(Our previous blog post, entitled The Cost of Custom Interfaces, is good pre-requisite reading for this one. Not necessary, but perhaps helpful. Check it out.)
At a high level, and all nuances not considered, let’s look at a typical process for custom interface development:
- Document detailed requirements analysis
- Identify all tables and fields tables to support all necessary business processes and data requirements
- Build the interface
- Unit test
- System test
- On-site (environment) system test, as required
- Document and make any corrections
- Re-install interface, with corrections
- Re-do system test (and steps 7-10 until acceptance)
- Finalize documentation
- Update materials and perform training, user and support staff
- Promote to Go live
What would be a reasonable time to do the above?
Would perhaps six business weeks or 30 days be reasonable? If so, then what would be a reasonable cost to perform the above steps, as an average, for each custom interface?
If such a development resource was $1000 + per day, which seems to be about the right daily and, if we used one full time resource (note the effort is likely to involve multiple resources, but let’s figure one), then this would be $30,000, if all goes well the first time around. With maybe one re-do and some additional tweaking, considering the additional time of others required, $45,000 might still be a conservative number, depending on the complexity of the interface.
Let’s make it more realistic. Let’s say the third party system will require 20 to 40 custom interfaces back to your ERP system, in order to integrate properly, so everyone gets the data they need and so that the enterprise can report on it. Based on this scenario, the estimate of the effort is between $600,000 and $1,200,000, on the low end, and $900,000 to $1,800,000 on the high end. And that is just to get to go-live!
The next question is the big one: How much will it cost to support each and every custom interface through at least one major ERP upgrade, for maybe 5 years or so? Don’t forget to include changes required to support any other systems, devices, and touch points throughout the enterprise wide system. If we consider $15-30,000 each per year for support costs, to get to a Total Cost of Ownership (TCO) number, for 20 interfaces, we need to add $1,500,000 to $3,000,000. For 40 interfaces we need to add $$3,000,000 to $6,000,000 to get to a total comprehensive estimate.
Those are big numbers. Numbers that don’t loom so big when the idea of a ‘custom interface’ are first floated in preliminary meetings.
Now consider the alternative. All of the above goes away, whatever it turns out to be, with a totally integrated ERP system module.
Integration is more than marketing fodder – it’s a tremendous amount of cost savings wrapped up into an engineering concept that has, unfortunately, been relegated to checklists and RFP responses with far more prejudice than it ever should have.
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