Cost trap ERP implementation? Reduce costs with these strategies

The introduction of an ERP system is a financial challenge, especially for small and medium-sized companies. To ensure that the investment pays off at some point, it is not enough to focus solely on the initial acquisition costs. It is not uncommon for the subsequent running costs to overstretch the budget over the years.

In this article, we give you practical tips to help you make your system implementation as cost-effective as possible – from ERP funding to the right system selection. We also uncover hidden cost drivers that many inexperienced companies overlook at the beginning.

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These are the smartest strategies for reducing costs

1. carry out a detailed requirements analysis

The initial preparations for ERP implementation can already determine whether the project will end up costing you dearly. In particular missing or inadequate target definition can drive up costs enormously. Without clear objectives and well-founded background analyses, there is no indication of which functions your company actually needs and which it does not.

The result is long wish lists from the specialist departments, some of which bring little benefit and cause costs to explode. Your production management may insist on a detailed planning module in the ERP – but this is of little use in the end if the master data is still lacking at the beginning. In such a case, it is better to work on specific improvements in a second phase after the vital functions have been produced. Then the necessary basis has been created.

A detailed analysis of the requirements is essential so that you do not start the ERP project with too high expectations. The ERP provider first takes a close look at your goals and requirements and carries out a comprehensive potential analysis. Experienced experts take a close look at your company’s business processes and gain an overview of the performance potential in the individual departments. Problems and weaknesses within the organization quickly come to light.

Once an objective basis has been created for the optimization options and the subsequent ERP configuration, the provider works with you to prioritize the requirements. In this way, you only purchase the range of functions that will ultimately bring you real added value and avoid unnecessary investments.

2. concentrate first on the ERP standard

There is another way to keep expenditure on unnecessary functions as low as possible when introducing ERP: You only use the system standard at the beginning. This means that you first implement the ERP system as the provider has developed it in its basic functionality. Instead of purchasing all possible features right from the start and carrying out numerous cost-intensive individual programs, you start with small steps.

You may be thinking now: But can a standard system really map all the specific needs of our company? Well, perhaps not one hundred and ten percent right from the start, but it doesn’t have to. If you need additional modules after some time, these can ideally be retrofitted without any problems.

In contrast to a complex conceptual approach in an ERP project, a standardized implementation offers the following advantages:

• The implementation is much faster – often within just five to six months. This corresponds to a time saving of around 50 percent.
• You will normally receive a fixed price quotation with a clearly described scope of services so that you have maximum control over the costs.
• There is no risk that you will end up paying dearly for unnecessary adjustments.
• You need fewer internal resources, as the introduction of the standard does not require extensive support from the project team.

3. select the right ERP system

We can say from experience: keep your eyes open when choosing a system! Because not all ERP systems are the same. There are extremely different product philosophies on the market, some of which are more customer-friendly than others. You should pay attention to the following factors:

Wide range of functions as standard

There are ERP systems that offer a wide range of functions out of the box and in which all important core processes are already predefined . Only with such a solution can a lean, fast and cost-effective ERP implementation on a standard basis succeed. It is important that the system has a modular structure so that you can expand the standard later if required.

On the other hand, there are modular systems with which you first have to configure the processes. This configuration is incredibly time-consuming and requires a great deal of expertise. It goes without saying that this effort ultimately costs time, resources and money.

Process-oriented system

Many ERP systems are still offered that only support function-oriented use. The user interface of such data-centric solutions is usually extremely complex, as it is overloaded with many buttons and input fields. This is neither user-friendly nor up-to-date.

Ideally, a modern ERP system offers a process-oriented process-oriented view and functionality. Overloaded user interfaces are replaced by predefined workflows that guide users step by step through their tasks. Only those functions that are relevant for the respective tasks are displayed.

The advantages are obvious:

• An ERP system that focuses on processes is self-explanatory and can be operated intuitively. This not only speeds up everyday workflows, but also onboarding processes.
• Routine activities can be easily automated on the basis of defined workflows. As a result, standard processes run quickly and error-free.
• As a result, the amount of work and time required is reduced, which is reflected not least in lower operating costs.

