A cloud-based ERP is a major investment. As with any investment, executives must understand its full costs to generate the best return.
Some implementation costs are clear. For example, the price of your vendor’s software stack is explicit, and you know that you’ll need resources to migrate your data from legacy systems. But some costs associated with cloud ERP implementation aren’t obvious. Companies often forget the costs of data transfer, service customization, and cloud compute and network fees, for instance.
To properly estimate the true total cost of ownership, you must understand and anticipate these expenses. Only then can you make a fully informed decision about the ERP system you implement.
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The Unanticipated Costs of Cloud ERP Implementation
Unanticipated costs range widely depending on the ERP system. Cloud ERP system costs that companies most often fail to consider include:
- Compute services prices: Cloud-based services require sufficient computing capacity to operate smoothly. As you scale your business, you may need more processing power. That can be costly, whether you underestimate your needs and pay an unexpected cost later or overestimate your needs and pay an unnecessary premium. Even small variations in pricing from cloud vendors can lead to huge cost differences for an enterprise.
- Bulk discounts for block and object storage: Cloud service providers often price data storage to offer bulk discounts for big blocks of data. That can lock you into paying for storage capacity you may not use.
- Data transfer costs: Data is cheap to store but can be expensive to transfer. NASA learned this lesson with a cloud audit where it discovered it was paying every time scientists downloaded data. Many enterprises are in the same boat—paying more than they expect for transferring data across systems.
- Future customization: As you grow, your ERP needs may evolve. You may need to customize your cloud-based ERP to ensure it still serves your needs, and this can add costs.
- Expensive premium support packages: Cloud infrastructure vendors often provide documentation and basic support. However, you may need to pay hefty fees to access more specialized support from experts who can assist with latency problems, network outages, and so on.
If not anticipated, the above outlays can cause major cost overruns.
Setting Level Expectations for Your ERP Cloud Implementation
Here are some ways you can mitigate them to keep your cloud ERP system costs within your budget.
Choose the Right Managed Cloud Service Provider Early
Your cloud service provider will become a vital business partner. Carefully choose a provider that can meet your needs early on. They should be able to explain how they will scale your computing and data storage needs. Consider providers that offer tiered support, a native auto-scaling solution to manage capacity, and the ability to tailor plans for future scale changes.
Consider the Impact of Network Charges
Providers use different pricing models. For example, Oracle doesn’t charge on the first 10 terabytes of data downloads, while Microsoft Azure charges after 5 gigabytes. Be aware of the different cost models for moving data from the cloud and find a provider that doesn’t charge exorbitant fees.
Understand the Scope of Your Compute Dependencies
Get clear on your cloud needs, including computing power and network storage. Determining whether you are overshooting or undershooting for computing power will help set expectations for costs down the line.
Decide on an Elasticity Window Up Front
Look for solutions that can autoscale computing capacity according to needs. Consider cloud partners that offer elasticity windows to better govern compute costs in various situations. For example, you might seek lower capacity for day-to-day operations and boosts for certain testing periods.
Deduplicate Data and Reduce Your Organization’s Idle Time
It’s critical to identify where there may be unnecessary data usage that will drive up cloud service costs. When you find these areas, you can turn off resources you’re not using. Also, take time to look for organizational silos that might cause data duplication.
Cost Reduction and Increased Competitiveness
Cloud ERP systems can drive efficiencies and ensure your organization runs smoothly. But they can also be expensive—especially if you haven’t carefully estimated the total cost of ownership.
Expect to pay not only for the platform you use but also for the auxiliary costs mentioned above. Build those costs into your budget from the start, and you’ll be on track toward a more successful implementation.
Wondering if you’ve accurately assessed the cost of a cloud ERP solution? Feel free to get in touch to learn how Pemeco can help.