How to estimate ERP implementation cost
Implementing an ERP is a major project for the industry and it is necessary to do proper research before going for an ERP. Before deciding to go for an ERP one should figure out how much its gonna cost to your organization. Cost of ERP implementation is not constant. It is different for different organizations; even similar type of organization can have different ERP implementation cost. It depends on what the organization needs, type of the organization, size and even location of the organization. The factors that should be taken into consideration while estimating ERP implementation cost are:
1. Software License Fees
ERP systems are typically not bought, but licensed for use. The price of license depends on how many modules you want to use, number of units in the organization and number of users. A maintenance agreement may be integral to licensing to pay for technical support and updates. The price of the license can be easily found out with a little research.
2. Hardware and Third-party software
Hardware & third-party software refers to the infrastructure an organization needs to run ERP smoothly.
Third party software also enhances working of the ERP system, as well as to suits specific needs of your industry. Hardware and third-party software price depends on the requirement of the industry and deployment type of the ERP. You should discuss the vendors about the requirements and company’s infrastructure to estimate this cost.
3. Deployment of ERP
Whether you choose a cloud-based installation or on-premise ERP implementation, each influences the cost in its own way. Most cloud ERP systems are sold on a subscription basis when you pay per user / per month, and rent the solution, so to say. Premise ERP systems usually carry one upfront fee, making you the full owner. Choose the ERP that fits your business type and fulfills your needs. Know more about cloud ERP vs On-Premise ERP
4. Number of users
More users often mean you’ll pay more for the initial license as well as additional system upkeep. Number of users depends on the size of the organization. For a larger organization, multiple users across departments are needed which may require greater functionality and customization, which drive up costs while for a small organization you may not have to pay much for this.
5. Customization needed
ERP system are generally not an exact fit of your industry, it can be a near fit but even near fit require some customization to fit in the processes of your industry. It should be preferred to look for an ERP that is a near match to your industry requirement as a huge amount of customization will cost you a lot time, money and energy and a lot of customization is also said to drop the efficiency of the ERP.
6. Training and services cost
ERP vendors generally charge extra for training and services and if the project delays this cost increases. Training and services cost depends on the ERP vendors, so it should be discussed in detail with the vendor before selecting an ERP.
7. Maintenance Fees
Maintenance cost is one of the crucial factors while estimating ERP cost in long run
ERP systems needs to be updated to make sure they run smoothly. Updating of the ERP is required to change in business scenario, change in business processes, opening of new business units etc. Cost to update the ERP should be discussed with the vendor.
A general AMC (annual maintenance contract) for ERP maintenance typically cost 18-22% of ERP product cost
By considering all this factors you can estimate ERP implementation cost pretty accurately. It is also necessary to follow proper ERP selection process before finalizing an ERP
