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It’s time again for my monthly thoughts re: developments in the ERP and accounting software world – spoken from an objective perspective. This month’s topic: the hidden or unexpected costs of hosting ERP software at your business…

A few years ago I became aware of a very good illustration that likened the cost of ownership of a traditional ERP system to the consequences stemming from an iceberg’s structure. You only see what is obvious – the beauty of the ice above the water – yet, there is a a lot of iceberg structure and mass under the ocean surface that you should best heed before proceeding on a journey near it.

Investing in an ERP or accounting software solution can, in fact, feel like navigating an iceberg.

This could be you: you paid hundreds of thousands of dollars just last year related to the implementation of XAZ 2009 software. The costs included:

  • The initial license fee to use it
  • The servers and new network architecture to host and manage it
  • The internal staff time devoted to migrating from your old software to XAZ, and
  • The implementation costs for integrator/reseller

After about 1 year, the project was complete and you were pleased. You felt like the big part of the investment was safely behind you… Let the ROI process prove itself out, right?

Well… Sort of. About 2 years into this experience, you find out that the publisher of XAZ has decided to upgrade its software to a new version: XAZ 2012. Good news! New features! Hooray! Hold on…

Your CFO just informed you of some harsh realities that take the sizzle of this upgrade down a notch: the 2009 version will not be supported by this time next year. Also, the upgrade – for which you have NO CHOICE – will require $90k in server software & architecture changes, $65k in consulting fees to migrate all your data into a new data structure in the 2012 version, and $35k in consulting fees to your network advisors. OUCH! You thought you had budgeted adequately for annual license maintenance fees and such… You’re looking below the ocean surface about now, right?

Lesson learned: never underestimate the on-going costs of ownership of ERP and accounting software – knowing that the software publisher can make well-intentioned improvements that have a dramatic impact on your checkbook.

Of course, when you migrate to a cloud-hosted application, much of this all goes away. The risk is shifted to the software publisher – but, that’s another concept to dive into, next month.

For now: remember that we are objective financial and business software advisors that work with clients every-day to navigate icebergs of a software nature.

We enable intelligent, well-planned software selections, and help clients oversee their implementations. We DON’T sell software. We DO work hard at helping our clients navigate the ERP waters.

See you next month… We’ll chat about more predictable ROI…