ERP Budget Planning
Effective ERP
budget planning involves assessing both direct and indirect costs
across software, implementation, and ongoing maintenance, typically ranging
from 1% to 3% of your annual revenue. A comprehensive budget should
account for all potential expenses and include a contingency fund.
Key
Budget Components
- Software Licensing/Subscription: This is the base cost,
which varies by vendor, features, and user count. Cloud-based (SaaS)
solutions have lower upfront costs with recurring monthly/annual fees
(e.g., $40 to $200 per user per month), while on-premise
systems require a larger one-time license purchase plus hardware
investments.
- Implementation &
Professional Services: This is often the largest expense, potentially 100% to
200% of the software cost. It covers consulting, project management,
system configuration, and third-party integrations.
- Hardware & Infrastructure: For on-premise systems,
you'll need to budget for servers, storage, and networking equipment.
Cloud solutions eliminate most of these, but you may need to upgrade
connectivity or mobile devices.
- Data Migration & Cleanup: Extracting, cleansing,
transforming, and loading data from legacy systems is a complex,
time-consuming process that can add significantly to the cost. Allocate at
least 15-20% of your total budget for this area.
- Training & Change
Management: Inadequate
training is a primary reason for implementation failure. Budget for
comprehensive, role-based training sessions and change management programs
to ensure user adoption. This can account for 10-20% of the total
implementation cost.
- Personnel Time & Opportunity
Costs: Factor
in the time your internal team (subject matter experts, IT staff, etc.)
will dedicate to the project. This is an indirect cost from lost
productivity on other initiatives.
- Ongoing Maintenance &
Support: After
go-live, you'll have recurring costs for software updates, bug fixes, and
technical support. Maintenance contracts for on-premise solutions
typically cost 15-20% of the initial software cost annually.