How to Budget for Business Software

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Presented by Blytheco

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www.blytheco.com

Presented by Blytheco

Beginning now…

Welcome!

Today’s AgendaIntroductionsHow to Budget for Software ImplementationQ&A

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Introductions

Apryl HansonSenior Director, Customer and Partner Strategy, BlythecoSan Francisco Bay Area12 years of extensive business system and management consulting experience, specializing in sales, marketing, customer experience and process improvement.Broad industry experience including financial, manufacturing, entertainment, retail, software development, marketing automation, SaaS and wholesale/distribution.Lover of shoes, food and dogs.

Audience Poll…

How Well Does Your Company Budget for Software?

We have a good handle on all the costs associated and are never surprised with budget overrunsWe have a handle on the costs but sometimes have budget overrunsWe have an idea what costs to include but are often surprised by the final costWe don’t really know what to include in the budget for software, and usually have budget overrunsWe have no idea what to put in the budget for software, and our CFO has heart failure when we suggest a change

How to Budget for Software ImplementationApryl Hanson, Blytheco

How to Budget for Software Implementation…

What are common problems when budgeting for software?

Why Do Projects Go Over Budget?

A study by Panorama Consulting showed that reasons for going over budget on ERP projects included:Additional technology needed to be purchased to meet project goals – 16.7%Project budget was unrealistic - 16.7%Project staffing was underestimated in the initial budget – 22.2%Initial project scope was expanded – 44.4%

Instead…..take your time getting to a number

Scope: Key to Your Software Budget

It’s vital to define scope of the project before you can know how much it will cost

Do you want a Ferrari or a Ford Focus?What functionality do you need?What reporting do you need?How many users?What other software will you need (i.e., EDI, ecommerce, etc.)?

Cloud-based or On-premise?Each has different costs

On-premiseLower software cost, but consider:Hardware costsHardware maintenance costs (appropriate room, IT staff, etc.)Maintenance and upgrade feesIntegration costs

CloudLower hardware costs, but consider:Subscription costs

What Should Your Software Budget Include?

Software Costs• Licensing

• Consider # of users• Add-on software• Maintenance fees

Hardware (On-premise)

• Server• IT Staff

Services• Implementation• Data conversion• Integration• Customization• Training• Support• Data conversion• Data cleansing

Plan for Growth

How long will your next system last?

You don’t want to have to change software again sooner than you need to

CostDowntime

Most companies change their business software every 8 years on averageEarly adopters will change every 5 yearsRecession caused some companies to wait longerWhat’s right for your company depends on your growth rateOn premise solutions may have longer lasting power so you don’t have to change as frequently

How Much Should You Expect to Spend?

What Percentage of Revenue Do Companies Spend on Software?

Small companies (Less than $50M) spend 6.9% of revenue on IT on averageMid-sized companies ($50M - $2B) spend 4.1%Larger companies (over $2B) spend 3.2%

* Manufacturing companies on average cost about 14% more than other industries and the average cost to revenue ratio is .3% higher than that of all industries due to the complexity of those additional requirements.

How Much Should You Expect to Spend?

Keep in mind that: Implementation costs can run from 1-1/2 to 2 times the cost of the software, depending on your needs and customizationFor cloud-based software, the ongoing cost of the software could have a 1:1 ratio with implementationFor on-premise software, the software itself may be a small percentage of the total software budget

Cheapest Is Not Necessarily Best

In fact, cheapest is usually NOT bestGood discovery = getting what you needThorough discovery = no surprise costs

Study: 63% plus of manufacturing ERP implementations go over budget, with actual cost exceeding expected cost by an average of over $3 million. Integration with other software often the cause

Complete discovery = smooth “go-live”Study: 51% of organizations experienced some sort of material operational disruption at time of go-live, such as not being able to ship product or close the books. Of those, approximately two out of three experienced a disruption lasting one month or more.

Cheapest Is Not Necessarily BestMake Sure You’re Comparing Apples to

Apples in Proposals you Receive:Customized system vs. “out of the box”Does it Include all of add-ons you need?Have you considered phasing to reduce up front costs?Compare the hours allotted for training?Include project management hours?Calculate your own teams responsibilities in the project and your level of involvement.

Consider Funding OptionsIs This the Right Time to Get What

You Need?May need to wait a year to afford/justify the system your company needs in the long termGet it right rather than getting it right nowConsider your funding options as many companies can fund software + implementation and training for youWhy go through a software implementation twice in a short period?

Additional costDowntime twice

Conclusion

Remember:It’s vital to scope your project before you budget, including all the functionality your company truly needsConduct thorough discovery to uncover what your company requiresConsider all the costs involved, not just softwareRemember, cheapest is not usually bestGet it right, not right nowA good consulting partner will help you build the right budget so that “go-live” is a non-event

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