Selecting ERP Software – Best Practices – When the budget is too low

So you read my posts on budgeting…and you came away thinking, “He’s too high! We can do it for less!” And you just might be able to do it for less. But before you try, let me relate a true story…this happened to one of my clients about 5 or so years ago. They aren’t the only story I could tell…

A Budget Too Low

The easiest way to explain this is to tell you about my client…I’ll call them E-Corp (hey, if you watch the TV series Dr. Robot, you might know them…not really)

E-Corp set a budget of $150,000 for their software. They needed a lot of software. 40 or so users. Warehouse management. EDI. …and they had a huge need for customization…

You see, the software they had was developed in-house, and they knew they wouldn’t find anything that did exactly the same thing…and the programmer retired…and then the Controller who knew what the software did announced his retirement…

I told E-Corp that $150,000 was too low….but they insisted on that budget…even though I encouraged them to double or triple it...

The last time I talked to E-Corp, they had spent over $400,000..and still weren’t through!

What Happened?

E-Corp started with a list of potential software vendors. They sent them a rough RFP and asked for proposals. Several vendors whose products I knew didn’t respond. The client asked me, “Why?” I said, “Your budget is too low; I wouldn’t have responded either. You aren’t acting serious about this.” 

But because they got a response from a SAP dealer (BusinessOne), they thought they’d go forward. They did demos and discovery. They specified customizations. They drank the Kool-aid, as they say. And then came the proposal. $288,000. The client called me to check the proposal. “Can you help us get it down?” I reviewed it.

“This proposal is too low,” I said. “The fees are all estimates. You’ll never finish the project for this. The fee to product ratio is 50%, and you have data conversion AND extensive customizations.”

“What does the budget need to be?”

“$500,000”

They told themselves (and me), “We have the technical ability to get this done for this price.” Only one of us believed them. It wasn’t me.

I told ’em so

The last time I talked to them, they had implemented the software for 2 of 5 business units (the easy ones), and they had spent $400,000 and were two years over schedule.

I can only tell you the truth. I can’t make you believe it.