Beyond Software:

How to Estimate the Cost of

ERP Implementation Services
This white paper outlines:
 The 4 costs involved in ERP software projects
 A definition of what is included in “implementation services”
 Guidelines for calculating a ballpark cost
 8 factors that can increase your total price
 A comparison of Time & Materials versus Fixed Fee pricing models

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 How to Estimate the Cost of ERP Software Implementation Services
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Part 1: “I Need New ERP Software –

Now What?”
The Search Begins
There are many reasons companies begin the search for new
accounting/ERP software. Perhaps you have outgrown an entry level
package like QuickBooks, or your proprietary system is no longer
supported. It could be that your existing software doesn’t integrate with
your other systems and you are drowning in double entry. Whatever
the reason, the first question you will likely ask when researching
options to replace your existing system is, “How much will it cost?”

With midmarket accounting software/ERP packages it’s not as easy as

finding a price tag on the bottom of a box. There are many variables
that impact your final project price.

The only way to get a complete and accurate quote on the total cost of
your ERP project is to work with a local ERP expert, called a partner or
a VAR (value added reseller). But sometimes you need a way to
estimate the costs in the beginning stages of your research to determine
“I chose working with if it makes sense to continue the evaluation process.

Microsoft Dynamics GP The Four Costs of a Complete ERP Project

basically because of The mistake many companies make when initially trying to estimate the
CAL - excellent cost of an ERP project is only paying attention to the actual software
company, excellent license costs.
employees, excellent
support, and we’re In reality, there are four elements to consider in your budget.
looking forward to
having a good  Software License Fees
relationship over the  Maintenance Fees
years.  Hardware
 Implementation Services
”
Ileene Chernoff,
IT Project Manager,
Apple Health Care, Inc.

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Software
The actual license cost for midmarket accounting software is relatively
easy to find. In the case of Microsoft Dynamics GP, the software list
price is the same no matter who you buy it from and is published online
by many partners. (For tips on how to calculate the software license cost
read “30 Questions to ask About the Cost of Accounting Software”)

Maintenance Fees
Typically you need to add 18% to the software list price for the required
first year maintenance fee.

Hardware/Infrastructure
Your company may need to purchase a new server, upgraded
workstations or SQL server licenses to run your new ERP software.

Implementation Services
This area is the largest “unknown” in most ERP budgets, and is the
primary focus of this white paper. Using our experience with more than
“We put together a 200 Microsoft Dynamics GP projects we will outline what is included in
implementation services, how to estimate the cost, and how to avoid
dream list of paying too much.
technologies we
wanted to implement.
Note: Our guide uses Microsoft Dynamics® GP as the software example,
CAL Business Solutions but the principles presented should apply to all midmarket accounting
researched our dream software products.
list realistically and
brought to the table
solutions that were
forward-looking, could
be implemented in a
realistic timeframe and
at a budget that made
sense.

”
Jason Kloter,
President, Kloter Farms

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Part 2: “What Am I Really Paying For?”

Implementation Services Defined

The term “implementation services” can seem vague, especially if this is
your first ERP software project. The list below provides an overview of
services that are generally included in this category:

Requirements Analysis/Definition of Scope

Analyzing and documenting your specific business requirements,
scope and project plan.

(Note: Some partners charge separately for this and others roll the
cost into the entire project..)

Installation
Installing the software on your company’s servers and/or
workstations.

Configuration
Setting up the software with your business information, users
and personal settings.

Integration
Configuring the software to “talk to” your existing systems to
eliminate double entry.

“The best thing about Data Migration or Conversion

Microsoft Dynamics GP Transferring data from your current system to the new system.
is that the reporting is
so easy; just navigating Customization
is very, very easy. Changing the source code of the software to fit a specific need or
business process.

”
Cathryn Vogel,
(Note: Customization is typically not included in an initial estimate
as it requires a very detailed discovery process.)
Budget Analyst,
Connecticut Community Care

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Reporting
Creating or modifying custom reports and forms not included in
the standard software (such as invoices and checks).
Testing
Testing the system to make sure you are ready to “go live”.

Training
Training the project team and end users on how to use and
maintain the new system properly.

Documentation
Documenting how your system is configured.

