Do you know what phrase is rarely spoken by a municipality after implementing a new ERP?
“We completed the project on or under budget.”
The reality is that whatever budget your municipality sets for its ERP implementation, you should expect to spend even more. But the question is: How can your municipality control ERP implementation costs?
In this article, we’ll explore key strategies to help mitigate unnecessary expenses and keep your project on track.
1. It All Starts with Requirements
Effective cost management begins with the procurement process. The more detailed your functional and technical specifications are, the better you can:
ERP vendors excel at navigating the gray areas of system requirements to their financial advantage. When a provider claims they can deliver a specific capability, always verify whether it is included in the bid price or if additional fees apply. By proactively addressing these details and asking clarifying questions during contract negotiations, your municipality can mitigate the risk of unforeseen expenses.
2. Invest in Legal Expertise for Contract Negotiations
Software providers and ERP system implementers negotiate contracts every day—backed by teams of experienced legal professionals. They count on their legal teams being more knowledgeable than yours.
To level the playing field, municipalities should hire legal counsel specializing in ERP contracts. While this may seem like an added expense, expert legal support can save your municipality far more money by securing better contract terms and preventing costly loopholes.
3. Negotiate or Defer Licensing Costs
Many ERP providers insist that full licensing fees apply from the moment your municipality gains access to the system—even for demonstration or configuration purposes. However, only a small fraction of licenses are needed during these early stages.
Municipalities must push back on this requirement and negotiate flexible licensing terms. If using an nRFP (negotiated RFP) process, you can leverage multiple vendor negotiations to secure more favorable pricing and payment structures for licensing fees.
4. Adopt a “Zero Customizations” Approach
One of the biggest cost drivers in ERP projects is customization. Municipalities often face long, expensive system updates due to highly customized ERP solutions. A smarter approach is adopting a “zero customizations” policy, which means:
This strategy saves time and money in the long run. Without customizations, your ERP vendor remains responsible for ensuring system functionality after updates—support that is typically included in your subscription fees.
Note: This approach requires municipalities to align their processes with the ERP system’s built-in capabilities, which may necessitate workflow adjustments.
5. Limit Data Migration
ERP systems are data-driven, but migrating excessive historical data can inflate costs and introduce unnecessary complexities. To reduce expenses, municipalities should adopt a “minimum viable product” approach—migrating only the data required for system functionality at go-live.
More historical data means:
Municipalities can meet data retention requirements without migrating all historical data by using separate archival databases. By carefully planning data migration, significant cost savings can be achieved.
6. Invest in Skilled Project Management
One of the most misallocated leadership roles in ERP projects is the Project Manager (PM). The PM is responsible for controlling scope, timelines, cost, and quality—yet municipalities often underfund this role.
Finding a PM with both municipal experience and ERP implementation expertise is challenging. Due to lower municipal compensation structures, attracting top-tier PM talent in-house is unlikely. Instead, municipalities should contract an experienced ERP project manager. While this may seem expensive, a skilled PM will prevent scope creep, mitigate risks, and control costs, ultimately saving your municipality money.
7. Dedicate Full-Time Functional Resources
ERP implementations require full-time commitment. Municipalities that attempt to manage them with part-time staff often face:
To ensure long-term stability, municipalities must assign full-time functional leaders and analysts to the project. These individuals become the subject matter experts (SMEs) who provide continuity post-go-live. While staffing these positions incurs costs, outsourcing these roles to consultants can be three to four times more expensive.
Investing in functional staff is not just a cost-saving strategy—it is key to ensuring your ERP system remains sustainable and well-managed in the long run.
The Hawforce Advantage
The strategies in this article come from firsthand experience with municipal ERP procurement and implementation. At Hawforce Consulting, we have seen—and lived through—the consequences of poorly managed ERP projects that have cost municipalities hundreds of thousands or even millions more than necessary.
If cost control is a priority for your municipality’s ERP journey, we’re here to help. Contact Corey Halford and Hawforce Consulting at info@hawforce.ca for expert guidance. We offer complimentary ERP advisory sessions—just reach out to get started!