise a business and its operations, but only if it is implemented well in the first place. Even the best ERP system can be a bad fit if it is overly customised, poorly integrated or not tailored to your business, processes, industry and goals.
The right ERP partner will take all of these things into account when scoping your system, as well as all the hidden costs outlined above. They will build these costs and contingencies into your implementation plan, so there are no nasty surprises.
Choosing the right partner:
Take a look at our blog post on choosing the right ERP partner
Many costs emerge only once the system has gone live, when your business grows, staff join and leave, the market shifts, new regulations come in, or new technologies change the game. That’s why it’s important to not just think about what you need from an ERP today, but what that could look like tomorrow.
AI is definitely one of those game-changing technologies. AI-driven forecasting, intelligent reporting and automated workflows are becoming almost expected as standard. If you’re not keeping future automation in mind, you may find yourself needing costly redevelopment.
If your business expands faster than expected, you may find that your existing software can’t keep pace with the new frameworks, processes and regulations that come into play as you grow internationally. Having a scalable ERP that supports multi-entity operations is vital.
Industries are evolving as businesses become more and more digitally-focused, and with this come changes in regulations. We had GDPR a few years ago, and over the coming months, we’ll see an overhaul of the VAT system for businesses selling to the EU. Your ERP needs to be flexible and adaptable to cope with these changes.
Working with a NetSuite or Microsoft Dynamics implementation partner, like NoBlue2, will help you avoid hidden costs and ensure the success of your project, delivering an ERP solution that works for your business.
With over 25 years of experience in ERP implementations, we know how these hidden costs can build up. But with us in your corner, you’re set up to succeed from day one. Using proven methodologies from over 1,000 successful projects, we can see your business through even the most complex ERP project.
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