ERP IMPLEMENTATION – THE HIDDEN COSTS

Introduction

                          ERP software packages promise great benefits. But what are the costs involved? Exactly how much will one have to pay to get them? In most cases, the ERP implementation cost exceeds the budget. Why is this? Even the most well planned and though out budget is exceeded. In this chapter, we will examine the areas that most managers miss to account for in their budgets. Or in other words, we will discuss the hidden costs of the ERP implementation.

                          Few companies buy enterprise resource planning, or ERP, software just to save money. The objective is the integration of company-wide information. A single, enterprise-wide computer system should be cheaper and easier to maintain than a hodgepodge of antiquated COBOL application from a dozen different vendors. The move to ERP is a project of breathtaking scope, and the price tags on the front end are enough to make the most stoic manager a little twitchy. In addition to budgeting for software costs, financial executives should plan for consulting, process re-work, integration-testing and a host of other expenses before the benefits of ERP work, integration-testing and a host of other expense before the benefits of ERP start to appear.

                Underestimate the price of teaching users their new job processes? Fail to consider data warehouse integration requirements on the need for extra software to duplicate the old report formats? A few such oversights in the budgeting and planning stage can send ERP costs spiraling out of control, faster than oversights in planning almost any other information system undertaking. Although different companies find different hurdles and traps in the budgeting process, those who have implemented ERP packages agree that some costs are more commonly overlooked or underestimated than others. Armed with insights from across the business, ERP implementation veterans agree that one or all the following five areas are most likely to result in budget overruns.