Cost of ERP Implementation - Direct and Indirect Cost
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Posted On :
Jul-07-2011
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Article Word Count :
462
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ERP implementation is a daunting task, and the costs vary according to modules. Different ERP vendors offer different packages with costs varying according to the ERP features and tools.
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ERP implementation is a daunting task, and the costs vary according to the number of modules, services provided and the requirement of the organization. ERP implementation cost depends upon a number of factors, both constant and variable like the cost of hardware, number of software or modules, license cost, implementation time, training of the in-house staff, consultation costs, costs for extra tools and applications, integration, testing, customization of the software and future maintenance costs. Among these, the cost of hardware and license are constant or fixed while other costs like training, consultation, integration and customization vary according to the business requirements. Again, different ERP vendors offer different ERP software packages with costs varying according to the ERP features and tools.
Cost of ERP implementation can be covered under two categories:
Direct Cost: This includes the expenses incurred on basic hardware, different operating systems, software and database license, number of suites, add-on applications, third party license and ERP integration. The total cost of ownership (TCO) again varies according to the number of users. A two-tiered ERP architecture can cost between $3,000- $10,000, but the TCO can be as high as $60,000 depending upon the number of users.
Again, the cost of the hardware depends upon the number of workstations, networking services, service providers and it does not vary too much. The total cost again depends upon the adopted technology and the users.
Implementation cost varies greatly depending upon the complexity of the business process. One-tier ERP architecture would involve lesser expenses and prior knowledge of the team before ERP implementation reduces the cost considerably.
Indirect Cost: Indirect costs are variable, and it is often tough to estimate the amount. Expenses related to transportation, consultation, training of in-house staff, time consumption for implementation and communication mostly remains on the higher side than the estimated cost. In some cases, these may amount to more than 20% of the estimated cost.
Customization of the ERP modules is very often required and the costs related to it turn out be very expensive. Often, the original ERP module gets damaged in course of customization, and the organization has to bear heavy expenses. Above all, different ERP vendors offer different prices for different types of customization and one should have in-depth knowledge before selecting the fitting customized module.
Training of the staff for efficient and intelligent handling of ERP systems is another recurring expense. The staffs need to be trained in installing ERP and data migration. Consultations necessary for this process heightens the cost. Since the employees in the initial stage of ERP implementation cannot exhibit the required efficiency, the TCO ultimately goes up. To minimize the training costs, a well defined team is provided to restrict the number of users.
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Article Source :
http://www.articleseen.com/Article_Cost of ERP Implementation - Direct and Indirect Cost_65320.aspx
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Author Resource :
Find about Benefits of ERP for SME. Also know the Advantages of ERP in an organization. Read about SAP ERP Course Fees and duration of the course.
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Keywords :
cost of erp implementation, cost of erp, cost of implementation,
Category :
Computers
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Software
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