DISCOVER HOW TO CALCULATE ERP TOTAL COST OF OWNERSHIP (TCO)
Determining the total cost of ownership for an enterprise resources planning (ERP) system is challenging.
Vendors have varied pricing models for system and user license fees. Costs to install required hardware, implement the system, and maintain infrastructure add to the total costs. Other factors, such as internal costs, industry variations, project management, integration, and multi-company implementations, must also be considered.
Traditional ERP applications are licensed perpetually, meaning that companies purchase the software outright with annual maintenance and support plans providing access to bug fixes, new releases, and technical support.
Modern cloud ERP applications are hosted online and licensed annually. They offer a much lower total cost of ownership by eliminating costly infrastructure and system administration. Further, cloud ERP software subscriptions include maintenance and support and are easier to deploy.
User license fees also vary across ERP platforms. Some publishers charge fees for concurrent users while others license their software by named user, and others still use hybrid user license strategies. Costs for users contribute significantly to the overall system costs.
It is imperative that companies understand the total cost of ownership for their ERP system. TCO is used to calculate the return on investment (ROI) possible with the new business application based on estimated cost savings from improved efficiency, reductions in technology licensing, and other factors.
This eBook helps business leaders calculate the total cost of ownership for ERP applications based on independent analysis from leading industry analysts and other expert sources.