Essay: TCO and Technical Consideration for ERP Selection

By | April 27, 2011

Sample Essay

In many implementation of ERP, the cost of maintaining the ERP greatly exceeds the initial cost. This is because of the fact that  the customers  of the ERP did not fully consider the capabilities of the ERP, and ended up spending extra in terms of software and hardware upgrade as well as for further customization due to change in business processes or in strategic goals (CFO Research Services 2009). This fact highlights the importance of technical consideration in ERP selection and shows that though technical features of an ERP that is cost-effective initially may be enough for the current need of an organization but would prove insufficient in the long run.

In this regard, there are three technical factors that play a major role in keeping the TCO of an ERP low. These factors are customizability of an ERP (Schragenheim 2004), its hardware support (Khosrowpour 2001) and its support for multiple languages and other internationalization features (Leon 2007).

ERP systems facilitate the integration of business processes, hence supporting the formation of a more uniform organisation. This standardization of the processes may or may not be beneficial for an organization, who might be using it customized processes to make it self competitive. Hence standardization in this regard may not only lead to failure of ERP implementation but could also result in business failure (Rau and  Sankar 2006). Since SMEs are small business organizations which mostly rely on customized processes suited to their market, budget and other requirements, an implementation of ERP in the same way it is done in the larger organization is not possible. Due to their constrained resources SMEs are required to consider such software which are best suited to their own business processes and require minimum BPR (Leon 2007).

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