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ERP software costs

What are the costs of introduction an ERP software and beyond?

Freddy Czaja

The introduction of a new ERP software has to be planned and carry out very well in order to meet all requirements and to keep the budget. But how do the costs for an ERP software come together?

Basically, it can be said that implementation costs vary widely depending on the complexity of the business. Small businesses that want to implement standard ERP (out-of-the-box) typically have shorter implementation times and lower costs than a mid-sized business that needs a lot of customization. Factors include, for example, the size of the company, complexity of the requirements, customizing, number of users, license costs, consulting costs, costs of maintenance contracts, costs of the system environment. However, not only the introductory costs should be considered, but a longer period of, for example, five years. This helps to figure out the relationship between implementation costs & running costs and ultimately to determine the total cost.

Table of contents

Introduction costs

Consulting firm
ERP service
Calculation
Project duration


Steps of introduction

Planning
Implementation
Customizing
Training
Go live


Running costs

software licenses
maintenance contract
system environment
Updates & Migration

Introduction costs

The introduction costs of an ERP are difficult to estimate at the beginning of the planning. It separates between internal and external costs. Internal costs arise, for example, when employees as project managers or IT managers take care of the introduction of the ERP system full-time. This is a not to be despised cost factor which is to be taken into account in any case. External costs are incurred, for example, by consulting companies, the ERP service provider or license costs.

Everything starts with the decision to introduce an ERP or to change the ERP. In the following now possible cost factors in the introduction.

Consulting firm

The first step after the requirements are created by the client is the selection of a future-proof (very important) enterprise resource planning software that comes as close as possible to the requirements of your own company. Here, costs can arise through consulting firms that (if at all possible) give independent assistance with the decision. Questions are here: Is the ERP is future-proof, the ERP can meet the requirements, is the ERP is customizable, the ERP can be extended later, amount of the license costs, is an industry solution is available and much more.

ERP agency

Once an ERP has been chosen, a specialized service provider has to be found to implement the project. Check here whether the service provider has sufficient experience in the implementation of the requirements, the amount of the offer and the hourly rate and whether sufficient resources are free (qualified staff) to implement the implementation in a timely manner. As a rule, the greatest costs are incurred when creating the ERP by the service provider (see steps in the introduction). However, the license costs are becoming more and more important later on (here it depends simply on the provider & the solution).

Tip: Ask customers of the ERP service provider if they are satisfied with him.

Correct calculation

In the process between the decision for an ERP & an Agency it has to be calculated how high the implementation costs & running costs will be. As mentioned earlier, is important for the costs planning in the future. One way (and to recommend) is to calculate internally higher to have more scope. Thats why is good to know that the planned costs in the field of ERP are usually exceeded.

Project duration (implementation time)

An important and decisive point in the introduction of an ERP is the duration of the project. If the resources - the will - and the know-how on the part of the client and contractor are there, swift implementation is possible (very important). If one of the things is missing, there can be considerable time delays.

Smallest companies with simple standard processes can also implement the ERP within one month. For small and medium-sized companies, a project duration of 6 months & more is the rule. It depends on the complexity of the company and the requirements.

In the case of an first ERP introduction, work should be as agile as possible so that finished ERP areas are delivered promptly. For example, a rhythm would be every three weeks.

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Steps of introduction

After the previous steps, such as selecting the ERP's & agency, have been performed, the actual work begins. These include planning, implementation, customizing, training & go live (launch). For the sake of completeness, we would like to briefly explain the points, followed by the section "running ERP costs". The steps are different for each ERP implementation and are explained here only rudimentarily.

Planning

The planning begins with the preparation of the specifications (requirements) by the client and for the service provider with the preparation of the specifications (how he wants to solve the requirements). Then the participants are determined, the sequence of work, solutions, schedule & system environment. The work is roughly structured in order to get a good overview and then in turn structured into smaller areas, right down to the ticket level. Involved in the planning are clients & contractors with their project managers, business analysts & developers.

Implementation

After the planning is completed to a certain extent, the implementation can begin. First, the system environment is created, including live server, test server & measures for the security of software & data (backups, mirrored servers, etc.). Then the ERP software will be installed, demo data will be prepared and integrated. In the next step, the individual processes will be adapted to the company. For example, the sale area with its sales processes, information and necessary documents. Once everything has been tested and the ERP is to be delivered with its functional areas, the company's master data will enter the ERP and it will be tested again. This is followed by one or more tests of the launch, under conditions that are as realistic as possible.

Customizing

An ERP must always be customized if the standard software is not sufficient to map, control or even enable processes. If a subarea of ​​the ERP can not be delivered because the standard software does not provide the necessary functions, these functions must be implemented. It is important to consider future ERP versions.

Training

Just as important as the planning and implementation of the software is the training of the employees. Key users are trained here, who then pass on their knowledge to other employees. It is also important to start the training in good time so that a deep understanding can grow.

Go live

The moment of the launch is the moment of truth. On this day, the ERP goes into operation and just has to work. The client's employees are in close contact with the ERP service provider to report errors. The service provider test the Live ERP and correct errors.

Running costs

The running costs of an ERP are comprised of software license, user license, maintenance contract, system environment, training, or migration costs to current ERP versions. In addition, further development of the ERP can lead to considerable costs through the addition of modules and customizing. The exception is the use of SaaS-based ERP standard software, which usually does not allow customizing. In these cases, server and software are technically managed by the provider, whereby security updates & updates on current versions, etc. are performed by the provider. The whole thing is usually included in the usage fees (see Odoo Online).

Software License

The fees for software licenses are very different for all ERP providers and are not always transparent. Often, they include license costs per user, per module used, maintenance costs, operating costs or support. This should be checked by your company beforehand.
But there are also ERP's without license costs: Odoo (Community) for example. Odoo offers three versions of its ERP. The Odoo Community comes with no software and user fees, which can save a lot of money for larger companies. The other two versions are Odoo Online & Odoo Enterprise. The license costs are made up of the used apps & the number of users.

Maintenance contract

The maintenance contracts between the client and the contractor usually include backups, hosting (see system environment), monitoring of the software and system environment, as well as minor updates and security updates. The maintenance contract is negotiated with the ERP service provider prior to commencement of work. Updates (migration) to larger versions are usually not included.

SYSTEM ENVIRONMENT

The system environment consists of software & hardware that includes the live environment, test environment and backup environment. The whole thing should be physically separated to ensure max safety. The costs are either allocated through the maintenance contract, are included in the usage fees (SaaS) or paid directly by the client.

Training

Employee training is important not only in the introduction of ERP software, but also afterwards. Changes to the standard software, the release of new software areas or the use of a new module make training essential and are part of the running costs. Here you should not save costs - because an ERP is only as good as its users can serve it.

Updates & Migration

It makes a big financial difference if a standard ERP or a customized ERP will migrate to a new ERP version. Here one must understand that changes in the code must be adapted also in the new ERP version. This is a considerable time factor, which can be very expensive, especially with complex customizing. Companies that only use the standard functions of an ERP have a big advantage here. But clearly, what use a company an ERP that does not support, facilitate or map the business processes?

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About Freddy Czaja

SEO is the air he breaths. If it has a bit of Oxygen, he doesn't care/ He likes his coffee black and cold.