Important Factors That Affect Cost Of Erp Implementation

By Author: Aiden Smith
Total Articles: 199
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There are many benefits of implementing an ERP system. Spending on an ERP system is a significant investment because, Enterprise Resource Planning software integrates all the data of an organization in one single database. So, the user does not have to wait for the related department, instead an authorized personnel can directly take out the information from central database system. There are several costs associated with the implementation of the system, because it depends on several factors, such as number of software license, hardware, need of additional resources, and many more. Some of the factors that affect cost of ERP implementation are mentioned below.

1. Type of organization and number of users affects the cost of ERP implementation. There are different needs of different organizations, due to which vendors have to work on several necessary customizations. The complexity of the system also changes with the type of organization. For example, the system of a manufacturing organization is more complex than a professional service organization. The number of employees in any organization can also affect the budget, ...
... since vendors have to establish different set-ups for each employee.

2. Third-party software is essential for successful implementation of the system. The third-party software products are used by the vendors to enhance the system with applications which are specifically tailored for specific business needs. Usage of third-party software might account for 15% to 40% percent of TCO.

3. Expenditure on hardware is the most essential cost of ERP implementation. Hardware is needed to build a data centre space which is capable of housing all the integrated data of the organization. Hardware is also essentially needed for constructing an uninterrupted power supply unit that acts as a backup power unit in case of electricity failure. Hardware is used for building disaster recovery infrastructure, network infrastructure, server, and disk subsystem hardware.

4. Licensing cost is another cost of ERP implementation. The expense on licensing may vary according to the number of servers. License fees would also include ongoing maintenance fee for the system. Vendors can ask for fees of add-on tools and other applications that support the system. Licensing cost would also include fee for management of database system of each server.

5. Cost of ERP implementation would also include training and knowledge transfer costs. Training fees is charged by the vendors to train entire workforce involved in implementation of the system. Training fees is often charged by the vendors as a package that includes, training of functional as well as technical workforce, training cost of key users and end users, and cost of transferring business process knowledge to support staff, consultants and other authorized personnel.

6. The organizations have to calculate personnel cost of ERP implementation. The personnel cost includes hiring project manager, project monitor, and documentation specialist. Also, they have to account for cost of hiring database administrators, solution architect, and technical and functional consultants.

7. Travel expenditure of project head to different branches and manufacturing units of the organization is also one of the many costs of ERP implementation.

Read more about Cost of ERP Implementation. Also know Total Cost of ERP Ownership. Read about ERP Software Benefits.