In today’s technology world ERP contracts and prices are becoming very complex. So if you are looking for an ERP system for your business or evaluating new software you might want to consider some of the inputs reviewed on this article. Few of them are critical and may reflect the whole project in means of implementation and budget.
These inputs may also influence future relations with your vendor. In terms of costs the right negotiation may save you hundreds or thousands of dollars in software licenses, maintenance, upgrade, service and technical consulting costs. Let us begin.
Total Cost of ownership
Now here is long run perspective that might save you thousands of dollars. Unlike purchasing something tangible like a truck or a copy machine, the ERP system has many hidden costs.
Considering the TCO will present you with a transparent and fair comparison of different proposals. This subject is complicated. I refer you to the next resource for more information total owner costs.
Licenses
Software licensing is one of main profits of the vendor. This is where the vendor earns most of the money. How does ERP licensing work? The software is typically not bought or sold; it will be licensed for use. The Licenses are sold to a company for a particular computer or number of users.
The terms of using the license vary from one vendor to the other. A license can be sold as perpetual – one pays for it once and may use the application forever. But most likely it would be offered with a maintenance contract – a recurring cost that provides both technical support and periodical maintenance such as upgrades.
The catch is that you will need to renew the licenses each year and that costs. And so the vendor profits each year from the licenses. If it is good software and the customers are satisfied – they hang on to it and renew the software each year. And the licensing is one big potential area of savings.
You should make sure that you are not getting over-licensed on your ERP software. Which parameters affect the cost of licenses?
- Number of users
- Modules that you are allowed to use
- Maintenance and service after implementation (once the project is completed)
Negotiate a long term license deal. Bear in mind that you can always extend your licenses.
Support and Training
This is also a considerable issue that costs. How do you plan to manange the support and trainings during the project and the implementation? Who is repsonsible fort the trainings? You or the vendor?
The most effective method that I think of is to adopt the next tactic; the vendor will train several key users and the key users will train the end users. Training on large scale tend to last longer and thus generate more costs.
Another aspect of training is the documtation that will be handed over. There are three levels of documentation – the process description (the organisatorical process), the process diagram (ERP process) and the work instruciton – instrucitons of how to operate the system. you Should inssist on receiving appropriate and sfficient dokumentation.
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