Carefully judge an ERP system’s eventual total cost of ownership

2/15/2012 at 11:58 am by The Sage ERP Team

There are a lot of financial considerations that companies have to make when adopting different kinds of business software. Some are more complicated than others and require a lot of calculation. Returns on investment, new business plans and pre-implementations strategies all factor into successful enterprise resource planning suites of applications. However, one of the most important estimations is software’s total cost of ownership (TCO).

There are some mundane and seemingly insignificant details that go into the actual operation of any sort of large commercial program, and quite a few of them can be easily swept under the rug if planners aren’t careful. That’s why it’s so important for companies to methodically assess everything that will go into an ERP system. Far from being prohibitive, a TCO analysis will actually end up saving organizations money in the long run. Consider the following details before going forward with an implementation.

Devices
The computers that are used to actually run ERP programs aren’t terribly expensive, especially when enterprise resource planning systems are hosted in the cloud. However, many of the processes that can be made more efficient by using business software often require new mobile devices. Tablet PCs and smartphones can make an ERP system infinitely more powerful since there are fewer limitations on its operations, but they certainly cost a little bit more in terms of training and maintenance.

Staffing
There are many ways to fund the staffs that will eventually be responsible for ERP operations, but the exact model should be considered before a system goes live. For example, some companies decide to invest in workers who have experience using commercial software, while others elect to train existing or unfamiliar employees. Consider which is more feasible and which will contribute more or less to a total cost of ownership over time.

Licenses
When a suite of applications of any sort is assembled, there is probably going to be a non-standard mix of programs and applications in play. Some can be purchased outright, while others might be used at will under a licensing agreement with a software vendor. Be sure to understand the purchase schema that a vendor uses to charge a company when compiling all of the financial considerations that will impact a system’s total cost.

Coordination
It isn’t often that companies exist in vacuums where they’re cut off from all other organizations. Therefore, collaborators and clients will need to meet to plan deliveries, productions and supply issues. Be sure that these meetings and information sharing sessions are part of TCO analyses so costs don’t end up spiraling out of control.