Cost of ERP implementation is how much? Businesses need to prepare a budget how to avoid incurring? In fact, the cost of ERP implementation does not only stop at the purchase of ERP software, which also includes many other terms such as consulting, implementation, training, infrastructure and operating costs long-term.
This article Lac Viet will help the business understand the cost structure ERP implementation, the factors that influence optimal way budget to ERP actually become investment to bring sustainable value.
1. Why business often misjudge the cost of implementing ERP?
When the business starts to find out the cost of ERP implementation, the first important thing is to understand that this is not merely the purchase price of the ERP software. Cost of ERP implementation is the whole of the total costs that a business must spend from the moment decision to buy ERP software until the system is stable operation create practical value in daily work.
In many projects ERP, ERP software occupy only a small part of the total budget. The costs most often located in the counseling, standardized processes, training of personnel, the operation change – the factors that determine the effective use of the system in practice.
In fact, many business ERP implementation meet a number of popular misconceptions following variables:
Confusion deployment costs with the cost of ERP software
Many new businesses just ask the question “ERP software price how much?” when approaching suppliers, led to the only draft budget for copyrighted software that ignores the cost of implementing other. Meanwhile, according to the survey, independent software costs often only accounts for about 15-30% of the total cost of ERP project, the rest are costs, services and people.
Ignoring hidden costs in the project, the hidden Costs often see include:
- User training for them to use ERP effective.
- Adjust internal processes to sync with the system.
- Technical support and maintenance after go-live.
The account has a total budget increased significantly if it has not been calculated from the beginning.
Inexperienced project planning, ERP: Business not clearly define the objectives, scope of deployment from the start often leads to extensive requirements between the project, causing incurred unforeseen costs.
2. Panoramic expenses deployment ERP business need to know
When the business starts to find out the cost of implementing ERP, the most popular question usually is: “ERP software price how much?”. However, in fact, the cost of ERP software is only part of the total cost of ERP implementation. To avoid a budget shortfall or developments, businesses need to look at ERP as a project operated switch overall, not only is a sum of buy software.
Below is the group of main costs that businesses need to understand before you decide to buy and ERP implementation.
2.1 the Cost of buying ERP software
This is spending most recognizable when business began to approach ERP. Currently, the market ERP common to the two main models:
- Buying the rights to life (On-premise): Business to pay the initial cost to own software and deployed on the system internal server. This model is fit with the business wants to control the data closely, there is a team of internal IT.
- Subscribers by year or by month (Cloud/SaaS): an Enterprise pay a recurring fee to use the software of ERP on cloud platform. This model helps to reduce the pressure of the initial investment, in accordance with the small and medium enterprise or business that is growing fast.
According to the analysis of Gartner, the cost of ERP software typically only accounts for about 15-30% of the total cost of ERP implementation, the rest came from deployment services, operational training system.
In fact, in Vietnam, medium business usually starts with investment from several hundred million to a few billion for the cost of buying ERP software, depending on the number of modules (accounting, treasury, purchasing, production...) and the number of users.
2.2 Cost consultant ERP deployment
This is the sum accounted for the largest share in the cost of ERP implementation, but often undervalued when set the original budget.
This cost includes:
- Survey actual business at the business
- Standardized, re-designed workflow
- Configure the ERP system according to management needs
- System tests (UAT – test user)
- Test, put the system into operation official
According to the annual report of Panorama Consulting, cost consulting and deployment can account for 40-60% of the total project budget ERP, depending on the level of complexity of the business.
2.3 Cost customized according to specific business
Not well enterprises need custom ERP. However, in the following cases, this cost can arise:
- Business activity in the business process peculiarities
- There are policies of internal management are not popular
- The old system was operated year long and hard to change now
Custom ERP “fit” better with the business, but also comes with risks:
- Rising cost of ERP implementation
- Difficult to upgrade later
- Much depends on the provider
From the perspective of governance operate, practical advice is: only custom when really necessary, priority standardized process before requesting editing system.
2.4 Cost of technology infrastructure
This cost depends on model ERP which business to choose.
| With ERP on-premise: | With cloud ERP |
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Simple comparison:
- On-premise: the cost of the initial investment is high, good control
- Cloud: cost flexible, easy to expand, reducing the burden on IT
Value brings is stability, safety data operation, the vital factor with business as ERP become the core system.
