ERP implementation involves huge financial investments that do not end with implementation. Therefore, it is essential for a proper analysis of the expenses that should include hidden costs, direct and indirect costs and Annual Maintenance Costs (AMC) of ERP software before fixing a deal. Selection of the right ERP software according to the requirement and financial strength of the organization is vital for successful running of the ERP. Proper cost analysis of ERP software will reduce the total cost of ownership (TCO) and provide high ROI (Return on Investment).
The annual maintenance cost of ERP software depends on a number of factors like hardware and software maintenance, number of users, renewal of licenses, server maintenance, updating, customization and inclusion of add-ons. Often, the organizations have to bear an AMC of about 20% of the total cost as this is essential to keep the ERP system upgraded according to the market demands.
Running a third party application may invite huge maintenance costs as the organization cannot refrain from updating. Moreover, it is not at all wise to reduce the annual maintenance cost as a step to reduce the IT expenses. An organization is able to use only 80% of the total ERP features provided, and there is always a need for further assistance. Again, old database and out dated servers do not fetch the desired benefits as the operating systems change frequently. The life cycle of every ERP system gets limited with its usage, and sometimes it becomes too expensive to replace the whole infrastructure based on market demands.
An organization cannot go without annual maintenance cost and rely on the old database and outdated software versions of the ERP expecting high growth margins. These are important factors that every organization has to factor in before going for ERP implementation. Organizations, able to harness the technological advancements paying optimal annual maintenance costs for ERP are sure to get higher ROI.
Nowadays many vendors include Annual Maintenance Cost with their ERP software. Therefore, the onus lies on the organization to analyze the current and future requirements wisely and negotiate an acceptable deal. This will optimize the Annual Maintenance Cost without hindering the business processes. Many organizations have succeeded in fixing the best deal through bargains with the vendors. Regular updating of the ERP is carried out by the vendors at a reasonable cost. The vendors are benefited as their earnings pour in uninterruptedly through these long term deals. In the competitive market, every organization is compelled to reach out for updated versions of ERP to keep things moving on expected lines.