ERP Software

ERP Software Cost

Enterprise Resource Planning software solutions consist of multiple modules, integrated to create a central, data-gathering, organizational system in order to improve accuracy, productivity, and to reduce overhead for all types of businesses.  When a company decides it needs help to run more efficiently, it looks to ERP software for support in reducing costs while increasing both productivity and earnings.

Once the decision is made to purchase a new system, one of the first questions asked is: How much will it cost?  And, as businesses in that position soon discover, a clear answer is not easy to find. It would be unrealistic to expect the cost of ERP software to be made up solely of the cost of the software and the hardware. Total ERP Software cost consists of many variables. Some of the variables work in favor of the purchasing business and some do not; these costs are hidden and will benefit the vendor.  Ultimately, ERP software cost includes all the direct and indirect costs incurred. These begin when the ERP is purchased and continue all the way until the implementation process is absolutely finished. Some of the expenses in this process are clearly evident, but some are not.

Expenses incurred in purchasing the software and the following installation of the hardware necessary for running the ERP are two fixed costs surrounding ERP ownership. Yet, the costs entailed in formulating the system include: external analysis to prepare ‘as is’ documentation, time lost switching over from the old system, training, tools and software required for integration with the legacy system, the vendor’s workforce assisting the implementation, purchase of security features software, licensing fees, and checking third party intrusion.  Depending on the format of the old data, converting it to become usable by the new ERP software might be another cost, as will the necessary test runs processed before actually going live.

It is interesting to note that research has shown the reason most often cited for ERP software cost going over budget is due to the vendor’s consultants. These consultants who oversee the implementation procedure end up charging more by spending time on small projects which were never included in the original quote. And, some of this is understandably unavoidable. For example, a buyer and vendor agree on a certain number of training hours, but then someone unexpectedly leaves a position halfway through the training resulting in a new person having to be trained from the beginning –duplicating the efforts of the consultant. 

Written by :

Amy Cruz