SAP B1 blog

The basis: Why a new ERP system, what does it have to contain and what are the benefits?

Why do you need a new system?

This is the essential question that every company should ask itself before deciding on a new ERP solution. And there are several answers. On the one hand, it may be that the company has grown and can no longer be adequately supported in its processes and size by the solution currently in use. In this case, many systems (such as SAP Business One) offer the option of upgrading through Add ons extend the solution so that the company can continue to work effectively with the ERP.
If this is not the case, you need to look for a system that does not serve as a replacement for the existing solution, but meets your requirements for the ERP software and make a decision on the basis of this. This has a completely different scope than if the solution simply has to be replaced because it is no longer being developed further, for example. Here, you only have to take over the existing requirements. This means a much smaller project effort and in turn has a corresponding impact on time and budget.

What is the scope of the project?

Determining the scope of a project is often underestimated. Often, it is precisely those companies that are looking for a new solution that make the mistake of wanting to adopt old structures instead of introducing effective innovations. During the project (or even afterwards) the disappointment is great when the system does not have the expected effects. Then one starts to add or replace, which means uncalculated values for the project.

When defining the requirements for a new ERP system, it is helpful to consider whether desired applications (such as a integrated project management) in the ERP solution should be integrated, or remain in its previous form or be replaced by another system. This accelerates the integration and thus also has an impact on the budget.

What is the benefit value of an ERP system in the company?

On this question, it is very important to clarify: A ERP system is not a means of production. The mistake is often made here of making a simple calculation of the utility value. In the end, they argue with figures such as 'users who work with 80 % in the ERP system are then 5 % faster in the new one'. Of these Calculations we advise against, because they seldom have anything to do with reality.

The benefit factor of an ERP system can be measured financially in some respects (e.g. through the digitalization of certain processes, which saves working time). However, there are also benefits that are not measurable in this way, such as better data quality.
This question predominantly gives you a realistic view of the cost-benefit equation in the ERP project.

Additional question: What are the benchmarks for budgeting ERP projects?

The answer is simple: there are no benchmarks at the Budgeting for ERP projects! There are various reference values circulating on the web that range between 5,000 and 15,000 euros per user (factor 10) for a total cost calculation. However, you should urgently refrain from using these figures in your calculation. The cost framework in this case is far too uncertain to be determined on the basis of these sums. In addition, with ERP systems there are still the Maintenance costsbut which are calculated on the basis of the licence costs. However, the base and factor are not fixed values, making the final budget, in terms of value invested, random.

In the middle: What do my requirements mean for budgeting for ERP projects?

What additional factors must one reckon with?

In addition to the costs that the ERP system such as SAP Business One itself, when budgeting for ERP projects, the costs of implementation and staff must also be calculated. From the interface to the training, a lot of additional costs are to be expected. Here, too, the rule is: always remain realistic! Workers who are employed in the project team fall away elsewhere. Additional services must be expected, as during the project there are usually new demands on the ERP solution result. Especially with these costs, it would be naïve to set a sum. Of course, it is important to set limits, but still assume an amount that is currently too high.

Then why budget planning at all?

Yes, despite the great uncertainty, budgeting at the beginning of an ERP project makes sense in any case. This planning creates the facts about requirements and capacities that make such a project feasible in the first place. However, do not assume that you can set all the figures in stone.

To the front:  What is the use of budgeting for an ERP project and what else can I do to improve it?

At which points in the project does the company benefit from budgeting for ERP projects?

Actually always. Based on the information gathered, decisions can be made, justified later and success can be measured. Risk factors can also remain under observation - since they have already been recognised as such in the budget planning - and thus make a quick reaction possible.

How useful are reference observations?

Very! As mentioned before, fixed sums are not relevant, as every company has a different starting point. However, every company has experience with evaluation and implementation. And all of this was preceded by budgeting ? and afterwards, as we all know, we always know better. Therefore, do not compare prices, but procedures!

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