Project Management

“We have been a client Controlling the entire project to make sure it stays on track and
on budget.

of CAL since 2000. (Note: Some buyers do not like to pay for this service because they
I love the flexibility of perceive it as “overhead”, but actually it is a critical element to the
Dynamics GP. We’ve success of your project. Even if you do not see it listed specifically
in your proposal, your partner has likely rolled it into the cost.)
had more flexibility
and more powerful
Also, remember to factor in the costs for ongoing support. Some
reporting tools than partners, such as CAL Business Solutions, provide discounted rates for
we ever could have buying a block of hours or support contracts. While the software
imagined with our old vendor may provide a limited number of phone support calls as part of
system. We have the the cost of your maintenance plan, most companies prefer to call their
flexibility to report local ERP partner who is familiar with their system and processes.
from period to period
to cross periods. This is a basic listing of services you should expect to discuss with your
partner. Remember, just because your partner doesn’t include one of
It’s made a huge
these services on their estimate, or use the same terminology, doesn’t
difference for our mean it won’t be a part of the project. The best way to find an ERP
reporting capabilities. partner who matches your budget, schedule, and goals is to ask

”
questions, or request written clarifications, until you have a complete
understanding of what is included and what might be an additional
Lina Irizarry, charge.
Accounting Manager,
Connecticut Community Care

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Part 3: “How Do I Determine a Ballpark

ERP Project Budget?”
Without meeting with an ERP partner to discuss your specific software
processes and goals, you will only be able to calculate a ballpark estimate
of the cost of implementation services. The ratios presented here will
not provide an exact number, but will help you ensure your budget is
not out in left field.

In general we tell buyers that the absolute minimum software cost to

services cost for a standard ERP implementation is a 1:1 ratio. This
means that if your software list price (before any discounts) is $10,000
you would need to budget at least an additional $10,000 for services –
bringing the subtotal to $20,000.

The first step is to calculate the software list price for your desired
number of users or licenses, then at least double that price. If you are
not comfortable with this number as a starting point, you either need to
adjust your expectations or re-evaluate if your company is really ready
for the investment of a midmarket ERP system. You could also consider
financing or subscription-based software.

Now that you have a starting point, you need to consider additional
factors that could increase that 1:1 ratio. Answer these 8 questions to

“You really understood better determine your anticipated software to services ratio:

our compliance and 1. How many users will you have?

reporting requirements If you have a small number of users (less than 3) you will pay more
and found the right for services than for software. Conversely, if you have a large
number of users (over 10) you may pay more for software than
solution for us instead
services.
of just trying to sell us
more features.
2. How much time can your staff dedicate to the

”
Brenda Martin,
implementation?
If you are willing to be “hands on” during the process and complete
tasks on your own (such as data entry and online training) it may
Finance Manager, reduce the number of hours provided by your partner and lower
Protein Sciences
your services cost.

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3. How much customization or reconfiguration of the
software will you need?
In other words, how willing are you to change your processes
around the new software if necessary? The more flexible you can be,
the lower your costs will be now and in the future.

4. Are you implementing core financial software only?

Projects that have a 1:1 ratio are generally referred to as “vanilla”
implementations of the core financial modules (General Ledger,
Accounts Payable, Accounts Receivable, Bank Reconciliation,
Invoicing).

5. Does your company require distribution or supply chain

management?
Companies with more complex distribution and supply chain
processes (inventory, purchase order processing, sales order
processing) should budget at least a 1:2 ratio.

6. Can you supply (or list) all the reports and documents you
need the system to produce?
If you need many reports or forms that are not included out of the
box, and you want your partner to set these up for you, this may
result in a higher cost. We recommend using as many out-of-the-
box reports as possible for the first month or two as this can

“I just have to say I love eliminate the costly changes of reports because “they are not like
our old ones”.

how smoothly Great

7. How much data conversion or migration will you need, and
Plains had helped make
who will perform this work?
our year-end closing The most obvious way to minimize your costs for data conversion is
this year. Just, to bring only data you need to use often into the new system. If you
everything closed up require extensive data conversion with manual data entry it will
perfect, couldn’t increase your services costs unless your staff (or temp workers) can
complain at all. complete the work. Most companies keep their old system running
and accessible for several months to access historical data rather than

”
Joel Smith,
bearing the high cost to migrate it.

Staff Accountant,
Santa Fuel, Inc.

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8. How much training will your staff require?
Do you have an experienced staff that is open to learning a new
system? Training can be significantly impacted if the users being
trained have little or no experience in similar systems, or are
resistant to change.

If you aren’t sure you qualify as a “vanilla” implementation, we suggest

you budget at least a 1:1.5 software to services ratio to make sure you
are in the ballpark, and then you can work with your partner to explore
ways to reduce the cost. It is always better to find that you are paying
less than you expected, rather than more.

