Erp Implementation

Erp Implementation Costs

What You Need To Consider For Erp Implementation Costs

Erp Implementation Costs

Many factors affect erp implementation costs. With companies adopting different solutions to meet their business needs, forecasting and budgeting erp system costs can be a challenge. Here are some guidelines to consider.

Capital Costs: Erp solution costs usually entail an upfront cost for the software package. In most cases, this cost only represents a small portion of the overall project cost. The initial cost can also depend if the erp application is a once off all inclusive software charge or a per module charge. The later may involve staged implementation so the total cost will be dispersed over the full erp implementation lifecycle. Building an enterprise resource planning framework from 'the ground up' will also entail a large percentage of the cost base allocated to labor costs.

Erp Implementation Costs

Labor Costs: Erp application costs associated with implementation entail software development and integration costs. Where extensive migration, platform and data format considerations are involved, support programming costs can be significant. You can also expect a high attrition rate from programmers who lose interest or succumb to the challenges associated with full scale erp implementation. When formulating costs for this part of the project, you can expect them to exceed the capital cost of software by up to 300%. Labor costs are influencing by current market conditions, supply and demand, the degree of specialization required and geographical location of the project. Companies that require remote implementation involving the hiring of specialist services can expect to pay higher rates and incur significant travel costs to facilitate labor transportation.

Support and Maintenance Costs: One of the challenges faced by organizations is training and skilling personnel to derive benefit from the erp system. Erp solution costs require consideration for training and support personnel in accordance with organizational requirements. Extensive training for a large user base requires a significant budgetary allocation towards educational requirements. Historical studies indicate that companies that do not adequately scope and bound training requirements and allocate sufficient budget face much higher chances of project failure. Maintenance costs also need to be carefully thought out. Ongoing system refinement and the application of bug fixes, upgrades and patches will requires suitably qualified personnel to be maintained on an ongoing basis.

Previous case studies provide an ideal point of reference for erp implementation costs. ERP vendors such as Sap have extensive experience in project implementation and can assist with budgetary forecasts. You do, however, need to consider that erp vendors often make more money from support services than the software itself. Practical business reality demands tradeoffs between cost and risk but it is useful to understand the full extent of cost considerations.

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