Unveiling the Hidden Costs of ERP: Unforeseen Customization


Posted by Dana Craig March 01, 2011

Considering an ERP solution for your business? If so, in all likelihood, you’ve done some research on introductory costs and put together a budget. But have you considered some of the less obvious expenses of your project?  

There's been a lot of recent industry buzz about ERP packages being so robust now that customization may not be required, but the reality on the ground hasn't seen this change yet. During the requirements gathering phase, there are obvious areas of customization that may be discussed, scoped, and accounted for in the original proposal. Once the commitment is made and things start moving forward, however, 'uniqueness' can ooze from the walls to such a degree that significant revenue is being driven by the ubiquitous change request.

Change requests are typically charged at an hourly rate and are a result from gaps in the original scope of the project. These changes can be as minor as a monthly report or as major as a miscommunication in how raw materials are managed for your manufacturing process. Be prepared to be very pragmatic about what really must be done versus what can be managed around. For example, how is the monthly report being used? Is it vital to decision-making or has it become superseded by better or different data? If still necessary, can it be aggregated in Excel based on extracting some data from the system?

“The unfortunate thing about customization is it may cost you whether you sign off on it or not.”

 

It is likely that a project of any length will include some change requests, so make sure to include a line item for them in your budget. Discuss the change request process in detail with your vendor before signing and ask them what percent of the overall costs in prior projects are usually from change requests. You can use this as a guideline for budgeting. Also take an opportunity to negotiate a reduced rate for such work and have a very clear understanding of the vendor’s process.

The unfortunate thing about customization is it may cost you whether you sign off on it or not. If the change is important, but you choose not to have the vendor implement it, you may find a business process change is required to use the software the way it was intended. These types of costs are the most hidden of all, since organizations rarely measure the time and errors required to shift their business processes.

Ultimately the decision is yours, but go in with eyes open, consider your options carefully, and make sure there’s a solid business case to justify the added expense for the change requests.

Want to know more? Check out The Project Management Hut for an informative article about managing change requests.

As you might imagine, unforeseen customization isn’t the only hidden cost in ERP implementations. Our next post will focus on staff considerations. Use our comments section to share your experiences or pose questions.

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