Are you considering implementing new ERP software in your construction company? If yes, you might be wondering how much it will cost. Finding the total cost of ERP ownership can be tricky. But it’s the key to determining whether you have the right budget to replace your existing ERP system.
However, when performing an ERP cost calculation, many often overlook the most obvious costs of buying the solution or the ROI it can offer. There are several types of costs that you must consider to determine the true cost of implementing a new ERP Software for Construction Industry.
This article will guide you through the process of estimating ERP’s total cost of ownership (TCO).
Estimating Direct ERP Costs
- Software Costs
It includes annual maintenance, support fees, and license fees. All these costs vary depending on the size and complexity of your construction company. In addition, you must factor in the cost of customization, additional modules, or add-ons you need in ERP to support your business processes.
- Implementation Costs
ERP implementation costs include planning, project management, and deployment expenses. Additionally, this cost category includes hardware or infrastructure upgrades.
First, identify the scope of ERP implementation in your construction organization. What modules, features, and functionalities should your ERP solution have? Do you want AI in your ERP system? Next, determine the internal resources and third parties the ERP requires while estimating the project timeline.
Estimating Indirect Costs
- Support and Maintenance Costs
These are ongoing expenses that a user needs to pay to keep the ERP system running smoothly. It’s worth calling your vendor for assistance if your system needs technical support, software updates, or bug fixes. While the support and maintenance costs vary depending on the vendor and the complexity of ERP, you can get an estimate by asking for quotes from vendors.
You can minimize support and maintenance costs by investing in ongoing system monitoring and optimization to ensure your ERP meets your business’s changing needs.
- Organizational Change Management Costs
Many construction companies often overlook organizational change management (OCM). Here OCM involves preparing employees for the changes that can occur while implementing the ERP system. The OCM cost a company might incur are the expenses related to ongoing end-user training, communication, and resistance management.
The best way to estimate organizational change management costs is to understand the scope of change. All you need to do is identify the areas of your company that could be impacted by the new ERP software and understand individual role and responsibility changes. Next, determine the resources required to staff your change management team and support them. It can include in-house staff and external consultants.
Start planning OCM activities early and engage employees in the ERP implementation process to reduce OCM costs.
- Data Conversion Costs
Data conversion involves transferring data from existing systems into the new construction ERP system. During this process, you need to conduct multiple activities, including data analysis, mapping, cleansing, and migration.
Data conversion can be a complex task and, thus, might require the assistance of a professional external consultant. Therefore, consulting fee is another consideration for estimating the total cost of ownership. Make sure to develop a comprehensive data conversion plan to minimize these costs.
- Integration Costs
Integrating construction-specific ERP systems with other existing systems in the company can be expensive, especially with a complex IT infrastructure. You might plan to integrate your ERP system with your company’s software and hardware systems or any other third-party applications. As a result, you should develop custom interfaces and data integration plans for effectively completing integration projects.
The most helpful way to minimize integration costs is to select a vendor or system integrator experienced in integrating ERP with systems installed in your construction organization.
If you want to carefully manage the ERP implementation project with a reduced total cost of ownership (TOC), consider all the above-discussed factors- not for the short term but over the system’s expected life.
Once you are done estimating the TOC of construction erp software in India, next, estimate the tangible and intangible business benefits you expect to realize in the future. It will help you calculate an accurate return on Investment (ROI). Furthermore, work with a professional ERP implementation consultant to minimize TOC.