How much does ERP cost? The correct answer to this question is the same as that which applies to the length of the proverbial piece of string – it depends. The truth is, without an understanding of the scope of a proposed project and a host of other considerations it is not really possible to make a sensible estimate of cost. However, it is possible to identify the main ERP cost components. View an extract of the report and download the full report for free at: http://www.lumeniaconsulting.com/resources/reports-white-papers/how-much-does-erp-cost

1. How much does
ERP cost?
August 2013

2. Page 2 of 4
1. How Much Does ERP Cost?
The correct answer to this question is the same as that which applies to
the length of the proverbial piece of string – it depends. While there are
survey results available that provide benchmark ERP costs, for example
from Aberdeen Group, our experience at Lumenia has been that such
benchmarks need to be treated with a lot of caution. The number of
variables that can impact the cost of an ERP project is very large indeed,
and the costs of an individual project can vary wildly from the benchmarks.
The truth is, without an understanding of the scope of a proposed project and a host of other
considerations it is not really possible to make a sensible estimate of cost. However, it is
possible to identify the main ERP cost components and some of the drivers that influence
each.
2. Project Cost or Total Cost of Ownership (TCO)
The first thing to establish when considering ERP cost is whether one is discussing Project
Cost or Total Cost of Ownership (TCO). Project cost consists only of the cost components
incurred during the lifetime of the project, assumed for example to be eighteen months in the
diagram below. Note that for the sake of simplicity each component in the diagram below is
shown with equal cost – of course in reality, the cost of each component is likely to be different
and also to vary from project to project.
Cost
Internal Project Team
Maintenance
Internal Cost
Implementation
Software
External Cost
Infrastructure
Project Duration 18 Months
Time

3. Page 3 of 4
TCO on the other hand includes the Project Costs as well as the costs that will be incurred over
time in using the ERP system. Generally the time period used in TCO calculations is between 3
years and 5 years. The components of ERP TCO over a 4.5 year time period (project duration,
plus 3 full years) are shown graphically below.
Note this example assumes a single go-live point, with a clean break between project and
recurring costs. If there are a series of go-live events, as is common in phased ERP
implementations, there will usually be an overlap between project and recurring costs. While
this complicates the cost allocation process a little, it does not change the essential cost
components.
Internal Project
Cost
Maintenance
Support Team
Maintenance
Support Team
Maintenance
Support Team
Maintenance
Internal Cost
Implementation
Upgrades
Upgrades
Upgrades
Software
Enhancements
Enhancements
Enhancements
Infrastructure
Infrastructure
Infrastructure
Infrastructure
Project
Duration
18 Months
Year 1
Post
Go-Live
Year 2
Post
Go-Live
Year 3
Post
Go-Live
In the remainder of this article each of the cost elements
above will be explored in some more detail.
External
Cost
Time

4. Page 4 of 4
To view this full report please visit our website and register for free at:
http://www.lumeniaconsulting.com/resources/reports-white-papers
6.
About Lumenia
Lumenia is a leading independent ERP consulting organisation and
is not aligned with any ERP or other vendor of business software.
We provide objective advice and experienced project resources to organisations
that are planning to upgrade or change their ERP systems. Specifically, we provide
services in the following areas:
›
›
›
›
›
›
ERP strategy development
ERP product and vendor selection
ERP project management
ERP change management
ERP data migration management
ERP systems validation
We have offices in Ireland and the UK and work globally with many of the world’s leading
companies.
For more information, please contact Lumenia at:
Lumenia Consulting Ireland (HQ)
Lumenia Consulting UK
Parkmore Business Park West
Galway, Ireland
T: +353 91 746940
E: info@lumeniaconsulting.com
71-75 Shelton Street, Covent Garden
London, UK, WC2H 9BP
T: +44 207 4708766
E: info@lumeniaconsulting.com