Costs

__**COSTS**__ Companies do not want to invest in a system that will not add value to the organization. They will not spend money on software that is difficult to implement or use. A variety of unexpected costs tend to arise when implementing an ERP system. There are maintenance costs, infrastructure costs, training costs, customization/configuration costs, conversion costs, integration costs, testing costs, and a variety of other costs. There also seems to be a relationship between company size and total costs. As the number of users or employees increases, then the total costs increase as well. According to Metagroup, software, professional services, and internal staff costs can be in the hundreds of millions for bigger projects. //(Return on Investments, ERP Wire.com).// In some cases, organizations have gone into bankruptcy as a result of a failed attempt to implement an ERP system. However, if a company accurately and specifically identifies its objectives in the beginning, some of these costs can be minimized. Other costs that aim to make sure the system implementation is successful, should be viewed as an investment.



Infrastructure costs tend to be the lowest because hardware and network prices continue to decrease as technology continues to advance. Also most organizations keep their equipment up to date so there would be no need to invest in new equipment.

Training costs tend to be high because workers have to learn new processes along with new software. Some companies choose to use trainers from within such as IT personnel or other employees who are familiar with the new system and process. Companies may have to invest in outside trainers to focus on showing people how to use the software, but consulting fees tend to run high. Workers should also receive training in new ways to do business resulting from the implementation of the new system. Trainers should be able to explain if and how business processes will change as well. If a company invests in training, it will reap more rewards from the newly implemented system. For regular system users, organization should invest in regular ERP software training.

Integration and testing costs are important to consider. These costs facilitate testing ERP system integration with other internal corporate software. During this process, the company is able to run real information through the system with help from participating employees that have helped throughout the implementation process

Customization costs can be very expensive. Customization of the core ERP system can be overwhelmingly expensive and it should be avoided if possible. Customization usually occurs when the ERP software is not handling the business process. It can affect numerous modules within the system. When the system is customized, upgrading can be more difficult and costly. If go through with customization, companies should also plan on investing more into training costs.

Data conversion costs can run high as well. It depends on the amount of data that a company has to move through. Data conversion includes moving corporate information from the old system to the new one. It also involves making sure that the data is clean, filtering out any unnecessary information.

In an attempt to cut down some costs, vendors have been making the systems more user friendly which would cut down on customization and upgrade costs and difficulties. Companies must properly follow procedures and instructions set forth by the vendor or consultants. In any event, most ERP systems do not reveal their true value until it has been up and running for a while. At that time, companies are able to focus more on making improvements in the business processes that are affected by the system. to consider.

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