What is the Total Cost of Ownership (TCO) of an ERP Implementation?

Just thinking about converting your software platform is enough to create feelings of unease.  There are many considerations such as:

  • Will it be worth the investment?
  • How long will the business be disrupted?
  • What will happen to our data?

And of course, one of the most important questions to ask is, “What will the total cost of the change be?”

Total cost of ownershipTotal Cost of Ownership, or “TCO,” is a financial estimate calculated to help product buyers and stakeholders consider a new software solution’s direct and indirect costs.  TCO goes beyond the “sticker price” of a software solution to understand all the associated costs of implementing a particular system.  Experienced consultants can help you identify hundreds of details about potential costs that you might not otherwise know about.

One of the first choices a company needs to make regarding new software is whether or not the software will reside on its internal servers or if it will be hosted at the vendor and accessed via the internet.  Cloud-based solutions (a.k.a. “Software as a Service” or “SaaS”) has the advantage of being managed by the vendor, thus reducing the company’s cost for hardware and IT staffing.  On the other hand, on-premises solutions have a more significant upfront purchase cost and require ongoing internal IT staff maintenance but do not rely on the quality of internet connectivity to operate, and they are often more customizable.  The choice of structure will impact the total cost of ownership in several ways.

Below are some of the costs a company should review to calculate the Total Cost of Ownership of an ERP Implementation:

Cloud-based solutions (SaaS) On-premises solutions
Description The software vendor hosts these systems.  They are responsible for ongoing maintenance and updates.  Your data is residing on their network, and you access the software via the internet. In this scenario, you purchase the software and install it on your server.  Your IT team is responsible for ongoing maintenance and upgrades.  Your data is on your server, and you are responsible for backing it up.
Platform Costs Ongoing Subscription Licenses

Telecommunications Infrastructure and Charges

Computer Terminals, Printers, Scanners

Software Purchase Cost

Servers and Processors

Network and Wiring

Computer Terminals, Printers, Scanners

IT Team Labor

Other Application Costs These are costs associated with other software you will need to run the ERP effectively.  For example, Microsoft Outlook or a specific reporting software solution.
Implementation Costs Software Implementation Fee

Software Company’s Training Packages

Travel and Lodging Associated with Training

Configuration Fees

Data migration Charges

Staff Labor for System Testing and Training

Carrying Costs IT Team Labor to Test Upgrades and Patches

Replacement Hardware (mostly terminals)

IT Team Labor for Maintenance and Installation of Security Patches and Routine Upgrades

Purchase Cost of Major Upgrades

Replacement Hardware (Servers, Processors, Terminals)

Decommissioning Costs The cost of getting your data from a server hosted by the previous vendor and archiving it to a cloud data repository. The cost to maintain a backup of your historical data from the previous software onto a secure server.

Ready to look at new ERP solutions for your company?  WEnd Consulting can help!

At WEnd Consulting, we’re dedicated to helping companies in the petroleum and agriculture industries to adopt technology that will boost their bottom lines.  We can help you streamline processes and increase accessibility to data to help your team members more easily achieve strategic goals.  Our team is comprised of individuals who spent decades in the industry and are eager to help you analyze your current technology and learn about options that will make your company more successful.  Contact us today, and let’s build a plan to reach success.

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