ERP and Cost Control

Today is the first day of the AACE annual meeting. I attended the keynote from Joel, Primavera and several good technical sessions.

One of the technical meeting I attended is about the Project Cost Management and System Integration. It discussed what is required for an integrated cost control solution. They described that it should allow you to have best-breed of the following systems, while you should not compromise your cost control :

• Accounting
• Change Management
• Estimation
• Scheduling
• Procurement
• Time Reporting
• Contract

I agree with most of what they said about the cost control system. The presentation provided a very good overview of what project cost control system is about, and reach a very similar conculsion as one we did several week ago for my boss.

The most interesting topic in the presentation is that it compares different solutions:

• Spreadsheet based
• Cost Loaded Scheduling
• ERP

They concluded that none of these solutions is ideal. You should really have a separate, dedicated cost control system. I will agree with their conculsion if their assumption about ERP are true:

• ERP offers a project accouting solution, not really a project cost control solution.
• Project Accounting is concerned with expenditures and based on GAAP.
• You need to collect data and report against your chart of accounts, a single, rigid, non-project specific structure.
  
• You can only have a single WBS, which is in the cost accounting system and is not controlled by the project cost control people.
• ERP does not offer robust budgeting and forecasting functionalities.
• ERP does not provide the end user customization.
• ERP provided good "online" reports, but poor "printed" reports.
• ERP does not do trending or what-if analysis.

These may be true for some ERP systems or for the situation you may face 5 to 10 years ago. Unfortunately, most of them may not be true today. At least for the application I am being involved in now.

I am appreciated the analysis they did. It is still an outstanding presentation. It highlight what the ERP vendor should work on. I do strongly believe that customers are looking for an single integrated system that can address the needs described earlier. If they cannot find a single system from a single vendor, they will take a best of breed approach.

If you are interested in what they said in the presentation, take a look at their Project Cost Management Solution White Papers. They are very well written with good logic and reasoning.


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