Why do Essbase and other systems changes cost so much?

September 8th, 2020

By Jim Burke

 

Have you ever noticed that when software salespeople quote the price of software and then very quietly whisper, “Plus implementation”, with no number for the implementation?  

 

They whisper the word “Implementation”, because depending on the software you are considering, that implementation cost can be between 2x and 5x the software cost.   The worse news is that getting an accurate quote on the implementation is difficult.  

It is not that the sales and consulting reps are being untruthful, it is that they really do not know how much of a mess they will encounter or if your promise to help and deploy qualified people on the implementation will be fulfilled.

The consultants that do the implementation work are expensive, but not because they make a lot of money, it is because most of the process is MANUAL.  

It is ironic that software automates a lot of work but implementing it is still a very manual process for most software companies.  

 

Here are the high-level steps of an implementation and please take note of the: Metadata, Integration, reconciliation, and handover stage.  

The Metadata and Integration stages together these take up 37% of the implementation project budget.  The good news is that these two steps in the process can be automated, which will all but eliminate that cost.  

Using a managed service to provide the systems administration is more cost effective and the quality is higher than running the software on your own if combined with BOT’s. 

 

Software implementation stages and where the money goes:

Requirements

The requirements stage has a bunch of people in a conference room, who convert “Vision” into a plan that can be implemented.  A lot of time goes to writing requirements, then negotiating those requirements for the separate needs of groups within the enterprise.

Infrastructure

There may or may not be an infrastructure stage, as many applications are cloud based, so if the software is installed on premises that adds a couple of weeks to the project process and corresponding cost.

 

Integration

The integration stage runs concurrently with other stages, but it is always a big expensive challenge as this also is a mostly manual process.  The odd thing is that even though this detailed step is done on a computer the work is very manual.  Integration is made worse as it is subject to change every time there is a data input or output adjustment, so it can be expensive to maintain.

The integration stage can be automated with software tools which cut costs. 

Metadata

The metadata build stage is unfortunately a painful and repeated process, but it does not need to be.  It gets painful and expensive if your implementation team ignores that there are now inexpensive software tools to automate this. 

It's quite common to build the metadata only to find out that elements were missing, this gets awfully expensive depending on if the application build / configuration stage has also begun.

   

The Metadata stage usually eats up 12 % of the budget, so it is a substantial portion of your cost basis.

 

The Metadata stage can be automated with software tools which cut costs and all but eliminate that 12% spend.

 

Application Build

This requires very skilled people to apply the software purchased to the business requirements.  There are software tools to automate elements of this process the cut costs.  

Reconciliation

This is usually a terribly expensive and labor-intensive stage that can scar the relationship between the software company and the client.  

The reason is that its very tough to reconcile data between the legacy system / process and the new software.  There are often years of data to reconcile and those responsible for the data have long ago left the company…messy. 

This part of the job usually eats up 25% of the budget, perhaps more as few project managers track the overtime put in by the corporate staff. 

This stage can be 100% automated with software tools to cut costs. 

Handover / Training

This is where it gets tricky as, “Expectations meet reality”.   The software was sold as a path to improvement, but not everybody feels that the improvement, some users win other users lose.  

Regardless this stage is where missing elements like reporting are discovered.  This leads to more cost and anxiety for users who were “Trained” but really cannot operate the software very well.  

The cure to this problem is often a managed service agreement that seems like an extra cost, but saves money compared to lost productivity and headcount.    The key thing when hiring a managed services company is to make sure that their expertise is not limited to the software you just acquired.   To be effective, they must also have the staff on hand who are certified in the feeder systems as well.   Not having a staff with corresponding feeder system, database and reporting expertise leads to cost overruns and conflict.  

So be careful and contact us if you think we can help. 

 

 

About Jim Burke

Financial Systems Automation and Back Office / Operational Cost Containment Leader, leveraging software tools and best practices to drive margin improvement for clients that do not have money nor time to waste.

 

Contact:   jburke@answer-factory.com     Office 609 750 8887

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