What does ERP really cost?

There aren’t any good numbers to predict ERP costs because the software installation has so many variables, such as: the number of divisions it will serve, the number of modules installed, the amount of integration that will be required with existing systems, the readiness of the company to change and the ambition of the project—if the project is truly meant to be a battering ram for reengineering how the company does its most important work, the project will cost much more and take much longer than one in which ERP is simply replacing an old transaction system. There is a sketchy rule of thumb that experts have used for years to predict ERP installation costs, which is that the installation will cost about six times as much as the software license. But this has become increasingly less relevant as the market for ERP has slowed over time and vendors have offered deep discounts on the software up front.

Research companies don’t even bother trying to predict costs anymore. A few years ago, the dearly departed Meta Group did a study looking at the total cost of ownership (TCO) of ERP, including hardware, software, professional services and internal staff costs. The TCO numbers include getting the software installed and the two years afterward, which is when the real costs of maintaining, upgrading and optimizing the system for your business are felt. Among the 63 companies surveyed—including small, midsize and large companies in a range of industries—the average TCO was $15 million (the highest was $300 million and the lowest was $400,000). While it’s hard to draw a solid number from that kind of range of companies and ERP efforts, Meta came up with one statistic that proves that ERP is expensive no matter what kind of company is using it: The TCO for someone who uses the system a lot over that period was a staggering $53,320.

Kaynak: erpdanismani.com

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