Enterprise Resource Planning, application software that integrates the functional departments of a company. It is normally a packaged application that carries the entire business operations by streamlining the communication between all the functional departments. There is a huge cost involved with ERP software. This article deals with the cost associated with the application and implementation of the enterprise resource planning software.
The first ingredient in the cost sheet goes to application cost. Almost fifty percent of the ERP system cost associated with the application cost and licenses. As previously explained, it is the bundled package. The package includes the total number of the modules planning to be implemented. Depending upon the number of modules, the cost of the application varies. If the customer wants to go for some of the core modules like production and accounting without human resource management module, the cost will be low. If the customer wants all the modules including human resource management and customer relationship management, the cost of the application reaches very high. Application cost takes a large portion of the ERP cost.
Depending on the size and the complexity of the business operations, the number of licenses varies. If the customer plans to go for less number of licenses, the application cost would go down and vice versa.
Normally, the ERP implementation requires some new hardware equipment such as a dedicated server, new compacters and networking material. All these things bundled up and take some percentage of the total ERP project cost. The dedicated hardware is the most important ingredient in the ERP project.
The implementation and customization of the ERP application comes into this category. Depending on the complexity of the business environment, the customization would vary. The more the customization required, the cost of the service would go up and vice versa. The implementation of the ERP depends on the number of modules and number of licenses the customer plan to implement. If the business environment is very complex that needs a customized and fully packaged ERP system, the service cost would go vey high. The implementation cost includes testing cost, training cost, integration cost and data conversion cost; based on all these factors, the vendor gives the quotation for the implementation services.
This is also called as renewal cost. The customer has to pay every year depends on the terms and conditions mentioned in the quotation. Normally, the annul maintenance cost varies from fifteen percent to twenty one percent. If the customer pays the annual maintenance cost, he will be eligible to receive any upgrades and bug fixes in the software. Otherwise, the customer would not receive all these things.
Broadly, this is the cost structure involved with the ERP software. The customer has to carefully analyze all the breakups in the quotation before zero in on the project. To put in a nutshell, the application cost and implementation services cost would reach almost eighty percent of the total ERP project cost.
