Stats Watch: The real cost of that ERP upgrade

Where are the real costs of your ERP project? It depends if you're upgrading.

Where are the real costs of your ERP project? It depends if you're upgrading.

Forrester Research surveyed 36 large enterprises about the total cost of ownership for their ERP projects. When Forrester says large, it means huge -- the average implementation has cost $US48 million and most are not even two-thirds of the way through yet. But the way the costs are cut is instructive.

Labour is the real budget factor you can't escape. For an original implementation, labour averages 65% of the total project cost, rising to 76% for upgrades. Internal staff almost double as a percentage of costs, from 23% to 44%, when the implementation becomes an upgrade, as users rely more on IT staff, says Forrester (the ratio of staff to IT personnel was about 42:1). In turn, the money spent on consultants halves from 28% to 14%. Costs incurred through internal business staff rise slightly and hardware/infrastructure stays at about 17%. Software licence fees typically halve from 22% to 11% between implementation and upgrade.

Speaking of licensing, it doesn't go away. Some 51% say their annual ERP maintenance fee is 16% to 18% of the initial licence cost. All but 6% say it's 21% or lower. But Forrester notes that half of its respondents extended their use of the product "footprint" during an upgrade, meaning new fees had to be paid.

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