Criteria for choosing a cost-effective ERP

There are certain criteria that determine the cost-effectiveness of an ERP system.

Business requirements – An ERP system gives the benefit to choose the functions that the business needs and ignore the other ones. No business needs to include all the features in the software unless it requires every one of them. This could lower the cost and ensures effective spending.

One-time purchase – It is very wise to choose a system that follows the one-time purchase model. All the business needs to bear is the maintenance cost which could be paid annually, quarterly, or even monthly, depending on the client.

Reduce excessive customizations – Too many customizations would eventually raise the cost of the overall implementation.

Future scalability – It would be wise to choose software that could able to scale in the near future. This would not be cost-effective in the initial stages but as time changes, the cost of updating the software can be ignored. Cloud based ERP software could be a very good option in this situation. The software providers ensure timely updates so that the business does not need to worry about them. Apart from that, the updates are all included in the package so there will not be any further charges for the updating from the provider’s end.

ROI – Probably the most important reason why a business is investing in software is that it wants a higher ROI. So, while choosing the software, it is important to analyze beforehand how much returns can be estimated from the software.

Inevitable charges that the business has to incur while purchasing ERP software

While certain charges can be avoided while purchasing the software, as mentioned earlier, however, there are then few charges that cannot be avoided.

Here is the list of those inevitable charges that the business will incur while implementing an ERP solution:

Personnel cost – Unless the business is using a cloud ERP system, all other ERP needs to be maintained and run by the business. Hence, the company needs to hire IT personnel which would incur a hiring cost. In the case of a cloud system, the management and the operations are maintained from the vendor end hence the business does not need to worry about the functioning.

Training – When the business is hiring personnel for the new technology, training has to be provided which will be another cost that is unavoidable. Unless proper training is given, it would be difficult and time taking for the employees to operate the software through trial and error methods.

Testing – Additional testing applications are needed for the testing of the operations which is yet again another cost to incur. Real-time testing is important to check how the module is working and that would eventually require resources and cash.

Customization – Customization cost is something that every software user has to go through. A different business house requires a different module for the software and this comes with a price. The more customization the more will be the cost.

Maintenance – Whether it's a cloud system or On-Premise ERP, maintenance cost is something that every company needs to go through. For cloud software, a maintenance charge needs to be paid quarterly or annually depending on the plan while for on-premise, the maintenance expense will be needed as and when required.

Is there a way to cut down the ERP cost?

There is! Money matters and when a business is spending unnecessarily, it hurts. Hence, there are certain ways which are listed below, that can cut down some of the costs that the business could incur.

Choosing a seller with no hidden cost could provide transparency and clarity.
Preparation of a cost estimate and moving forward strategically.
Unexpected expenditures from changes should not be ignored.
Proper market research before choosing the software is very necessary.

Conclusion

Choosing the right ERP is very important as apart from the functionalities, a high amount of cost is also involved. Businesses need to ascertain the right price for the software before paying. Mentioned above are the various criteria and ways that a business can check on the cost of ERP software. However, there are certain costs that cannot be avoided hence the enterprise need to have a well-calculated budget for the purchase of the software. To conclude, choosing a cloud ERP is perhaps the best decision for any business, where the cost would be comparatively much lesser than any other version of ERP. Moreover, a cloud version would add efficiency and multiple other benefits that would enhance productivity and the right utilization of time.

Author’s note

The author of the article, tries to highlight the amount an ERP system costs in India. He has also given detailed writing of the various costs involved in the implementation and installation of the system. He concludes with the point, for any business, the best version of kahankir chela ERP would be a cloud based ERP, which would lower the cost and provides efficiency in productivity.