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Total Cost of ERP Ownership

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The cost of ERP package depends on the hardware, software, implementation, data migration and support.

Cost of Software: The cost of software depends on vendors and end users. The increased number of users and many new features software - may be expensive as compared to software which is designed for less number of users. The software which can be integrated to external business entities is expensive and the software designed for mid-sized and large organization is also expensive. The features of wireless, e-business, multi currency, multi location - comes at a higher price.

Cost of Hardware: TCO includes expenses on purchase of new hardware system, servers, system software, integrated equipments etc. The hardware system can cost more than half million dollar to a midsized organization although the cost depends on type of system.

Cost of consultancy and professional service: If a company is buying pre packaged software it may have to spend on getting professional services for customization and annual maintenance.

Many companies have to spend more than three times in the consulting to bring a system on track. For example: the cost of packaged software can be $3 million and consultancy can be around $8 - $9 million. There are also provisions for remote consulting in which the buyer company can get better rate of consultancy but remote consultancy also depends on the location of the company because the business unit located in rural areas cut off from places may require a fulltime onsite consultant for implementation.

Integration and testing: In the phase of integration and testing the buyer and vendor teams are involved in testing the functionalities and performance of the new system. The integration can happen at many stages and testing is also done at various levels. The testing is required for checking the integration of modules, integration of functional areas, integration to the legacy systems and integration of application to e-business solution.

Data Conversion: The cost of implementation includes the cost on data migration and data conversion in which the final data should be delivered without errors. The data which is no more required by the company may have to be removed and only the valid data is retained by the company.

Training: The cost of training can vary from 13% to 17% of the cost of implementation and training cost also depends on staff members using the system. There are many organizations where the employees are not aware of the features of the software and they use only 60% to 70% of the features - only because they have not been given training. Training ensures that the software is used properly by the employees of the buyer company and it also helps in reducing errors.

Sometimes, the employees find it exciting to learn the new technology but sometimes it is difficult to understand the new technology. Some employees of the buyer company are even scared to use the new system because they do not find it easy as the old system, and the pressure of performance makes the job further difficult.

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