Budgeting for an ERP consultant

You’ve decided to go ahead with your ERP software project, but you know your in-house team lacks the bandwidth (or the specialist knowledge) to make it a success. We often highlight the importance of setting aside a consultancy budget where it’s needed; but what should you expect to pay an ERP consultant, and how do you compare the array of costs and options?

Estimating how much an ERP consultant costs

The cost of ERP consultancy depends on multiple factors (more about that later). By far the biggest factor is time. Some consultants charge by the hour, others by the day, and most on a fixed project fee. You’ll need a good handle on how long your project will take if you want to estimate the total cost.

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Calculating the time your project will take is one of the trickiest parts of any enterprise-scale software implementation. You’ll need to discuss the full project scope with your shortlisted consultants to get a ballpark figure. It’s important to set an ERP budget that will cover the entire project, including accounting for any hidden costs, from there you can map out your scope and total expenditure.

ERP consultancy variables

If you already know which ERP system you want, you’ll get a better idea on consultancy fees. For example, the fee for a SAP consultant is likely to be higher than a Sage 500 consultant. Of course, this doesn’t help if you want your consultant to help you choose the right system for your business. In that case, you’ll need a fully independent consultant who has expertise on a wide range of ERP solutions. That means you’ll be paying for more experience and wider knowledge. Look at these key variables to identify which end of the pay scale you should be forecasting:

• Project complexity
• Project duration
• Your location
• Preferred ERP solution
• Solution independence

For the 24% of businesses that use an ERP consultant to give unbiased input at the selection stage, independence is highly relevant. If your consultant isn’t getting a kickback from a particular vendor or software provider, then you may be more likely to get advice that has your best interests at heart. However, without a revenue stream from software partner, they may need to charge you a higher rate to make up for it.

How much do ERP consultants charge?

ERP consultancy is quite a broad term. Some will focus more on the business impact of the implementation, some will be more technical. Either way, you’re looking at a range of $150- $175 per hour. The tier one software specialists (think SAP and Oracle) will certainly be at the upper end of that scale.

These rates can also vary by as much as 20% to 30% depending on where you’re based.

Why do businesses use enterprise software consultants?

If you’re still on the fence about whether or not you need a consultant, take a look at these top five reasons for using a consultant:

• Steering ERP software selection: providing unbiased analyses of vendors and their software (24%)
• To provide support during organizational change management (23%)
• Planning the ERP project from a strategic perspective (22%)
• Managing the actual ERP implementation (19%)
• Fixing an at-risk implementation (9%)

Businesses have different reasons for choosing to engage a contractor or consultancy firm; if any of these reasons resonate, it might help you make up your mind.

If you are confident that you have the in-house resources to cover each aspect, from selection to implementation through to change management support, you might not need external help. However, get any of these parts wrong and you might end up in the 9% who have to draft in help when it goes off track anyway.