The implementation costs of an ERP are expected to be in the range of $3 to $10 per dollar spent on the software itself. When you consider ERP implementation, there are obviously more ways to fail than to succeed, most projects require years of tweaking, support costs are prohibitively expensive and can be ten times the cost of software.

Implementation costs gets allocated towards training, integration, testing, data conversion and data analysis and none of this can be ignored if you are looking at a system that can deliver the business benefits of implementing an ERP system. The significance of each of these activities is defined thus:

  • Training – employees have to learn new processes and not just a new software interface; talks about change management and is typically 10% to 15% of the total budget
  • Integration – it is not easy, for links have to be built between ERP and other best-of-breed systems on a case-to-case basis
  • Testing – has to be process driven; use real-time data preferably with real employees who would be using the system and the same volumes as expected
  • Data conversion – the most underestimated cost activity and even the best of data needs changes to match process modifications necessitated by ERP implementation
  • Data analysis – reports in ERP packages needs to be combined with goals, budgets etc. to make business meaning and this cost is more often than not overlooked

After all, the cost of ERP software is only a fraction of the total cost of the project.

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