In Part 1, we focussed on the Selection Process. Let’s look now at how to establish a ballpark price.
Once the suppliers have been provided with the essential information, it’s not unreasonable to ask for a ballpark figure for the cost of the proposed solution. This is a win-win in that neither side wants to waste the other’s time going through lengthy demos and detailed scoping exercises when the likely cost of the system is so far away from what the business is likely to spend.
Costs for a new ERP system should normally be split between the upfront capital cost and the on-going annual support cost. But, remember that support will usually also be chargeable in the first year. If the system is being hosted, it should still be straightforward enough to do some number crunching to create a cost over, say, 4 years for comparison.
Costs would cover –
Software licences – remember that you might save some money by differentiating full and occasional discrete ERP users; by delaying the rollout of users until needed; or delaying some extra cost modules that won’t be required until later in the project;
Services –these cover Installation, project management, development or customisation, changing document layouts e.g. invoices and purchase orders, integration e.g. to your bank, data cutover of customers, open invoices etc., training and assistance on the ‘go live’ day.
These will be guide costs and guide days. Remember that you shouldn’t complain if fewer days are spent than were budgeted in one area e.g. training if more days were spent elsewhere on the project. Suppliers are being asked at an early stage to provide a ballpark only. Generally, barring a major change to the requirements provided to assist with the cost, the overall figure should be within 10% or so of the final quote.
Another area to seek guidance on is infrastructure. If you need to replace or upgrade any of your equipment such as PCs, laptops, servers and communications, that can be quite a significant sum. Make sure what you have can support the proposed new system or establish a cost to upgrade.
You should also have an indicative annual support charge for software (and infrastructure, if required) and understand fully what is covered. Be wary of signing an extended support deal, e.g. three year, just because some advantageous terms are offered. You will not have experienced the support yet, so committing to a long term deal could prove foolish. Many such contracts are difficult to break.