Hidden Costs In ERP System Budgeting

Enterprise Resource Planning (ERP) has undoubtedly become a buzz word in the business world. The role played by the ERP software is significant in terms of business growth. However, the most important question that comes to mind while implementing an ERP is How much does an ERP system cost?

ERP implementation requires careful planning and understanding of the key aspects of ERP budgeting. If you are someone who has decided to implement ERP in your organisation or someone who is planning to do it, read this blog to know about ERP budgeting.

4 Main Stages of ERP Implementation

There are several steps involved in the ERP implementation process. Understanding each phase will lead you to smooth and cost-effective implementation. Some of the main stages of ERP implementation are mentioned below.

• Planning and Analysis:

The first and foremost step of ERP implementation is analysing your business needs. Identify the challenges that you need to tackle with the ERP system. Understanding your business goals will help you choose the right ERP software for your business.

• Implementation Costs Budgeting:

The total costs of ERP implementation is affected by several factors that include-

• Customisation
• Number of Integrations required
• Number of modules required
• Backups and Storage
• System Upgrades
• Employee Training
• Consultation Fees

One should consider all these factors before planning the implementation costs budgeting.

• Vendor Management:

Once you are aware of the hidden costs of ERP budgeting, the next step is to negotiate with the vendor. An idea regarding the ERP vendor pricing model plays a crucial role in finding the ERP system that fits your budget and business needs. It is an understanding of how you want to pay for the ERP software. A few of the ERP pricing models are as follows-

• User-Based Pricing Model: it is one of the most common ERP pricing models and is based on the number of users using the ERP system. The cost goes up when the user count goes up.
• Module-Based Pricing Model: The costs depend on the number of modules or the functionalities of the ERP system. The vendors can charge on specific modules or a group of modules.
• Subscription-Based Pricing Model (SaaS): This type of pricing model requires the subscribers to pay on an annual or monthly basis.
• Perpetual Licensing: It is another very common ERP pricing model offered by the vendors. This allows the ERP users to make a one-time payment to purchase the software licence.

These are just a few out of the many ERP pricing models available in the market.

• Employee Training:

The success of ERP implementation lies in user adoption. Hence, investing in employee training ensures successful ERP implementation.

ERP systems are a game-changer in today’s competitive business landscape. Hence, by carefully studying the business objectives and understanding the factors affecting the hidden costs of ERP budgeting, one can make informed decisions. Successful ERP implementation ensures successful business outcomes. For further information on ERP budgeting and implementation, visit https://www.edupluscampus.com/.

FAQs on Hidden Costs In ERP Budgeting

What are the issues related to hidden cost in ERP?
Most of the organisations fail to consider the hidden costs of ERP implementation while planning and budgeting. The hidden costs include consultation fees, infrastructure costs, training, integration costs, customisation costs, etc. The issues related to hidden cost in ERP budgeting can be resolved by having an understanding of all these factors before planning to invest in the implementation project.

What are the types of ERP implementation costs?
There are mainly two types of ERP implementation costs.

• Direct Costs
• Indirect Costs

Direct Costs include the known expenses that are incurred while implementing an ERP software. Indirect Costs are the unknown and hidden costs that are a part of the ERP implementation process.

What is the ERP pricing model?
An ERP pricing model is the cost structure that a business needs to adopt for implementation of ERP software. There are mainly two types of ERP pricing models.

• Cloud-based model
• On-premise model

Does ERP reduce costs?
ERP helps businesses to automate and streamline their operations. It boosts productivity and efficiency while reducing the operational costs. Cost management is one of the significant benefits of implementing an ERP system.