Calculating Total Cost Of Erp Software Ownership

By Author: John Naruka
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Implementing ERP software system for enhancing the business profit of a company is not an easy task. To implement the right ERP system, you need to have a little research first. TCO or total cost of ERP ownership plays an important role in getting required result. To get best result, make sure that you select the right ERP or enterprise resource planning software for promoting online businesses. Generally, implementation cost of ERP is determined according to the complexity of project. When searched online, today you can find a good number of ERP specialists who are willing to assist company owners. Calculating TCO or total cost of ownership is found to be very effective for planning different cash expenditures.

You can consider TCO or total cost of ERP ownership as the denominator of ROI or return on investment value. Almost all ERP software programs needs to be upgraded at one time or another. It is found to be very effective to improve the profit of businesses. Software is generally upgraded according to the future needs of company. Today, SaaS or Software-as-a-Service is a popular program used by company owners. ...
... It is usually given in accordance with monthly charges and number of users.

ERP licensing is generally done on the basis of several modules like financials, customer service and operations. Apart from the above specified modules, an ERP is also found to be very effective to manage CRM and configure-to-order.Apart from ERP software, ERP vendor also quotes user license. Generally, manufactured ERP software is proposed with a specific discount price. In some cases, upgraded software is also available with discount offers for each module. Hence the total cost of ERP is estimated after calculating the whole charges, especially hidden fee.

Maintenance cost is a key factor to consider while implementing ERP system software. Usually, ERP maintenance cost is charged on a yearly basis and depends on the total number of users. Apart from total number of users, ERP also depends on other factors like complexity of solution, level of sophistication and the selected hosted deployment strategy like cloud or SaaS. Generally, ERP cost is defined in terms of tiers. Tier 1 serves largest company by providing complex ERP software packages. Examples of ERP software packages included in tier 1 include SAP and Oracle. Similar to tier 1, tier 2 supplies ERP software packages like IFS, QAD and Made2Manage to users.

Tier 3 is generally introduced for small scale companies. Some of the best known ERP software packages in tier 3 include Microsoft Dynamics GP, MAS90 and intuitive ERP. As already seen earlier, price rate of ERP software system generally varies according to the complexity of project. So also, the price rate of tier 3 software like SAP and Oracle is higher than tier 2 ERP software packages. As a deployment option for their service, most of the ERP vendors now offer SaaS. It is completely free from license cost and operating system cost. Also, the annual or monthly fee specified for SaaS is higher than maintenance fee with licensing.

Read about ERP Implementation Best Practices. Also know ERP Features. Read about ERP Benefits.