ERP Applications and Vendors
  Home ERP Benefits Features Selection Implementation SAP Oracle Microsoft Dynamics Books
ERP Guide
Business Performance
Change Management
Data Migration
Decision Making
Enterprise 2.0 S/W
Enterprise System
ERP and Accounting S/W
Fix Implementation Failure
Functional Modules
Guide for Executives
Implementation Failure
Implementation Time
Improve ROI
Manufacturing S/W
Measuring Performance
Negotiating Agreements
Open Source S/W
Outsource Service Providers
Outsourcing Software
Project Management
Replace Existing Software
SAP Business One for SME
S/W for Telecom Sector
Syspro Accounting S/W
Vendor Shootout
Web Vs Server Based
When to Consider
Beginner's Guide
Basic Features
Become Consultant
Before Implementation
Best Practices
Certification Course
Effects of Enterprise S/W
Evolution and History
Finance Module
Functional Consultant
Functional vs Technical
Future of ERP
Future Trend
GAP Analysis
Get Maximum ROI
Goals and Objectives
Guide for Beginners
History and Evolution
Implementation Methods
Implementation So Long
Implementation Stages
Implementation Steps
Implementation Timeframe
Increase Productivity
Industry Focus
Issues In Outsourcing
Latest Trends
Major Pitfalls
Market and Industry
Market Growth In India
Open Source Popularity
Regulation Governing
Rising Need of S/W
Roles of Consultants
Software as a Service (SaaS)
Software for SMEs
System Requirements

Cost of ERP Ownership - What Does ERP Really Cost

SocialTwist Tell-a-Friend

From selection to implementation and till ERP software start working in full swing, involves many activities and processes which adds up to the total cost of ERP ownership. There is no ERP using company which can boast of implementing ERP within budget and before time, this is largely due to the reason that this process is big and complex, and it is very difficult to calculate exact time and money that may get consumed in getting through. Prima facie it appears that cost of buying the software, cost of IT infrastructure and some petty expenses here and there might add up to give an idea about the total cost of erp ownership. But this is as far from the factual situation as heaven and earth because ERP has hidden cost centers which surface when implementation begins.

The cost of purchasing the software and IT infrastructure required for making that software run, are evident cost centers which are required to be calculated first up. Apart from these to access the real cost of ERP the cost of customization is also required to be calculated. It is very difficult to find ERP solution which fits in the needs of the organization completely without any change. ERP software needs to be customized and this cost is owned by the purchasing company which is not included in the buying price.

Cost of optimization is different from customization cost as it is required when company wants to use the new system at the best of its ability. This process may incur new expenses in the form of buying add on tools, expanding pre-decided IT infrastructure, hiring consultants or support staff. Before implementation process begins and during selection of ERP some companies find it feasible to hire external consultants for functional, technical and GAP analysis which is considered as a wise step by many pundits, but if this was not decided before it will increase the expected cost substantially.

If the buying company has been using a computerized system before shifting to ERP then its integration with the system to reduce the magnitude of change or if complete migration from old system has been decided then data conversion, are other factors which may increase the real cost of ERP ownership. To carry out any of these processes, integration or data conversion, internal cost goes up as more resources are required to help in completing these processes and later testing the system for ensuring its success. External support may also be needed for the same.

Testing and training are two most important steps which require decent amount of funds. Dry run of the software with test data and testing its result need internal work force to invest their time in the process as well as training might require some more investment from the company which in the end adds up with the total cost of ERP. It is estimated that training alone, if done properly, accounts to nearly 17% of the total ERP implementation cost, which is a huge amount and surprisingly most of the time ignored while calculating the cost of ownership of the ERP.

 Read Related Articles

ERP SoftwareFeatures of ERP for Small Business
ERP SystemChallenges for Successful ERP Implementation
Enterprise SystemImplementation of ERP System
Enterprise SoftwareFeatures of Sap Web Application Server

  SocialTwist Tell-a-Friend
Review Section
Dynamics AX  
Dynamics CRM  
Dynamics GP  
Dynamics NAV  
Dynamics SL  
Godrej eNcompass  
JD Edward  
Microsoft Dynamics  
Sage X3  
SAP Business One  
Tally Accounting  
SAP Section
ABAP Module  
Business Warehouse  
BW Module  
Career In ABAP  
CO Module  
Course Duration  
Course Fees  
Data Warehousing  
Enterprise Portal  
FI Module  
HRMS Software  
HR Module  
Job Opportunities  
MM Module  
Modules Features  
Online Training  
Performance Tuning  
SD Module  
Web AS  
Web AS Features