This undoubtedly leaves some “gray area” to consider, but using the 1:1
or 1:1.5 ratio as a starting point will allow you to determine if your
budget is even in the right ballpark. The best next step is to speak with
an experienced local partner, such as CAL Business Solutions, to
determine a more accurate cost for your specific needs.

Just starting out? Take advantage of our Microsoft Dynamics GP Quick

“The staff at CAL has Quote Tool for a free automated quick quote on software, maintenance
and estimated implementation services.
been fabulous to work
with and has provided www.calszone.com/quick-quote
some very innovative
solutions for us. I was
originally concerned
that the CAL office was
located so far from us,
but using online tools,
it’s never been an
impediment. Everyone
is amazing - I just can’t
say enough great things
about CAL!

Christine Huebert,
”
Controller, PrideStaff Inc.

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Part 4: “Is There Such a Thing as a

‘Guaranteed Price’?”
There are two methods of pricing software implementations:

“Time and Materials” and “Fixed Fee”.

In a recent nationwide poll of Microsoft Dynamics GP partners, the

overwhelming majority only quote ERP projects on a time and materials
(or hourly) basis. Very few offer fixed fee pricing because there are so
many variables in every ERP software implementation. Regardless of the
pricing model, it’s important to do your homework and choose an
expert ERP partner who bases their quote on a detailed discovery and
years of experience so you can trust they will get the job done right and
on budget.

Fixed Fee Pricing: The Truth Behind the “Guarantee”

It’s understandable that many buyers want the perceived “guarantee” of

“I chose Great Plains

fixed fee pricing, especially in a tough economy. You want to know
exactly what you will get and what you will pay for it. But fixed fee
pricing is a misnomer. You are never guaranteed you will pay one
because of the price regardless of what happens during the implementation.
Microsoft brand. I You are only guaranteed that the partner will do what they carefully
believe Microsoft is outlined in the proposal, with no changes. But as changes come up, and
they always do, those changes will be considered extra work and you
willing to spend
will pay hourly anyway, just as you would with a time and materials
considerable resources proposal. These changes are called “out of scope”.
to advance the
software and as a result On the other hand, a fixed fee price will protect you from getting
the software will burned by a partner who has no idea what they are doing. If they need
continue to evolve. I to learn as they go along, you will not be stuck paying for the extra time
felt Great Plains was a it takes them to get the basic project done. But, who wants to work
solid investment. with a partner like that anyway?

”
Mark F. Smith, CFO,
Plus, most partners admit that fixed fee quotes have a built-in cushion to
mitigate risk for the partner. If the implementation actually takes LESS
time than anticipated, you will still be charged the full amount and pay
Oil Purification Systems, Inc.
for time you didn’t even use. So, while this may sound like a great deal

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initially, you may not save money in the end with this pricing model.
Second-time buyers of ERP software realize that getting a software
solution that meets their needs and having a staff that can use it
efficiently is more important than having a fixed fee. There are many
honest partners out there who genuinely want to help you control costs
and deliver superior service.

Time and Materials Pricing: Pay Only for What You Use

When you are paying a partner by the hour, it may feel like you are just
giving them a blank check to get it done no matter how many hours it
takes. However, there is a more realistic way to look at this pricing
“We have been on model.

Dynamics GP for about When CAL Business Solutions gives a time and materials quote we feel
three years. We are a it can best be described as a “fixed scope” quote. We do a thorough
different company since discovery of your needs and present a detailed proposal based on this
information and our experience with hundreds of similar projects. Our
we started working
proposal includes a detailed explanation of what you will receive, and
with CAL. Our CAL the estimated number of hours to complete the project. Any additional
consultant is a costs would be communicated to you in advance for approval.
wonderful, patient
teacher. He has sat at While you are not guaranteed a certain price, as long as both sides stick
my side for hours, and, to this plan, it should be the price you pay. If you are willing to pitch in
in fact, days as we went more work along the way, or some type of customization proves to be
through a very less complicated than anticipated, you could pay even less.
recalcitrant bank
Time and materials proposals are more flexible. If requirements change
reconciliation, solved
during the project, which they often do, the project manager has the
the problem, patiently, flexibility to take budgeted time out of one area and move it to another.
quietly, going through Or if you decide that you can do more of the work on your own you
everything we needed will not be charged for that time included in the proposal.
to know. I really feel
very empowered Let’s look at a sample estimate from CAL Business Solutions based on
working with him. the time and materials method of pricing.