2.5 training Costs user switching
ERP is only really effective when the user uses competently the right way. So, the cost of training is the investment required, including:
- Training end-users in each department
- Team training management system
- Duration acquainted, leading to reduced yield temporary
2.6 operating Costs, maintenance and upgrade
After ERP into operation, the business still needs to predict the cost for:
- Annual maintenance fee
- Technical support
- Version upgrade when the system development
Spending this helps ERP:
- Always stable
- Meet the change of business
- Avoid the risk of interrupting operation
If you just look at the cost of short-term that ignores the commissioning phase, the business is very easy to misjudge the total cost of ERP implementation in the long term.
3. Why the same is ERP but the cost of deployment can be a huge difference?
In the process of consulting accompany many business ERP implementation, Lac Viet is often met with a familiar question:
“Why business A ERP implementation, just a few hundred million, while company B cost up to a few billion, although the scale is not too different?”
The answer lies in that: the cost of ERP implementation is not dependent on a single factor, which influenced at the same time from enterprise scale, scope development, the level of readiness intrinsic. These three factors decide directly to the total budget, deployment time and the final effect of the project.
3.1 Scale and complexity of the business
Scale business is the first factor affecting the cost of ERP implementation, but not merely the number of personnel.
The number of departments participating system
Each of the departments involved ERP synonymous with:
- A group process needs survey
- A set of business requirements need to configure
- A group of users who need training
Business only deploy ERP for accounting and warehouses sure you will have a much lower cost compared to business development for accounting, purchasing, sales, manufacturing, hr.
Number of branches, plant locations, operating
ERP as to serve multiple branch plant, then:
- System as complex on the right
- Data to be synchronized in real time
- The testing and training as time consuming
According to the report by Panorama Consulting, the business has multiple branches or pattern corporations often have the cost of implementing ERP significantly higher compared with business unit basis, due to the request data governance and internal control more complex.
Level standardized processes current
This element is “hidden” but a very strong influence to the cost:
- The enterprise already has a clear process, unified → deploy faster, less incurred
- Business operation based more on personal experience → need more time, standardized, adjusted
In fact, business as less standardized processes before then cost consulting and ERP implementation as high, though the cost of the ERP software does not change.
3.2 Scope of the ERP is deployed
One other important factor that many businesses fret “ERP software price how much” privacy is the range of the subsystem is introduced into the system.
The analysis platform
The distribution system is typically deployed first, including:
- Accounting – finance
- Purchase – sales – inventory management
This is the subsystem standards, have high popularity, so the cost of implementing ERP typically at the level of control is if the business does not require too much custom.
The distribution system characteristics and advanced
When extended to:
- Production
- Personnel – salaries
- CRM, BI (data analytics, management reports)
The cost will increase due to:
- Process more complex
- Requires accurate data and contact information high
- Training time longer
3.3 the Level of readiness of the business
This factor is often underestimated, but the ERP is successful or not, the cost of ERP implementation can team up or not.
Data can be standardized or not
ERP operations based on the data. If:
- The list of goods, clients, accounts, accounting has clear → deploy favorable
- Discrete data, overlaps, inconsistencies → cost a lot of effort cleaning data
Personnel are willing to change or not
ERP not only is the tool change that is to change the way of working. If hr:
- Yet to be communication full
- Be afraid to change habits
- Understand the value of the system
Enterprise will cost extra training, support even do the procedure again.
The level of commitment of the leader board
From the perspective of governance operate, this factor is decisive:
- Leadership commitment, participation-oriented → project in the right direction
- Leaders only “assigned to IT” → ERP prone to failure or deployment form
3.4 the perspective of the expert operating
The disparity in the cost of ERP implementation does not come from the business, “select software cheap or expensive,” which comes from the context of operation, range and deployment readiness level of intrinsic. Business as understand these three factors, the draft budget, the solution chosen, the decision to buy ERP software as accurately as possible and effective.
4. Cost of ERP implementation, how much is reasonable for businesses in Vietnam?
When learn ERP, many business leaders question:
“The cost of ERP implementation, how much is reasonable?” or “ERP software price how much it fits with the scale his company?”.
In fact, there is not a fixed number applies to every business. Cost of ERP implementation depends on the scale, the level of complexity in the operation of the enterprise choice of route development. However, businesses can fully referenced according to the scale to build the budget fits more realistic.
