The One Sure Way to Lower the Cost of Your ERP System

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Posted by: briansittley Comments: 0 0 Post Date: November 8, 2016

pssi_logo_2010We first published the following two-part post here on our blog over three years ago.  We thought it would be a good time refresh and republish it.  It illustrates by example of an area client the importance of starting an ERP project with a Business Process Analysis to ensure that proper expectations are established and met, and to reduce the risk that you’ll suffer the same fate as our friends at this local manufacturing company…
Our client’s story highlights the fundamental principle that that there is one sure way to lower the overall cost of implementing your business management system.
It’s a simple answer, and its proven value – as well as its proven disastrous results when it’s not done – only serves to emphasize the importance of the Business Process Analysis.  We’ll keep it simple but we hope enlightening, with our story below.
A few years ago, we were called into a manufacturing business that supplies wood cabinetry to the mobile home and RV industry.  They were attempting to implement a well-known ERP solution from Microsoft (also one of the software products we sell).  They’d bought in from another reseller and to put it mildly, things were not going well.  Here’s what we learned:  the original project including software and implementation services was scoped to a cost (excluding hardware) of $125,000.  By the time we were called in, projects costs had soared to $200,000, and were rapidly climbing.  And the company was nowhere near “live.”
Now, the very first time we’d approached this company a year or so earlier, they’d passed on our proposal for a modest, fixed-price Business Process Analysis.  We tried to explain, as we always do, that the BPA is the critical first step in any major software implementation.  We also tried to explain that our version was no piece of fluff.  Rather, it would be an in-depth analysis of workflows and suggested solutions, performed by highly experienced senior staff.  And while the effort might run 100 to 200 hours on our part, it was not priced that way.  Indeed, the price was quite modest.  But it wasn’t free either.
The client told us later they didn’t think they should “pay for an analysis.”  As we later learned, they’d found someone willing to do the analysis “for free.”  After that, they were told, any further analysis could simply be done as the project progressed.  We later saw the analysis report, and true to form, it was a 4 page high-level regurgitation in broad strokes that discussed what the client does, and how software could solve their problem.  That was the extent of the “analysis” that preceded their project, and as a result, now they were nearly double the budget, and double the promised timeframe.
During a very frank conversation, we told the owner why we needed to do a Business Process Analysis.  It boils down to our simple mantra: We cannot quote what we do not know.  We explained the process, the people, the expected outcome, the detailed process review and summary report we would present to them, and the cost and time frame.
We were also careful to explain that doing the BPA was not going to change a quarter million dollar project into a one hundred thousand dollar one (though our experience has shown that it will reduce the overall cost of the project by more than the BPA’s cost).  But my point was even simpler than that.
I said, “It’s not that your project isn’t a quarter million dollar project – in fact, it probably is.  But… wouldn’t you like to have known that at the outset?”  Bingo.
The fact is, by knowing the cost upfront, an owner can make a rational decision.  Knowing the full cost going in, at least roughly, he or she can decide whether now is the right time to proceed.  After all, it’s not that you don’t need good systems to grow – and this client was growing rapidly, thus putting a strain on all his cash resources.  Of course you need good systems.  But by knowing the true cost upfront, you can plan and budget accordingly.  In the end, we believe the honest solution provider will win out – either sooner or later.  It’s the only way to do business.
We’ll conclude our story in our next post.  Stay tuned…

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