The “Hidden Costs” of ERP

Addressing the issue of Total Cost of Ownership of an ERP project means spelling out some of the "hidden costs" that are sometimes overlooked or minimized when a vendor is trying to sell you their ERP or satellite software solution. Don't be fooled. Those hidden costs can add up and need to be taken into consideration.

The leading expenditures on ERP projects are (listed in order of magnitude):

• Internal resources
• External (consulting) services
• Software (licenses and maintenance)

Some of the factors that affect these expenses are the size of the company, number of ERP users, and the depth and breadth of functionality. The true total cost of the ERP system’s deployment, however, is usually unclear during the evaluation process, because these expenditures are not readily apparent until they come up over the lifecycle of the project. Some (but not all) of these "unexpected" or "hidden" costs can include:

• Data conversion and improvement (from existing systems)
• Add-ons (external components), private customizations, satellite utilities (web sites, BI, BPM, Document Management, mail, etc.), their interfaces to the main ERP application and their migration through ERP upgrades (service packs and advanced versions).
• Identity management and security enforcement

All of these hidden costs take close scrutiny and time to discover

One of the bigger hidden costs, or one not always adequately factored into the equation, is the expense item of IT (or the IT staff/internal resources). Data collected for 2004-2007
on companies with 500-999 employees in the U.K by Kew Associates clearly show that annual spending on IT staff is larger by a factor of 4 than any other IT expense item. What are the IT people doing? They make a host of applications tick, including the ERP system and all satellite applications. An ERP system that can incorporate as many applications as possible will minimize the costs involved in maintaining a large IT staff and the hours spent on dealing with multiple applications, not to mention the costs of the applications themselves.

Priority Functionality & Satellite Applications

Priority's functionality covers a broad range of services, making many company's satellite applications redundant.

Following is an overview of some of the primary and satellite functionality included in Priority:

• SCM – Supply Chain Management
• CRM – Customer Relations Management
• WMS – Warehouse Management System
• POS – Point of Sale
• PM – Project Management
• PLM – Product Lifecycle Management and Document Management
• HR – Human Resources Management
• BI – Business Intelligence with built-in Key Performance Indicators and Slice & Dice capabilities
• BPM – Business Process Management (work flows and business rules)
• Shared Calendar, Project Gantt, Work Order Scheduling Chart

The availability of the last three items as out-of-the-box, fully integrated utilities is of particular note. There are plenty of good quality, low-priced, very specific software tools out there in the market. What is costly is their integration with an ERP application. With Priority, targeted functionality is built into the application. So the built-in BPM utility for example, with its intuitive user-friendly graphical interface, is linked to numerous Priority "Entities" and "Documents". In using the BPM tools, you can construct business rules (a sales order over a certain amount is automatically forwarded to the manager, for example) and maintain them as needed (if a new position in a company is created, or the rules need to change). Further, attention can be paid to the details of sequences of events for each record type (service call, sales order, etc.), which can all be modified if required.

Priority also enables full connectivity to users’ local MS-Office, including synchronization with MS Outlook. Outlook (with Exchange or Google synchronization) serves as Priority's mailing utility. For example, an alert generated in one of Priority's BPM processes will be forwarded through Outlook (or SMTP for system events) and logged in the "Sent Items" library for reference. MS-Outlook also serves as the primary tool for working offline and synchronizing with Priority later.

If required, Priority facilitates integration with legacy or custom applications with its Service Oriented Architecture (SOA).

Other ERP Costs to be Considered

• Installation Cost
  Installation of traditional ERP products usually takes months. Priority 13 WPF provides an out-of-the box configuration of Eshbel’s comprehensive end-to-end, completely integrated ERP solution. The use of Microsoft's advanced development tool, .NET Framework 3.5, enables remote connection to the server via Internet Explorer and thus, in setting a few preliminary conditions, Priority 13 WPF can be installed with a few clicks of the mouse (really, we mean it).



• Ease of Implementation & Adoption Rate
  
  A speedy implementation cycle lowers the TCO, but the truth is that there is no easy road for implementation. It doesn’t matter if your solution is SaaS, on-demand or on-premise since the time and cost of implementation depends on the depth and functionality of the chosen system, and the effectiveness of its adoption by the workforce. Implementation has several components. Following are some examples of Priority’s advantages on this issue:
• Migration of legacy data into a new ERP system often significantly impedes the progress of ERP projects. Priority provides built-in user-level configuration utilities for data migration, eliminating the burden of writing customized conversion routines.
• Eshbel’s Standard Operating Procedures (SOP), training tools and help wizards, which are incorporated in the application, reduce implementation time by providing ready-made templates, step-by-step instruction and more, all of which empower the end users.
• Rich documentation and help tools (including the SDK and SOA technology) make administration, customization and configuration tasks timely and therefore less costly.


• Software Costs
  
  Special pricing plans offer a wide array of convenient flexible options, from fully hosted SaaS ERP to per-user/per-month to flat fee on-site installation:
  • Choosing the fully hosted on-demand/SaaS ERP plan not only sets a low-cost fee per user per month, but can help you save on the cost of servers, operating systems, middleware, databases and accompanying administration. Using our hosting services will ensure that your information is available and protected 24/7, and will save money otherwise
  spent on upgrades, maintenance and security.
  • With the "Per-User/Per-Month" on-site installation you can start out small, using a few of the modules, and expand to use additional modules as you need them. Let the use of the software grow with the features you gradually employ and the number of users within the organization that progressively move over to using Priority.
  • For companies that have existing infrastructure, or that need to keep the application "in-house", our one time flat-fee (plus annual user's license charge) on-site installation is the ultimate solution.
  
  
• Private Customizations
  
  User-level design and configuration tools help Priority customers keep private customizations to an absolute minimum. With the appropriate permission levels, Priority users can (on a individual, group or corporate level) control the layout of:
  • A new graphical user interface (UI) for custom report generators enables the quick and easy definition of reports using drag & drop capabilities of desired columns to be displayed. It also allows users to create tabular reports, select columns for display in a report header, copy existing reports, run new reports directly from the report generator and link newly created reports to a Priority menu.

Conclusion

Eshbel doesn't want to hide these costs. They are an important part of the equation and affect the TCO of any ERP solution. The challenge is to choose an ERP solution that not only fits your business requirements, but can help you address and minimize even these "hidden costs."

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