Hidden Costs of ERP Packages

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Enterprise Resource Planning system implementation involves a lot of money, time and effort which can go out of control if not done in a proper way. Costs overruns due to inaccurate planning and totaling of the project costs. The total cost of ERP ownership needs to be controlled in order to achieve a high Return on Investment. For considering the total costs, all the hidden costs of ERP must also be identified.

For implementation of the Enterprise Resource Planning system, a core team is required. Apart from this, few other experts are also required for each core team member to take decisions and perform testing. These hidden costs of ERP must also be considered while calculating the total cost. It is assumed that the ERP consultants can handle all the communications, training processes and development but the involvement of the company employees is also often needed. This proves to be another one of the hidden costs of ERP.

There are various factors to be seen while implementing the Enterprise Resource Planning system. Conversion of data, interface development and generation of reports needs to be done with the help of internal or external resources. Replacement of people may be required who are spending their time with the project. This replacement is also one of the hidden costs of ERP and should be counted in the total costs. The top management has to be involved in the ERP project by conflict resolution and decision making processes. They need to give their time to offer strategic direction to see that the project is in line with the business requirements and goals. A lot of time, efforts and resources are involved in the standardization and globalization process. The expenses such as travel costs related to the members of the team who are dealing with the global project have to be taken into account also.

These are few of the hidden costs of ERP project and can be overlooked during the process of analyzing the costs. Even a well planned out budget can increase in the hidden costs are not taken into consideration. These are the areas in which the managers can fail to account the budget. The areas which are most likely to overrun the budget are customization, data conversion, training, testing, maintenance, data analysis and consultants. One of the hidden costs of ERP is training where the costs can be underestimated as the employees take time to learn the new software.

Customization costs form the major chunk of the costs of the services and testing of the links can involve costs which can be overlooked. Data analysis and data conversion cost money and the costs are often underestimated. The consultant services involved cost a lot of money and these fees can over shoot the budget. To avoid this, the company should include the performance metrics and time schedules for the consultants. The continuous maintenance of an ERP implementation is required and the services of the people involved in the project are also required after the implementation. These hidden costs of ERP should not be overlooked while planning the budget for ERP implementation.

Read about SAP Course Fees. Also know SAP HR Module. Read information about Disadvantages of ERP.

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Peter Filinovich has 607 articles online

Peter Filinovich

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Hidden Costs of ERP Packages

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This article was published on 2011/05/06