What is the typical ratio you have historically seen amongst your customers of implementation cost to ERP software cost?

Within the ERP software industry, there is an adage that goes something like ‘Whatever we give away on the software sale, we will more than make up for on implementation services’. What you really have to recognize is that no matter how good a job you think you do in communicating your requirements to the software supplier, you are going to either miss something entirely or not communicate the real depth of the requirement. The net result of this miscommunication during the sales process is that, despite the best efforts of both the buyer and the seller, there is always something unexpected that arises during implementation which results in (usually) incremental costs being incurred on the part of the buyer. This is commonly referred to as ‘scope creep’. This can range anywhere from minimal to outrageous. In one of the most extreme cases of which we are aware, the company spent around $6 million for application software, with a budget of $40 million to implement the software across the entire enterprise. They ended up spending over $350 million to implement, and did not implement it throughout the entire organization. The key is that a quality ERP software supplier knows and understands the concept of ‘scope creep’, and can fairly accurately include this within their project cost estimates. As an ERP software buyer, you need to be aware that there are many ERP software vendors who understand scope creep and will use it to their advantage by not incorporating this factor into their cost estimates.