There is nothing quite as exciting (or expensive) as having a baby. My husband and I are still wrapping our heads around the price tag associated with raising our child. Similarly, a critical component of selecting a cloud-based ERP system is determining Total Cost of Ownership (TCO). There is a lot we’ve done to get financially ready for the newest member of our family that can also help you build your ERP budget:
- Know your existing costs: Our pre-baby financial plan includes our regular monthly expenditures like rent, insurance and groceries. The first step to budgeting for a cloud-based ERP is to validate what you’re incurring for infrastructure or hardware, software and external consultants, and internal support staff. Developing a current TCO will serve as a baseline from which to compare alternatives to your existing applications.
- Estimate future investment: There are a few one-time purchases we anticipate (a crib and stroller) as well as recurring expenses like food, clothing and diapers. Similarly, in your future-state TCO model, it’s important to distinguish between upfront implementation costs and annual subscription payments. Be aware that some platforms require more dollars to acquire while others have higher costs to access and maintain on an annual basis. In order to arrive at an apples-to-apples comparison across your cloud-based ERP vendors, perform your analysis over a three-year period.
- Prepare for education: Our child isn’t even born yet but we are already saving for day care and setting aside funds for college. When confirming your choice of ERP vendor, be mindful of their approach to training and related fees to set your organization up for success come go-live. Do not assume that the development of reference guides for your users or the delivery of courses are included in their quotes.
- Plan for down time: I am lucky to be employed at a company that offers a generous maternity leave policy. Being out of the office for an extended period of time will result in my colleagues taking over my client projects and internal initiatives in addition to their existing engagements. My clients are generally relying on their current bench of employees to select, design and deploy their new system. Hiring a third party advisory firm can greatly alleviate bandwidth issues if key personnel are otherwise committed to the month-end close, annual performance review period or annual audit.
- Build a contingency fund: Try as we may to estimate, there may be circumstances beyond our control that will influence the price of our growing family. As a result, we have been beefing up our emergency fund. Unknown factors as they relate to your implementation services may still exist during your negotiation cycle. These include the volume of users accessing the system, number of modules in scope and the need for bolt-on applications. Nail down these details early in the process in order to better approximate your technology investment.
Planning for a new addition to your family (or technology ecosystem) will involve a lot of financial preparation. With an understanding of existing costs and a set of priorities for the future, you will be best suited to face the price of both parenthood and ERP ownership.