Economics of ERP
We agree – traditional product based ERP is a high risk investment. It is NOT the cost of ERP alone that keeps SMEs away from ERP, but a high risk associated with it.
ERP implementation today is considered to be a “Big Ticket Investment”. Considerable amount of money is required to first purchase an ERP package. Roughly three times the cost of package is spent on its configuration and implementation. Not to mention, other expenses related with hardware, networking, user training etc.
After spending tons of money, if it does not work, there is no residual value left. Moreover, a careful analysis of payment terms / advances by vendors would show that more than 90% of investment is made before any tangible benefits are realized. Note that before the ERP project goes ‘LIVE’, your company has already paid for everything including the efforts / expenses of ERP vendor. And almost always, all the problems start surfacing only when you use the product for your day-to-day activities.
ERP service model offers you a no-risk-low-investment solution. And the benefits start accruing to you on day one.
In ERP Services, You Do Not Invest In Making An ERP Run – You Only Pay For The Services Availed On A Monthly Basis.