4.1 small and medium Enterprises (SMEs)
With the group small and medium enterprises in Vietnam, the objective when buying ERP software is usually:
- Standardized financial management – accounting
- Control, purchasing, sales, inventory
- To reduce dependence on Excel, and handling
The popular investment: According to aggregated from the report ERP market in Vietnam and the Asia – pacific, corporate, SMEs often have the total cost of ERP implementation ranges from about 300 million to 2 billion, according to:
- Number of users
- Number of modules deployed
- Custom levels
4.2 large-scale Enterprises or corporations
With big business, ERP not only is the management tool that is platform operating core, serving for:
- Multiple departments
- Many branch factory
- Operations management concentration
Why the cost of implementing ERP higher? Cost of ERP deployment of big business usually higher SMEs by:
- Process complex, multi-layered control
- Requires decentralization, management reports in depth
- The volume of big data, the need to ensure the accuracy sync
A difference is very large in large-scale enterprise is change management. ERP fastening:
- Hr, changing work habits
- The old process to adjust or remove
- Leaders must be involved in the project
5. Lac Viet SureERP – ERP Solution optimal cost for enterprises
In the context of many businesses fear the cost of implementing ERP is too high or difficult to control, the question no longer is ERP software price how much, that is any solution to help optimize cost, but still meet the needs actual admin. This is also the reason Lac Viet SureERP are many Vietnamese enterprises selected in the transition of operation management.
Lac Viet SureERP developed based on a deep understanding scope, scale and peculiarities management of the enterprise. Instead of approaching in the direction of “standard ERP international, deployed in unison,” SureERP allows businesses to select and deploy each module is suitable to help better control the budget right from the early stages.
Difference of SureERP located in reducing the cost of deployment but do not cut reduce the value to use. Business is not spreading investment for those features aren't necessary, which can:
- Development according to the roadmap, prioritize the distribution system brings efficiency as fast as finance and accounting, purchasing, sales, warehouse
- Expand progressively as scale, level of administration, increased
- Avoid extra costs complex custom system was designed with practicality to operate in Vietnam
Besides, SureERP supports both model-premises deployment (on-premise), business suit, want to control data and proactive long-term cost. This helps businesses be more active in calculating the total cost of ownership of ERP, instead of just looking at the cost of buying ERP software original.
More important, with experience in ERP implementation for many different industries, Lac provides not only software, but also with the business in:
- Standardized processes
- The optimum way to operate
- Reduce the risks incurred costs in the deployment process
Thus, Lac Viet SureERP not merely answer the question: “buy ERP software how much money”, which helps businesses solve the core: invest ERP how to optimize the cost-effective and sustainable in the long term.
6. How to optimize cost of ERP implementation, but still effective?
From practical experience, the cost of implementing ERP is not only optimized by selecting software cheap, which is more important than doing it right from the start.
6.1 Identify the right goal when implementing ERP
Enterprises need to answer it:
- ERP to solve the problem?
- Financial management, inventory control, or optimize production?
When goals are not clear, the project is prone to expand the range, drag in the cost incurred to implement ERP plan.
6.2 Priority standardized processes before custom
Many businesses want to “put the old process in ERP,” which leads to:
- To customize the software more
- Increase deployment costs
- Difficult to upgrade later
Practical, standardized process before custom help to significantly reduce costs and risks, at the same time take advantage of the good governance has been integrated in ERP.
6.3 Select ERP solution matching the industry and scale
Not ERP would also suit any business. A solution:
- Suitable industry
- Suitable scale
- Match the development direction
will help the business avoid buying redundant features, reducing the cost of ERP software and the cost of deployment.
6.4 deployment according to the schedule, not “embrace”
Deploy too many modules at the same time often leads to:
- Overload for users
- Prolonged deployment time
- Incurred costs
On the contrary, deployed according to the roadmap to help businesses:
- Good control of the budget
- Assess the effectiveness each stage
- Timely adjustments when needed
6.5 Select partners, ERP implementation has practical experience
Implementation partner not only “software installed”, but also:
- Consultation process
- Companion's handle problems that arise
- To help businesses use ERP lasting effect
According to many studies, business select partners experienced industry often significantly reduced risk, cost overruns, and failure of ERP projects, compared to only choose a provider based on price.
The cost of implementing ERP case management is not located at the lowest figure, which is located at the level of investment in accordance with the scale, objectives and the operational capacity of the business. When there is the right approach, ERP no longer is the cost, which becomes investments bring long-term value for business in Vietnam.
