Sample Term Paper

The Total Cost of Ownership (TCO) is one of most significant non-technical factor that is considered when making a decision on ERP.  The core idea behind measuring the TCO is that the spending on an ERP does not simply end when its implementation is completed. Rather the initial expenditure, which contains consultancy fee, software licensing fee, customization cost, hardware cost and training cost form only a portion of the total cost that is required to implement and sustain an ERP for years.

TCO provides an approximation of all direct as well as indirect costs that can be associated with the lifecycle of an ERP venture which includes the implementation of the system, its operation as well as ultimate replacement of the system. This usually involves making assumptions about the future and simulation of different scenarios to arrive at alternative cost estimates. TCO supports intelligent decisions about the total cost of an ERP project at its start, and then helps in anticipating and managing the cost during the lifecycle (West and Daigle 2004).

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