Hidden Costs Of ERP - Achieve A High ROI With Right Decision

Most of the business organizations overlook the hidden costs of ERP implementation or underestimate it and ultimately land into disastrous situations. The multiple benefits of ERP implementation to improve work efficiency and profit margins of any business organization are much talked about often bypassing the hidden costs of implementation. ERP costs during and after implementation often surpass the estimated amount by a higher percentage unless there is meticulous planning and calculation beforehand. In order to achieve a high ROI, the total cost of ownership (TCO) must be checked through intelligent planning and anticipation.

Vital hidden costs of ERP

Cost of training: For successful ERP implementation, a core project team has to be defined and proper training imparted to the members to get acquainted with the new working system. Most of the organizations do a blunder in underestimating the training expenses. Apart from training, individual members of the team may require some expert advice while testing the ERP and decision making. This also adds to the hidden cost of ERP.

Integration and testing of ERP: The costs involved in integrating the different ERP modules and subsequent testing seem to be a never ending process that constantly raises the TCO. The integration and linkage between different modules has to be carried on the basis of different testing and case studies, which is a recurring cost often underestimated.

Customization of ERP: Customization of ERP is often necessary during implementation to streamline the business processes and this constitutes a huge chunk of the hidden costs of ERP. It is quite tough to estimate the customization expenses, and the running cost turns into a nightmare in many business organizations. Cost of the add-on applications and tools vary depending upon the business requirements.

Conversion of data: Conversion of corporate data followed by development of the interface and ensuring proper data transfer to new systems is another hidden expense, often not considered seriously. This process is time consuming and delays the regular work schedule.

Data Analysis: One should include the cost of a data warehouse while implementing ERP, as the need may arise for data analysis of the existing ERP system along with the external systems.

Replacement of workforce: This is another hidden cost of ERP implementation and should be included in the TCO. In order to optimize this cost, involvement of top ranked managers is necessary for important decision making to achieve the set targets of business. It becomes mandatory to deploy the best and intelligent workforce for better work performance, which can be costly.

Withdrawal of ERP implementation team: Implementing ERP system is not as simple as any other software and an organization should not think of withdrawing the team even after full implementation. Maintaining the team for a prolonged and indefinite time should be considered as another hidden cost.

Return on Investment (ROI): One should not expect immediate return on investment after implementing ERP system. On the contrary, ERP benefits can be realized only after intelligent usage of the software system after 1-2 years.
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