One of the most cited studies of the total cost of ownership (TCO) of ERP was completed by Meta Group in 2002. (Gartner acquired Meta Group in 2005.) This TCO study accounted for hardware, software, professional services and internal staff costs. Costs included initial installation and the two year period that followed, which is when the real costs of maintaining, upgrading and optimizing the system for your business are felt. Among the 63 companies surveyed—including small, medium and large companies in a range of industries—the average TCO was $15 million (the highest was $300 million and lowest was $400,000). While it’s difficult to draw a solid number from such a diverse range of companies and ERP efforts, Meta came up with one statistic that proves that ERP is expensive no matter what kind of company is using it. The TCO for a "heads-down" user over that period was a staggering $53,320.
Results from a 2007 Aberdeen Group survey of more than 1,680 manufacturing companies of all sizes found a correlation between the size of an ERP deployment and the total costs. Therefore, "as a company grows, the number of users goes up, along with the total cost of software and services," states the Aberdeen report. For example, a company with less than $50 million in revenue should expect to pay an average of $384,295 in total ERP costs, according to the survey results. A mid-market company with $50 million to $100 million in revenue can expect to pay (on average) just over a $1 million in total costs; a much bigger mid-market company, with $500 million to $1 billion in revenue, should expect to pay just over $3 million in total costs. And those companies with more than $1 billion in revenue can expect to pay, on average, nearly $6 million in total ERP costs.
“My company needs a cheaper but equally robust ERP. What are my options?”
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