Hidden Cost of ERP Implementation
Hidden Cost behind ERP Implementation is a common pressure point in Companies while implementing an ERP System.
The ERP Selection team have met with various vendors, analyze various factors and then done with Selection Part and then ERP creating , analyzing flaws , Implementing , Removing Flaws and finalizing ERP System are the important steps for Creating ERP System . While in this process there are some cost hidden which are not included in the Creating ERP System.
Some common Hidden Cost in ERP Implementation :
1. Labor Costs 2. Training Cost 3. Testing, Retesting and Testing Again 4. Customization 5. Customer Dissatisfaction 6. Re-engineered Processes 7. Ongoing Cost and maintenance cost 8. Resistance of Employee for Adopting new ERP 9. Data Conversion
These are explained as following below.
- Labor Costs –
Labor is the major part of ERP implementation. These are the person’s who are major part of designing of the ERP. For example : In a company if some organization order to create ERP for them then it is created by ERP Implementation Company. But Employee’s salary doesn’t depend upon the only this project. Their Salary is fixed and is independent on how much they contributed on how many projects of developing ERP.
- Training Cost –
While an ERP is created by a Commercial Company for other organization , before handed on to them a new created ERP is tested. So in that company training is given to the end user so that they can work on the new system and help the Company to find out flaws so that a new improved product is handed on the buyers. Also as we know when new technology is adopted by Companies the at that time training of that technology is provided to the employees so that they can work easily on it.
- Testing, Retesting and testing again –
When an ERP is created so at that time for checking its performance it has to go through number of testing so that an ideal ERP is produced as a final Product.
For example, A company has created an ERP so initially an ERP has go through Testing so that it’s flaws can be determined. So after correcting that flaws the system again has gone through Retesting phase so that an ideal product is produced. If after retesting again flaws are found that at that time the ERP System has gone through number of Retesting Phase until it become quintessential product. After that company handed the product to the organization. While using when an organization found any fault or they want some settings then it’s responsibility of Vendor of that Company to Remove that flaws free of cost.
- Customization –
It is difficult to find ERP System which do not need any Customization. Customization means any Organization want some desired module or desired Changes on Default ERP System of a Company. It is easy for Company to customize the ERP System according to the satisfaction of an Organization but difficulties arises when Company upgrade the customized ERP system because Default ERP System can be easily upgraded but Customized ERP System Require more efforts and expense for upgrading which is an extra hidden cost.
- Customer Dissatisfaction –
When an ERP is handed on to the Customer that is organization so at that time sometime happens that the provided ERP System doesn’t matched with the requirement of customers. So at that time the Vendor’s has to make some changes to the ERP System which meets the requirements of the Customer which is an extra cost to them.
- Re-engineered Processes –
Re-engineered process means a company recreate it’s business process or ERP with the goal of improvement by removing flaws faced in previous process. So also consist of hidden cost like when a company created an ERP system so firstly it goes for testing after that final product(ERP) is provided to the other company. So when that company really implemented the system at that time some flaws are also caused so for removing this the ERP system is goes for updating.
- Ongoing cost and Maintenance cost –
When an organization buy ERP from a company. So at that, in the total cost they paid to the Company consist of Support Cost. Support cost consist of removing bugs to the system and also consist of continue updating of basic system. But if some organization who created their own ERP are opting for Support Cost to other ERP manufacturing Company then at that time they have to pay more as compared to the company who buy ERP system with Support Cost.
- Resistance of Employee for Adopting new ERP –
Change is difficult to Adopt because everyone is comfortable with previous situation but also change helps a lot to increase productivity. So while buying ERP system from ERP manufacturing Company, the organization who brought ERP system also provide training to their Employee so that they can adopt the ew system easily, so this training is included in the cost while buying ERP system.
- Data Conversion –
When an organization buy an ERP system so, at that time data is not import itself to new System. An organization have to pay for it so that without any difficulty the data is imported from previous system to new system.
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