Hidden Costs Of ERP System That You Must Know

Organizations that adopt Enterprise Resource Planning or ERP package often fail to make estimate of various hidden costs of ERP. Such a mistake can turn well budgeted project into an over budgeted project, or it can sometime derail the entire implementation process. There are several hidden costs of ERP which are mentioned below.

1. Testing �� Every vendor would test the system before it goes live. The testing process can consume a great deal of time, since ERP system has to be linked with other software on a case-by-case basis. This process can get abated when employees of the organization run actual purchase orders instead of using fake data to test the ERP system.

2. Training �� A large number of organizations can underestimate what training sessions are going to cost them. The training sessions are extremely essential to help employees understand the new system. Training can be included in the hidden costs of ERP, because employees have to learn about the entire new system instead of learning about the different interface that are useful for them. Some employees would grasp the concept more quickly than others, and some would find it difficult to understand the new system, due to which training sessions would become lengthy and consume time as well as money.

3. Data Conversion �� Organizations would have to transfer data from old system to new ERP system. This process also consumes a great deal of time, since organizations would have to avoid putting unnecessary or outdated data in the new system. Some of the data might need to be modified to match the processes of new system.

4. Design of Business processes �� Implementation of an ERP system gives an opportunity to the organizations to create perfect business models for all the branches of the company. It is also a time-taking process that can be included in hidden costs of ERP implementation process.

5. Consultant �� It is quite useful for the organizations to hire an ERP consultant who can explain about the system. They can give good ideas to streamline the system and, provide full details about how the system works. It is a well known fact that, hiring an ERP consultant is expensive, so organizations will have to consider about their fees at the time of budget planning.

6. Backfilling �� Backfilling is a process in which organizations would have to hire temporary employees. The need arises when many employees are unavailable because of ERP implementation process. They would be busy in training session, or installing the new system, or testing system for issues. This is when organizations will have to hire temporary employees to fulfill duties of their permanent workers.

7. Travel expenses �� Travel costs are another category of hidden costs of ERP. The person in charge of installing new system will have to visit other branches and manufacturing units of the organization to set up the system. Travel expenses might not cost much, if the branches are located nearby, otherwise organizations would have to pay heavily for travel expenses.