Allocating the right budget for your software implementation
Calculating budget for a global software-implementation seems very hard. Studies have shown that almost half of all software implementations go over budget, with dire consequences. Having full project scope budget is much more than just the license fee. Here, we’ll outline six top software implementation challenges regarding budget and discuss ways to avoid or overcome them.
1. Ending up the happy path
Implementation partners are trying to build trust, but at the same time they want to close the deal. Customers don’t want to know all the challenges but want to hear the good news only. This allows parties to talk each other down to the happy path. If you go down this path, the full, honest story gets out of sight at an early stage. resulting in a quick deal, but with guaranteed budget overruns in the end. It is up to both the client and the implementation partner to remain honest.
2. Forgetting the cost of human resources
One of the main factors of overruns is that most of the implementation budget cost goes to human resources. You don't just have a project team spending time on implementation, your whole organisation is going to work in a different way. People change their day jobs to work on the implementation and adoption instead.
You must engage with the right stakeholders You need to be talking to executive people who, who are directly connected into the DNA of the organization. Business Application implementations concern everyone, so let both the IT department and key staff from the business drive the conversation.
3. Only focusing on cost
A software implementation is more than cost. It is about the Return on Investment (ROI). If the cost is 20 million euros and the value added 50 million euros, your implementation is a bargain. Focus on the business case and the added value. But how to calculate this?
Is your system end of life? How much does it cost to run it per week, including all the time employees spend on extra management and workarounds? How much do you save when processes are automated with new, smarter tools? Whatever the business case is, you always must try to put a monetary value on it. Beware of over-optimising the ROI, as there is a human tendency to overestimate the benefits and underestimate the costs.
4. Not predicting the not so unpredictable
You can't oversee everything in advance, especially not in complex, global programs. Scope creep, harder business harmonisations and rosy time planning often cause budget overruns. The gap between expectation and cost is usually about 20%. Unforeseen issues almost always arise, be prepared for them financially. So always keep a buffer of around 20% of the total cost.
5. Letting go of discipline
Often, budget overruns come from changing customer requirements and lack of discipline. Completely rigid implementations do usually not work, but you must stick to the plan, at least if you want to stay within budget. The same goes for time registration. It happens quite often that when there is a new project, all sorts of people start using that code, even though they do nothing for that project. So, the budget disappears at lightning speed. Prevent that with strict governance.
6. Buy cheap and waste your money
Honesty is the best policy, a sustainable relationship built on trust and integrity lead to success. That is our strength with which we make global implementations succeed, within budget and on time. That doesn't always mean the cheapest solution, but one that delivers the most in the long run.