One of the criteria used for measuring the success of ERP implementation projects is actual costs versus budgeted costs. The first step in achieving this goal starts before the implementation project with the creation of a comprehensive and realistic budget. Preparing a budget for an ERP implementation is no different to preparing a budget for any other project: all potential costs should be examined and those that are relevant included. The difficulty is ensuring that all costs relating to an ERP implementation are considered and that the estimates are realistic and based on sound assumptions. This white paper 'Budgeting for ERP' examines those elements and the steps required to build a good budget.

1. Budgeting for ERP
May 2014

2. Page 2 of 5
Table of Contents
1 Introduction ..........................................................................................................3
2 ERP Budget Elements .........................................................................................3
2.1 Technical Costs .......................................................................................................3
2.1.1APPLICATIONS SOFTWARE..............................................................................4
2.1.2HARDWARE .....................................................................................................4
2.1.3DATABASE AND OPERATING SYSTEM..............................................................4
2.1.4INTERFACES......................................................................................................
2.1.5CUSTOMISATIONS .............................................................................................
2.1.6NETWORK AND TECHNICAL COMMUNICATIONS...................................................
2.1.7MAINTENANCE AND SUPPORT ...........................................................................
2.1.8HOSTING ...........................................................................................................
2.2 People Costs .............................................................................................................
2.2.1TRAINING ..........................................................................................................
2.2.2PROJECT MANAGEMENT ...................................................................................
2.2.3CHANGE MANAGEMENT.....................................................................................
2.2.4EXTERNAL CONSULTANCY SUPPORT ................................................................
2.2.5INTERNAL TEAM ................................................................................................
2.3 Data Migration Costs .................................................................................................
2.3.1EXTRACTION .....................................................................................................
2.3.2COLLECTION .....................................................................................................
2.3.3CLEANSING AND TRANSFORMATION..................................................................
2.3.4LOADING AND TESTING .....................................................................................
3 Calculating estimates and building the budget.......................................................
3.1 Estimates...................................................................................................................
3.2 Building the budget....................................................................................................
3.2.1WHEN TO BUILD THE BUDGET............................................................................
3.2.2CONTINGENCY ..................................................................................................
3.2.3BUDGETING FOR LARGER PROJECTS.................................................................
4 Conclusion .............................................................................................................
About Lumenia ...........................................................................................................5

3. Page 3 of 5
1 Introduction
One of the criteria used for measuring the success of ERP implementation projects is
actual costs versus budgeted costs. The first step in achieving this goal starts before
the implementation project with the creation of a comprehensive and realistic budget.
Preparing a budget for an ERP implementation is no different to preparing a budget for
any other project: all potential costs should be examined and those that are relevant
included. The difficulty is ensuring that all costs relating to an ERP implementation are
considered and that the estimates are realistic and based on sound assumptions. This
white paper examines those elements and the steps required to build a good budget.
2 ERP Budget Elements
One approach that will ensure nothing is missed is to break the costs into three
categories: Technical, People and Data.
2.1 Technical Costs
Technical ERP costs encompass all software, hardware and related technical
consultancy costs. These are the costs that are usually considered when preparing an
ERP budget and they can be broken out as described in Figure 1.
Figure 1: Technical ERP Costs
Technical
Costs
Application
Software
Hardware
Database
Operating System
Interfaces
Customisations
Network &
Technical
Communications
Maintenance &
Support
Hosting

4. Page 4 of 5
Not all ERP implementations will have requirements in every area; however it is still
useful to examine each one.
2.1.1 APPLICATIONS SOFTWARE
There will always be a need to budget for ERP user licences and these costs may be
categorised as once-off or recurring depending on whether the strategy is to implement
a ‘traditional’ on-premise, full SaaS (Software as a Service) or hybrid on-premise/SaaS
solution.
Licences for ancillary modules or applications may also be required, for example:
 Business Intelligence/Reporting user licences
 Customer Relationship Management user licences
 Portal Licences for customer and/or supplier web-access
2.1.2 HARDWARE
Unless a full SaaS solution is envisaged there will be a requirement for servers. The
number required and their specifications will depend on the scale and scope of the
project as capacity will be required to support the application, database and
presentation layers of the solution. Any previous investment in virtualisation
technologies should be taken into account and requirements relating to disaster
recovery (DR) should also be considered. The implications for the DR strategy can be
a very big area in its own right and many companies take the opportunity of
reconsidering their DR strategies in the context of significant investment in ERP
infrastructure.
Other hardware requirements may include mobile devices, scanners, printers and, in
some cases, PCs and laptops. Installation and commissioning services will also need
to be factored in where external expertise is required.
2.1.3 DATABASE AND OPERATING SYSTEM
All ERP systems use a database and will therefore require database licences.
Likewise, a provision needs to be made for operating system licences. The way these
licences are purchased can vary if the budget is for a SaaS solution.

5. Page 5 of 5
About Lumenia
Lumenia is a boutique management consulting organisation, specialising in the
development of business systems strategy and the selection and implementation of
enterprise applications – particularly ERP and CRM systems. Operating from offices in
Ireland and the UK we have delivered ERP or CRM projects in well over 100
organisations across the world.
To download the full copy of this report for free,
visit our website and register at:
http://www.lumeniaconsulting.com/resources/reports-
white-papers/budgeting-erp
Copyright BSM Ireland 2014. Lumenia Consulting is a registered Business Name of BSM Ireland Ltd. All rights
reserved. No unauthorised reproduction without the Author’s written consent. All references to this publication must cite
Lumenia as the author and include a link to Lumenia’s website. Lumenia is not liable for any errors contained within this
Report.
Lumenia Consulting Ireland (HQ)
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Galway, Ireland
T: +353 91 746940
E: info@lumeniaconsulting.com
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