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The
Cost of ERP
We recently took a close look at ERP cost data for 107 separate
ERP applications from an ROI study we conducted. We then took
this data and referenced it with our CENTS studies that feed
our VirtualADVISOR cost estimator (representing 200 ERP cases).
These two studies combined gave us an interesting perspective
on the costs involved in purchased ERP applications.
The average purchase price for a single ERP application is
1.3 million, with the cost to implement averaging at 6.4 million.
The cost to implement is, on average, 5 times the purchase
price.
What about the cost to operate and maintain the applications?
Using the ERP study we found the average cost to operate was
1.1 times the cost of the software.
The VirtualADVISOR does not collect the cost to acquire the
application; it only collects data on operations. It shows
the application maintenance at 34% of the total cost to operate.
Using 24% of the purchase price for maintenance cost as backward
logic, ERP applications, would be at about 73% to operate.
Of course there could be some internal staff costs, as well
as fees, that would make it around 100%.
Using these different instruments we came to the same conclusion.
The right number for operations cost for an ERP application
seems to be book price or just below. A good range is between
90% and 100%. If people are below 100% they are doing a good
job. If they are higher than 100% they need to take a serious
look at their expenses.
Of course this all assumes a successful ERP implementation…
and we know from our CHAOS research that less then 10% of
ERP implementations actually succeed.
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