Erp Sap

ERP is widely perceived as a boon to companies especially the small and medium sized ones as it helps them manage their business processes more effectively. However, there are certain blocks in the minds of the customer relating to its implementation and installation. These include the fear of employee attrition by dispensing the need for human resources, suitability to various kinds of business and the choice of the package itself. However the greatest challenge seems to be the cost aspect.

Many businessmen have their own doubts about the actual cost of ERP and whether huge costs are actually justified. So they wonder if it is indeed prudent to give the go ahead for ERP implementation. This article tries to give an insight into the value for cost factor of the ERP software application.

The first fact to be kept in mind in the implementation of the ERP package is that the acquisition amount spent is never an expense. It is actually an investment that will reap benefits in the near future. The investment is indeed is a high risk one but at the same time is coupled with the high reward aspect. The investment ensures better productivity, wiser financial management, inventory management etc and also results in higher profitability and greater market share.

The up-front installation cost is actually expensive for companies. It is higher than the cost involved in the installation of many other commercial software applications. But the cost has to be analysed in terms of the benefits offered in the long run and a cost benefit analysis has to be carried out and compared with the option of non-implementation of the software. Thus the general answer to the cost question is that looking at the expense involved in the ERP implementation is more a view of only the risks and not the rewards associated with the package.

It has to be agreed that the cost justification for the implementation of ERP software applications cannot be easily done as the calculations of return on investment are not direct. However, the case studies of various companies, small and large, can be studied to know the impact of the software implementation. Microsoft, the world's biggest software company declared that the return on investment of an ERP package can be seen in the form of better performance is just two years.

The better performance can be categorically assured because the organizations get the ability to handle huge business transactions as the processing of every transaction is done with great speed and accuracy. Moreover, customer response is also known and interpreted faster enabling changes wherever necessary. Therefore customer satisfaction is guaranteed. This results in an increase in sales and orders execution. The goals of the organization can now be achieved faster than otherwise.

Thus ERP cost is not an expense but a useful investment that results in the company becoming a better entity within a short span!