Operations Management: An Integrated Approach, 5th Edition

THE COST OF ERP SYSTEMS

SAP AG, Peoplesoft, Oracle, and Infor Global Solutions are major suppliers of ERP systems. The cost of an ERP system ranges from hundreds of thousands of dollars to several million dollars. In addition to the software cost is the cost of outside consultants used in the selection, configuration, and implementation of the ERP system. An IT research firm, Gartner Group, reports that companies can expect to spend up to three times as much money for consultants as they do for the ERP system. Additional costs include the human resources needed to work on the implementation of the system, new hardware to run the program, and the development of a new, integrated database.

A review of successful ERP implementations indicates that the most critical factors are leadership and top management commitment. Top management must clearly set the vision and direction for the business, as well as establish a culture that enables the business to benefit by using the technological capabilities of an ERP system. Champions are needed to effectively implement change programs and promote best practices. Let's look at how some companies have used ERP.

When selecting the ERP system to use, a study by the Aberdeen Group (www.aberdeen.com) reports that functionality, ease of use, and total cost of ownership (TCO) are the top three selection criteria. Total cost of ownership is the software cost, services cost, and three years of maintenance cost.

Service costs are for external professional ...