; ERP Software Total Cost of Ownership _TCO_
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ERP Software Total Cost of Ownership _TCO_


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									Total cost of ownership begins with calculation of all direct and indirect costs
involved in all the processes of ERP software's life cycle starting from
implementation to replacement. Most of the time when it comes to ERP, total cost of
ownership is calculated as per cost of buying, implementation and IT infrastructure
required for running the software. This can be seriously misleading as TCO of ERP
software has many silent expenses which are evident after the implementation
  The best way to control total cost of ownership of ERP software is to take wise steps
right in the beginning, asses the cost those can be incurred in the start as well as
during its life cycle and keep those costs under control. For TCO analysis there are
five aspects of ERP life cycle which play a major role, these are acquisition,
implementation, operations, maintenance and replacement.
  Before implementation selection of proper ERP which suits to the need, size and
working style of the organization can keep TCO under control to a large extent.
Functional analysis of the company which can clearly and in detail depict the present
working, identify problem areas, chalk out the flaws in the functionality and identify
areas which can be corrected or improved with the use of IT, helps immensely in
proper ERP selection. The 鈥渁 s is 鈥?document of the organization helps in
matching the most suitable ERP, applying TCO with this, it brings down the cost
which is incurred by customization, purchasing of add on tools, training, hiring IT
manpower to install and make the software run without problems.
  Identifying cost involved in implementation process for calculating total cost of
ownership of ERP software is comparatively easy as this process involves mostly
direct costs. The cost of purchasing the software itself, servers, clients, peripherals,
networking infrastructure, software for support and maintenance are some of the costs
which can be calculated. If functional and technical analysis has been done by hiring
an external consultant then this cost is also added up in TCO analysis.
  Operations and maintenance are the two processes for which assessment of costs is
important as these phases of ERP software life cycle incur heavy costs on total cost of
ownership. Both of these phases of ERP life cycle are process and people oriented
hence it is difficult to assess hidden costs yet in these phases most of the indirect costs
reside and direct costs are shifted away. Staff training, inclusion of skilled and trained
IT team for internal support, use of most suitable implementation strategy, change
management, availability and cost of new upgrades and benchmarking of current
operations are few centers which shall be studied well to identify hidden costs in
operations and maintenance phases.
  Cost of replacement for total cost of ownership calculation of ERP software is
completely based on assumptions but can be done on hard facts by analyzing present
scenario. Some factors which may allow determination of approximate cost of
replacement or avoiding replacement are stability of the ERP vendor, technology of
the software, dependency on the vendor for future support and smooth functioning of
the ERP software, disaster management, recovery management and identification of
most suitable substitute of the ERP software can help in calculating much realistic
cost of replacement in total cost of ownership analysis.
 Read information about ERP Vendor Selection. Also know the ERP Software
Features. Read Microsoft Dynamics AX Review.

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