Gaining a different perspective on ERP cost

ERP cost is always a critical issue that a company needs to consider before taking on ERP. ERP or enterprise resource planning is the method of integrating an organizations data and processes into a single system using several computer software and hardware applications.

Pricing for ERP varies based on various factors, such as company size, requirements, nature of business. For instance, a larger company will have to pay a substantial amount of cost compared with a smaller organization since it has more business requirements to fulfill. ERP implementation would normally cost a smaller organization an initial of US$25,000, whereas a larger company starts with one million dollar or more.

There are three common factors that have substantial influence on ERP cost. These factors are: 1) ERP implementation cost, which involves all expenses parallel to implementing tasks and activities (e.g, business process engineering, gap analysis, training); 2) ERP expert consultation, which has an extensive influence to overall ERP cost since price would include both the professional fees and length of service provided; and 3) type of training mode. The first method of training involves hiring of trainers to update the companys IT personnel on the fundamentals of ERP. Trained IT staff is later expected to assume responsibility in equipping the selected ERP system users. The second method, on the other hand, involves a simultaneous training of both IT personnel and users, with IT staff trained on technical aspect, whereas users focused on the usability aspect. The latter method may cost more than the previous one however competencies among inhouse staff are improved.

Amazingly, most companies do not consider the cost of ERP as an expense, but rather they view it as a long-term investment, regardless of how high ERP cost can get.