”
Cathy Moran, Owner,
Moran USA, LLC

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Sample Estimate For Services:

Microsoft Dynamics GP Implementation Services

Hourly rate: $ 135.00

Microsoft Dynamics GP Service Description: Hours Extension

Project management, kick-off meeting 8 $ 1,080.00

Installation on server / up to 4 workstations 8 $ 1,080.00

QuickBooks Conversion 28 $ 3,780.00

ONE company : Import Chart of Accounts from QuickBooks.
Includes one (1) year of GL Summary conversion; Vendor Master file
conversion. Using QuickBooks Conversion Tool where possible.

Application Setup & Training 24 $ 3,240.00

System Manager, Financials: General Ledger, Bank Reconciliation,
Payables Management

Financial Report Training 8 $ 1,080.00

Note: Does NOT include duplicating current report formats. We
will begin training using your report requirements and you will be
responsible to continue the report work and complete.

Integration to external system (OPTIONAL) TBD $ -

Forms and report modifications 3 $ 405.00

Travel - estimated 5 trips 4 $ 540.00

IMPORTANT NOTE: Training time is included for the requested

modules. Training on other modules included in the Microsoft
Dynamics GP Business Essentials package will be available on a Time
and Materials basis in person or via remote connection.

Total Estimated Services: $ 11,205.00

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The key points to look at in this sample estimate are:

 The hourly rate is clearly defined.

 The hourly rate of partners can vary considerably. Make sure
you compare rates for implementation and for ongoing support.

 Hours are estimated per service area and not as a lump sum.
 You want to know exactly what is included in your quoted
price. If a partner only has a few hours included for training and
you know you require more, this is a red flag.

 Estimate states what is included and, more importantly, what might

be an extra charge.
 Don’t assume something is included unless you ask.

 Detail shows what tasks customer is responsible to complete.

 Often buyers will agree to complete tasks on their own in order
to lower the services cost. If you do this, make sure you have
the staff available as this is one of the main reasons ERP projects
go over budget.

 Quote includes travel time.

 Miscellaneous fees such as travel costs are often not included in

“CAL responds quickly the budget but in the end they can add up to substantial fees.

When you receive an ERP quote, it’s a good idea to have an honest
to support requests discussion with the partner and ask them to explain how you can avoid
whenever there are going over budget.
technical difficulties,
and the accounting
department loves the
software. It’s a win-win.

”
Paul Wasilewski,
Network Administrator
Specialist,
Connecticut Community Care

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Ready to Get Started?

We hope this paper has given you helpful information to begin budgeting
for your ERP software implementation with confidence. Let’s review
what you can do to get started on your budget:

 Understand the 4 costs associated with your ERP budget.

 Decide how many users/licenses you will need.
 Learn the definitions of services so you are prepared to analyze
partner proposals.
 Answer the 8 questions to find your anticipated software to services
ratio.
 Determine the best pricing structure for your company’s needs.
 Review the sample quote as a guideline of what to expect.

 Use the Online Quick Quote Tool provided by CAL Business

Solutions to obtain estimated pricing for Microsoft Dynamics GP
software, maintenance fees and implementation services.

For more information on the cost of accounting software, how to

“My experience with choose the right partner, and why ERP project go over budget review
our previous white paper: “30 Questions Every CFO Needs To
CAL and their training Ask About the Cost of Accounting Software.”
has been excellent. I Download at: www.calszone.com/30questions
had some one-on-one
training with Great When these points have been considered, it’s time to meet with CAL
Plains (Dynamics GP) Business Solutions to take the next step.
when I came in because
I had never used Great Contact us at [email protected] or 860-485-0910 x 4.
Plains before. Now I
can use Great Plains for
the type of reporting
and the type of
information that I need.

”
Jeff Beekman, CFO,
Consumers Petroleum

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About CAL Business Solutions, Inc.

Since 1982, Connecticut based CAL Business Solutions has helped more
than 200 companies in 16 states improve business productivity with
Microsoft Dynamics GP financial management system.

 Consistently ranked in the top 5% of business partners

worldwide.
 23 team members focused on Microsoft Dynamics GP—
the largest GP partner in New England.
 Connecticut’s only GP Training Center.
 In-house development team.

If you are looking for a Microsoft Dynamics GP Partner that will treat
you fairly, and work with you to save money, call us at 860-485-0910
ext. 4 or email [email protected].

We would be happy to schedule a discovery call to review your needs

and help you determine if Microsoft Dynamics GP would be the right fit.

Request a free automated

Microsoft Dynamics GP Quick Quote at
www.calszone.com/quick-quote.

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