Which Factors Influence The Cost Of Erp Implementation?

By Author: John Naruka
Total Articles: 109
Comment this article

What is the cost of ERP implementation? This is a common question asked by new comers in online marketing field. Generally, several factors influence the cost of ERP implementation in business fields. Main factors affecting ERP implementation in business fields include testing, training, add-on applications and future costs. Apart from the above specified factors, implementation cost is also affected by other factors like consultancy, customization and number of software license. Usually, the expense on hardware programs is invariable or fixed in nature. Whereas, expenses on other programs like reengineering, training and implementation are variable.

For easier reference, you can divide ERP mainly into two as direct and indirect. Initial cost of license and maintenance is a key factor coming under implementation cost. Database license, number of modules and operating systems are some of the costs included under initial license. As per studies, it is found that the total cost of ERP ownership increases with increase in number of users. What are the factors influencing ERP implementation processes? Let’s find solution ...
... to this question here. Generally, expense of implementation depends on software selected by the vendor and technology. Hardware maintenance cost is a main factor influencing ERP implementation. Common expenditure included under this category consists of servers, networking, terminal series and workstations.

Proper planning plays an important role in reducing total cost of ERP implementation. To reduce the hidden cost during ERP implementation, it is advised to do proper planning before selecting any ERP from store. Generally, complex project need more money for implementation. Apart from direct cost, indirect cost is another main factor to be considered while staring implementation. Expenses on consultants, time spend by employees and maintenance costs are some of the top listed indirect implementation costs reported by company owners. Studies say that the total cost of indirect expenses may come around twenty percent of the estimated TCO.

Usually, ERP software system is customized as per the requirements of company. Cost of customization varies as per the complexity of project. Complex ERP software system generally costs higher than simple ones. To reduce the cost of customization, it is advised to select ERP system software as per the requirements of company. Training cost is another indirect expense coming under implementation process. Data migration and expense on installation are two main indirect expenses coming under this category. As per studies, it is found that the average cost dedicated for training purpose can be three times greater than license cost. Remote consulting, a main process during implementation can cost around twenty percent of the total TCO.

Training period of ERP implementation varies as per the abilities of users. If the workers are skilled, it may take only short term duration to complete training process. To enhance the working efficiency of ERP software programs, it is often recommended to use third party software. As per studies, it is found that the total cost of third party software programs typically account up to 35% of the total cost of ERP implementation. As we have already seen earlier, complex ERP system packages need more money during implementation. Complexity of project generally increases with type of company and number of users.

Read about ERP Software Selection. Also know ERP Vendor Selection. Read about Top 10 ERP Software.