Planning ERP Upgrades - Part 2: What Will the Upgrade Cost?

In the second in a series of Blogs on ERP Upgrades, John Donagher looks at the question of upgrade costs. If you’re planning an ERP upgrade then you need to get a handle on your project costs. What are the main things you need to take into consideration?

My colleague Ursula Browne has previously blogged on Budgeting for an ERP implementation. Budgeting for an upgrade is not dissimilar, but has its own characteristics:

Infrastructure

• Your upgrade may necessitate new servers, new PCs, new handheld devices, new printers. Make sure you’re clear what the full implications are before the project starts.
• During the test cycle you will want an environment that can run in parallel to the live environment. Even an application-only upgrade will need a new environment to test in; upgrading operating systems or servers introduces extra complexity and may warrant new or temporarily leased infrastructure.

Software

• If you’ve been paying your maintenance then the upgrades for the software licences you already have should be free. However, you may have to pay to access any additional functionality.
• If you’re adding new functionality to the system then the chances are you’ll have more users accessing the system. Unless you’re already on an enterprise or site licence then there’s likely to be a cost implication here as well.

Technical & Business Consultancy Services from the ERP vendor

• Details regarding the technical & business consultancy services required should form the core of the Statement of Work agreed with the ERP vendor.
• Technical consultancy services will be required to install the software, upgrade existing customisations, write new customisations, migrate data etc.

Internal tasks

• Don’t forget that a large proportion of the work associated with any ERP implementation, new or upgrade, is done by the internal project team. The internal team needs to be selected carefully and resourced appropriately.

Other consultancy services

• Do you have the in-house capability and experience to support the project? Many organisations find they don’t have skills or the spare capacity and need to outsource tasks relating to infrastructure and project management. Make sure this goes into your budget if your internal resources are stretched.
• If you operate in a regulated environment then an ERP upgrade will involve validation. The costs associated with computer systems validation can be very substantial – indeed in some cases it’s been known to cause the upgrade to be abandoned. Make sure you understand the validation implications of the upgrade and the associated costs.

This blog was written by John Donagher, Managing Partner at Lumenia. Read the other blogs in the series 'Why do you need to Upgrade?' and  'The Upgrade Implementation Project'.  If you would like further information on ERP Upgrades or any other aspect of ERP please send an e-mail to John Donagher.