Costs and Benefits Associated with ERP Systems - Advanced Accounting Information systems - Essay Example

P.Regardless of the reason that has contributed to need of searching a new ERP, the fundamental question to be kept in mind is how the ERP will cost (Busco et al., 2007). The cost of an ERP varies depending on different factors. These factors include the size of the company; type of solution needed for instance the more specialized the solution is the pricier the ERP will be. The needed resources also contributes to the decision to be made regarding the ERP.The more external resources are the more costlier the ERP is.

The level of customization is also an a factor determining the cost of an ERP (Nixon, 2012). There is the purchase cost and the licensing cost. When an ERP is purchased, licenses for the Database Management System need to be bought separately. Often, the licenses are excluded in purchase price of the software since it is distinct product developed by a different company. There are two types of users’ license in the ERP; the named user and parallel operator. Respective worker has to require an authorization to be able to use the software in the named user licensing.

In a parallel user licensing, there has to be a password available to each connected user (Li, 2011). There are also infrastructure related costs. The infrastructure cost incorporates all the required hardware to ride the ERP. However, this will fluctuate for each company, but the following should be included irrespective of the company. Firstly, there is server infrastructure cost, the cost of storage, the cost of backups and new desktop computers, or the computers that require upgrading. The infrastructure costs are responsible for about ten to twenty of an ERP implementation project (Li, 2011).

There are also human resources. Human resources accounts for the greatest ERP implementation budget. Consultant costs and the employees’ wages consume more than fifty percent of the total ERP cost. Internal resources cost is also a cost related to ERP. The wages of employees should cater