Enterprise Resource Planning (ERP) packages are very expensive. Let us be clear. If you have already have some system or not, once you decide to go for ERP, you need to plan well. The entire project cost is not the only the ERP Software cost. It includes hardware, software, implementation, consultation charges, sensitizing employees to ERP and training them. Hence, if you come across some one indicating only the ERP software cost, do not get carried away.
Every ERP implementation needs careful planning. Once the Enterprise identifies a few specific ERP software, ERP companies or their consultants may be asked to give you some presentation as to why should their ERP software be bought. Do not expect to get the total ERP implementation costs including ERP software cost in this presentation stage.
You need to technically evaluate all the suitable ERP software packages. If you have internal expertise or a very strong IT team, you may evaluate yourself. Alternatively, you may hire a consultant, who will have the knowledge of different ERPs, their strengths, ERP software cost as well as all other costs involved. This consultant may be an individual or a company, guiding you and he/she/they may not actually help you in ERP implementation.
Once the ERP software package is identified, your actual work of scoping begins. Here, you identify the actual requirement in terms of modules to be implemented and number of licenses per module, based on users in that functional area etc. The ERP software cost depends on the number of people using the given module at any given point of time.
Your ERP evaluation team shall prepare a check list and ask the different vendors to offer their technical bids. These technical bids shall clearly indicate the modules being discussed ( functional modules ), the hardware requirement and ERP implementation strategy. At this stage, ERP software cost is not a criterion, as you are interested in technical feasibility, in the first stage of ERP evaluation.
Once you decide on the hardware, networking, technical expertise available, technical expertise to be sourced from a consulting company you obtain the costs of Hardware for the Hardware vendors. There may be a Vendor, who may offer the entire ERP implementation as a package, though they split the project into Hardware cost, ERP Software cost, ERP implementation cost, Training cost etc.. However, they have to procure the hardware from another Hardware vendor. Hence it is economical to freeze the hardware requirement and get the financial bids for hardware directly from the Hardware vendors.
The hardware costs may be different for different ERP software. Hence, compare the total cost of ownership. Consider ERP training costs. While ERP software cost is different for each module (per seat basis), it is uniform across the companies. However, the implementation costs vary across companies, depending on many factors like existing IT infrastructure, IT talent, functional specialists, implementing agency costs, etc. You need to check the Annual maintenance Cost (AMC) too, as you may be surprised that, you need to pay quite a lot of money even after the consulting company completes the ERP implementation and hands over the ERP to you. This AMC does not include any ERP software cost or any new module cost, if required to be added to your existing ERP.
Credit: MIS Notes_MGU