Implementing a new pension administration system can be one of the most significant investments a retirement plan ever makes. Between consulting fees, software licensing, training, and support, there are a multitude of factors that will impact the price tag of a system replacement project. With retirement funds under increasing pressure to do more with less, it is absolutely essential that plan administrators make smart choices in IT investment. This means thoroughly understanding the goals of the project, communicating clearly the expectations of the new system, and being realistic about the constraints in your resources. For those considering IT modernization, take in mind that the following factors will impact the cost of your project.
Scope – The price of an IT system is largely driven by the scope of desired functionality. Often, expectations for functionality can be unrealistic. What works for one fund may not make sense for another. And many smaller retirement systems won’t need the breadth of functionality that their larger counterparts do. Of course, any plan might be surprised to learn they can reuse existing resources and investments to help lower the cost of a new solution. Undertaking a thorough needs-analysis can help you determine a scope that meets both your requirements and your budget.
Data Conversion – Data can be the devil in the details of your project budget. If your data is stored in multiple disparate systems or requires custom interfaces to access, expect conversion costs to rise significantly. The more open you can be with your vendor about your existing data, the more the vendor can plan ahead and provide the best, most cost-effective solution for your conversion needs.
Human Resources – We don’t mean the department, but your staff. Employees may not seem like a huge cost factor now, but the effort needed to train existing staff in the new technology may be significant. Existing employees (in both IT and other departments) may be unable or unwilling to learn the new software. Expect at least some turnover and plan accordingly.
Maintenance and Support – At some point you will have to decide the level of maintenance and support your vendor will provide versus your internal capabilities. Ongoing licensing costs aside, higher levels of maintenance and support can mean added costs whether your vendor supports it for you or you hire your own internal support staff.
Organization Redesign – While many retirement systems have a tacit understanding that a new IT system will impact employee processes and organizational procedures, few actually take the time to think through the hidden costs of not planning for its effect. Failing to plan ahead can result in employee resistance, higher costs, and higher risk as you deal with the people-side of the organization. Take time to learn about organization change management or find a vendor who will provide this service for you.
Understanding the total costs involved in implementing a new pension administration system will help retirement systems better plan and implement their ideal solution. Costs, both explicit and implicit, can be predicted and minimized through open and honest planning with your IT vendor.
Are you considering a system replacement project? Are there other specific costs besides these that deserve mention? Let us know!
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About Sagitec Solutions:
Sagitec Solutions, LLC designs and delivers tailor-made pension, provident fund, and unemployment insurance software solutions to clients of all sizes. Sagitec has the expertise necessary to help their clients achieve strategic business objectives, enhance service offerings, and lower operating costs. Find further information by visiting http://www.sagitec.com. For more information, contact Rick Deshler at (651) 335-3406 or at rick.deshler@Sagitec.com.