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What is the total cost of ERP?
How much does an average system cost (including software and implementation) for a 200-person company?
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8 Answers
Hi James,
Rishi gave a solid answer, but here is my spin:
a) Your question said that the company size is 200. This doesn't mean you need 200 licenses, in fact you will probably need substantially less. The licenses that you need may be as low as 10. It really depends on what your company does.
For instance, your background suggests that you are in a manufacturing environment (Operations, Supply Chain), so the key question is how many concurrent users in mfg do you really need. Also, if you are using a 3rd party CRM like salesforce.com then your sales people don't need a license to your ERP, but rather you need integration to salesforce.com
Annual Maintenance: The standard is approximately 20%. Some companies have been trying to raise it to 22-23% and are getting a lot of heat from their customers. If you choose a SaaS model, then this doesn't play into the equation.
Implementation: Really depends on a number of factors including the complexity of your business, how much of the implementation your team can bear itself, how well are your processes defined, how much training will your team need, etc. Having said that, for a non-Tier 1 implementation, the cost can be as low as 50% (or even less) of the SW fees.
Hardware: Some ERP systems require 1 server, while others require multiple. If you choose a SaaS model, then this doesn't play into the equation.
Post implementation support: If you have to use an outside consulting company just a few words of caution:
1) Any customizations performed could make you hostage to your consultants
2) The fees paid to consultants will typically be a lot higher than if you were able to deal directly with the software vendor for a couple of reasons including the ERP vendor knows a lot more tips/tricks to get the job done quicker
Please feel free to contact me at bswedroe@expandable.com and I promise you won't get a sales pitch, unless you want one :)
Hi James,
Few are the important cost components for an ERP system
1. Software : its usually named user or concurrent user. Depending on the total number of users, as in your case I feel 200 you shall be requiring around 200 Named or around 100 concurrent users. If you go by top five ERP it shall vary from 400K to 700K USD.
2. Annual AMC for Software Product: It is usually from 20-22% of the software cost, so for the first year it shall be around 100-150 K
3. Implementation: Usually we have seen implementation is 1.5 to 2 times the cost of the software. It depend on the kind of business you are in and the spread of your business.
4. Hardware: this depend on the software you select, say for e.g for SAP hardware resource requirement will be high as compare to Infor.
5. Post Implementation Support: In case you want to be independent you can have your internal teams, but usually we have seen companies outsourcing and considering expert consulting companies.
In case you need any more inputs please feel free to write to me at rishibansal@merinoservices.com
Rishi
You may want to look at value as opposed to costs. The problem is, the costs are all too visible and the benefits all too obscured. Also, don't forget all of the sustainment costs when calculating value. Besides the software, middleware, database, and hardware maintenance costs there are the technical and functional resources that will keep the application going, apply patches and updates, and solve on-going transaction errors. Then, add in optimization requests! On the plus side of the equation, you have labor savings due to process automation and integration, new capabilities that could translate into customer value (and thus revenue), and the value of information you can mine from the system. Of course, you actually have to DO something with that information that results in lower operating costs, increased sales, etc.
As an example: I worked for a company in the 70's that put the first phone switching system into a country in the Middle East. Before that they had no system to track and CHARGE for phone calls. Their "ERP" system paid for itself in the first month as they went from a too low fixed fee to a "pay for use" method of billing.
ERP... can't live without it/can't kill it!
Hi James,
Important cost for an ERP system
1. Software : 200 concurrent users is aroung 200-500K base on modules
2. SYSPRO sla is 12% of software cost
3. Implementation: Usually we have seen implementation is 1 to 1 relationship
you need any more inputs please feel free to write to me at roody@cbstechnologies.com or visit cbstechnologies.com/syspro.html
Let me know what modules you'll want, I'll put a price quote for you free of charge.
Question is too generic, ERP (Enterprise Resource Problems) should not be implemented by taking advantage of a weekly ERP special.
1st - What vertical?
2nd - What systems are in place currently?
3rd - What is driving the need to change?
By answering those questions you'll have a decent answer.
It is not good to look at many ERP packages and be sold on all the gadgets.
Bottom Line: What is the financial cost of NOT investing ERP vs. What is the cost to invest in ERP. ERP has an enormous long ROI cycle, where daily business changes have a short cycle, be careful to not leverage your enterprise into a stovepipe departmental database prison.
James,
Based on your bio, I am going to make a BIG assumption that you are with a manufacturing organization. In which case of the 200 employees you may be looking at 60 or so indirect and 140 or so direct labor. In this example you would be looking to cover the 60 indirect with ERP licenes and the 140 with labor reporting licenses (probably about 10 reporting stations to cover this number of direct labor types). Then the question becomes is there additional functionality that needs to be included (for example is there a service component to the business), we will leave this out of the mix for now. So an ERP solution targeted towards the S&MB (Small & Medium Business) space which a 200 employee company falls into, would be looking at software costs around $150,000 (give or take), implementation services costs around $150,000, annual maintenance costs around $30,000, server costs around $15,000, network & data collection costs would need to be determined, and cost for your internal people. Needless to say, lots of variables & lots of assumptions, but should get you into the right ballpark.
Regards,
Bill
The answer is that there is never a total cost of ERP because by definition a business entity is a 'going concern' and operated as though it has an indefinite life. And since your ERP system is a critical component of your business, ongoing costs must be incurred to maintain it as with any other business asset. How much the ongoing costs will be, however, depends on the choices you make during the initial investment as well as after.
It is in this area that your ERP software provider can be most helpful. They can help you avoid the trap of investing in the wrong licensing configuration that will result in paying higher fees. They can advise of special offers from the manufacturers that can minimize if not totally eliminate certain annual fees. And they can provide different support and training options that will give you the most bang for your buck.
At the software company I worked for in the '90's we used to say that the client does not by the software, they buy the software VAR. That emphasizes just how important choosing the right VAR is. Choosing the wrong system and the wrong VAR has the potential of bringing down your whole operation, by bleeding it of money while not delivering a solution. Conversely, choosing the right system and right VAR can help you maximize your time and money freeing you up to focus on running your business and making money.
One of the main considerations to look for in a VAR is to determine whether or not your business matters to them. Because if it does then they will do whatever they can to enhance your system and make sure you experience minimal cost and downtime. One way of determining this is to talk to the VAR's existing client base. When requesting references, help the VAR by providing areas of your inquiry, such as VAR reponse time, software ease of use and modification, suitability for your industry, ease of applying updates, etc.
Dear James,
It depends on too many factors, first thing being selecting the right ERP
1. You need to know which ERP is performing best in your industry
2. You need to select the right solution vendor
3. You need to know how many users are likely to use the application
4. What is readily available in the application and what is not
5. Time of implementation
Do revert back with your contact info to selvakumar_r@preludesys.com. I wish to help you before you could finalize on the product as ERP has a greater impact in changing any business culture.
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