06
NOV 2020
The ERP system is used by more and more companies, globally. This IT platform is an indispensable tool for business, given the fact that it allows the optimization of all processes and the general organization of the activity in a company. The ERP system integrates all the departments of a company, automates many time-consuming operations and ensures a better collaboration between employees. Of course, the investment in such software can be quite large, given all the functions it offers. However, you should know that in the long run, the ERP system reduces business costs and improves turnover. Here are the costs involved in implementing an ERP system and how you can control them.
What are the costs of an ERP system?
An ERP system is not a simple application, like the ones you download quickly on your smartphone. The ERP system is a unique, complex platform that combines a variety of applications or modules corresponding to the different operations that take place in a company - accounting, payroll, production, sales, stocks, financial analysis, etc. That is why the costs cannot be insignificant, and the implementation process cannot be very simple.
The ERP system involves several stages of implementation, and each raises certain costs:
Proper implementation
Implementation involves configuring the ERP system and installing it on company devices. The configuration is performed depending on the modules you request and the type of ERP system chosen. Installation may require certain types of hardware, but some types of ERP may also be installed on your tablet or mobile phone. The configuration and installation of the software is done by experts or suppliers.
The factors that influence the costs of ERP implementation are:
What are the costs of an ERP system?
An ERP system is not a simple application, like the ones you download quickly on your smartphone. The ERP system is a unique, complex platform that combines a variety of applications or modules corresponding to the different operations that take place in a company - accounting, payroll, production, sales, stocks, financial analysis, etc. That is why the costs cannot be insignificant, and the implementation process cannot be very simple.
The ERP system involves several stages of implementation, and each raises certain costs:
Proper implementation
Implementation involves configuring the ERP system and installing it on company devices. The configuration is performed depending on the modules you request and the type of ERP system chosen. Installation may require certain types of hardware, but some types of ERP may also be installed on your tablet or mobile phone. The configuration and installation of the software is done by experts or suppliers.
The factors that influence the costs of ERP implementation are:
- ERP system type;
- Field of activity of the company;
- The number of modules / applications you request, their type and complexity;
- Number of working points;
- Number of software users;
- The number of devices on which the software will be installed;
- Implementation regime (purchase or rental on a subscription basis);
- Demo version (useful for testing the system and modifying it, if necessary).
Hardware
Depending on the type of ERP software chosen, the company may also require a series of special hardware equipment, compatible with the software. The on-premise ERP system is installed directly on the devices and requires its own data storage system, database, servers and other resources. All this is expensive, as is the installation process. Instead, the cloud-based ERP system involves storing data on servers hosted by the provider, requiring a stable internet connection, which involves much lower costs. That is why many companies opt for this type of ERP.
Training
Given the complexity of an ERP system, it is not exactly easy to use at first. Employees need training sessions to learn how to use all the functions of this software. Training can sometimes be provided by the provider, but other times it can generate additional costs.
Personalization
Companies are different and have different needs, which requires certain processes of their own. Customization involves the development of new functions at the customer's request. This influences the total implementation costs.
Redesign
You need to keep in mind that your business is evolving, and at some point you may need to change some features or implement other new applications. Of course, this also changes the total price of the ERP platform.
Maintenance
The implemented ERP system may need, at some point, maintenance services. Users may also need technical support. Although this is not a cost of actual implementation, you should keep in mind that technical assistance for an ERP system can generate costs of 15-20% of the initial purchase price.
Updates
And the software component can get old. That's why software updates are essential. You need to consider how often the software needs to be updated and whether updates are provided. Legislative updates are also important for automatically changing billing documents and data.
Given all these aspects that you need to take into account when implementing an ERP system, its exact cost can only be estimated by the provider, after prior advice.
How do you control costs?
Trying to save money for the implementation of an ERP system can affect its quality and operation, which creates long-term losses for the business. Therefore, you must be very careful when you want to reduce implementation costs without affecting the functions of the software. What should you do:
Depending on the type of ERP software chosen, the company may also require a series of special hardware equipment, compatible with the software. The on-premise ERP system is installed directly on the devices and requires its own data storage system, database, servers and other resources. All this is expensive, as is the installation process. Instead, the cloud-based ERP system involves storing data on servers hosted by the provider, requiring a stable internet connection, which involves much lower costs. That is why many companies opt for this type of ERP.
Training
Given the complexity of an ERP system, it is not exactly easy to use at first. Employees need training sessions to learn how to use all the functions of this software. Training can sometimes be provided by the provider, but other times it can generate additional costs.
Personalization
Companies are different and have different needs, which requires certain processes of their own. Customization involves the development of new functions at the customer's request. This influences the total implementation costs.
Redesign
You need to keep in mind that your business is evolving, and at some point you may need to change some features or implement other new applications. Of course, this also changes the total price of the ERP platform.
Maintenance
The implemented ERP system may need, at some point, maintenance services. Users may also need technical support. Although this is not a cost of actual implementation, you should keep in mind that technical assistance for an ERP system can generate costs of 15-20% of the initial purchase price.
Updates
And the software component can get old. That's why software updates are essential. You need to consider how often the software needs to be updated and whether updates are provided. Legislative updates are also important for automatically changing billing documents and data.
Given all these aspects that you need to take into account when implementing an ERP system, its exact cost can only be estimated by the provider, after prior advice.
How do you control costs?
Trying to save money for the implementation of an ERP system can affect its quality and operation, which creates long-term losses for the business. Therefore, you must be very careful when you want to reduce implementation costs without affecting the functions of the software. What should you do:
- Set realistic goals - set realistic expectations and present them as such, so that the software goals are fully understood by vendors. Misunderstanding the objectives leads to a wrong implementation of the software, which leads to unnecessary additional costs.
- Create a project plan - find out what all the needs of the company are and consult with the supplier, in order to establish exactly the costs related to each component integrated in the software. That way, you know what to expect.
- Don't eliminate essential functions - sometimes some functions may seem useless to your business, but this is not always true. Giving up a module that could lead to productivity only affects long-term turnover. Carefully analyze the benefits of each application.
- Be patient - don't rush into buying an ERP system just because you really need it. Weigh the offers offered by the suppliers very well, before making the final choice.
- Negotiate - some suppliers accept price negotiation. This helps you reduce costs, but it is not necessarily a criterion for choosing a supplier.
In conclusion, the costs of implementing an ERP system are influenced by many factors. Only consulting with the provider can help you estimate the budget needed to implement such software.