There is no disputing the costs and complexity of deploying an ERP solution. Everyone agrees that no matter what is budgeted for and how much time the implementation is allotted, there will likely be both time and cost overruns. Businesses are resigned to this, and in most cases managers will accept this reality with equanimity as long as the overruns are within reasonable limits.
However, the real shock is when hidden costs surface, costs that had just not been anticipated, and are difficult to explain. This whitepaper can help you identify and plan for some of these costs.
Traditionally, the costs of an ERP implementation are listed under the following main categories:
- Cost of software licenses
- Additional hardware and data storage
- Cost of implementation
- Change Management and Training
- Initial Impact on Productivity
- Maintenance
Under many of these categories, there are costs that may only surface much later in the implementation phase. For example, users find themselves restricted by the report creation features of their ERP solution, which can be complex or inflexible. Eventually, these users may buy report writing software: not only will they incur a cost to procure the software, there will be the additional task of providing training, integration and support for the new software. All such activities add up as hidden costs that were not budgeted for.
The hidden costs of ERP implementation can be broken down into two subheads. One looks at organization and complexity issues and the costs they impose. The other looks at implementation and management of the ERP solution.
Organizational Costs
Cost of Complexity
An article in the Harvard Business Review discussed the complexity of enterprise-class software. These solutions, of which ERP is a prime example, usually consist of a large number of databases and software modules that are connected via complicated protocols and processes. Keeping them running is a major challenge and every modification and customization adds new layers of complexity.