Integration capability

An ERP system should make a company’s processes more efficient. This is only possible if the ERP solution is optimally integrated into your existing system landscape and data exchange functions smoothly. To ensure that not every connection is associated with expensive programming work, the standard should already have open interface architectures.

In some cases, savings in the five-figure range are possible.

4. take advantage of the state ERP subsidy

Small and medium-sized enterprises (SMEs) usually have significantly fewer monetary resources for implementing digitalization projects than large corporations. At the same time, they can no longer afford to turn a blind eye to the digital transformation. That would cost them the most: first their competitiveness and ultimately their existence.

Companies that do not have the money for an ERP project on the high edge must therefore actively look for a suitable funding program. Although applying for state funding initially involves a lot of bureaucracy, the effort pays off in the end. In some cases, savings in the five-figure range are possible.

There are basically two funding options to choose from:

• ERP funding via subsidies

Both the federal and state governments offer funding programs that grant a government subsidy in the form of a one-off payment. This subsidy is not tied to anything in return – so it does not have to be paid back. However, the state never covers the full costs, so the company always has to pay a certain amount itself.

• ERP funding via loans

Alternatively, a low-interest promotional loan from the Kreditanstalt für Wiederaufbau (KfW) can be considered. This is also a state subsidy, as KfW’s capital is held by the federal and state governments. Unlike a grant , however, the applicant must repay the loan amount in full. The loan agreement usually runs for many years.

By the way: A subsidy program is not only useful when implementing a new ERP system, but also when upgrading an existing solution. You can also use the funding for the services of external funding consultants. They know the current funding pots, can help you apply for funding and provide valuable tips for the right application. With this help, the bureaucratic effort can also be managed well.

5 Do not fall for the tricks of some providers

You also need to be careful when choosing a supplier. Some manufacturers know exactly how to optimize their profits. You often have to dig deep into your pockets for these cost drivers:

License fees for indirect use

Sometimes companies overlook a perfidious clause when signing a contract with an ERP provider: the licensee is not only expected to pay license fees for the direct use of the ERP system. Even if a system or third-party application accesses the ERP functionality, the manufacturer asks its customers to pay – even retroactively. This is the case, for example, when the CRM system retrieves customer data from the ERP or store software synchronizes orders with the system.

The rude awakening usually comes when the ERP has already been implemented and there is a dependency on the provider. The customer then has no choice but to swallow the bitter pill and pay the unexpected license costs. The result: high additional payments and regular additional costs that were not planned for. Therefore, when selecting a system, make absolutely sure that no additional license fees are due for indirect use.

Insatiable financial investors

Nowadays, many manufacturers are caught up in a construct that is backed by financial investors. They have one main goal: to extract as much profit as possible from long-term revenues. They achieve this, for example, by massively increasing recurring costs in cloud subscription models. For example, you may suddenly have to pay 20 percent more for a service than in the previous year. In this scenario too, your dependency on the provider means that you have your back to the wall, so to speak, and can only look on helplessly as a repeated price increase flutters through the door.

Insufficient support abroad

Driven by investors, many providers are outsourcing their support abroad. This is of course cheaper for the manufacturer, as lower wages reduce operating expenses. For you, on the other hand, low-quality offshore support does not pay off – on the contrary, you end up paying more. If the provider support is not suitable, you will need additional specialist staff. And that costs money.

Conclusion: Preparation is everything

The introduction of an ERP solution is a complex project that can certainly be a financial burden. Good planning is extremely important to ensure that the project does not tear too big a hole in your coffers and pays off in the end. It not only determines whether you choose a useful range of functions. It also lays the foundation for the long-term affordable operation of the software.

Our APplus solution, for example, provides you with an uncomplicated and comparatively inexpensive start in the ERP world. It enables a Fast Track Implementation (FTI) so that you can get to know the standard without any risk. It also supports you with the Flow mode supports a process-oriented usage approach that makes your workflows significantly more efficient.