Odoo ERP Software Cost - Direct And Indirect Costs

Odoo ERP Software Cost – Direct And Indirect Costs

When any business desires to purchase a new ERP software, numerous considerations must be considered, some of which include ERP selection, functions, and customizations. Finally, the most essential expense is the direct and indirect cost of deploying any ERP solution. One of the primary reasons for making the selection on ERP software is cost.

ERP software costing encompasses both direct and indirect costs, from the purchase of software licenses to the completion of the deployment process. Some direct expenses are obviously visible in this process, whereas others are silent or buried, depending on the priority:

Customizations or the creation of additional features. In general, a half-finished ERP cost analysis would just cover the expenses to be made in purchasing software and hardware, although the overall cost of purchasing ERP goes considerably beyond these laid prices.

According to a 2020 survey, the average cost of ERP implementation is $15 million, ranging from $0.5 million to $300 million; nevertheless, the variables influencing the cost have not changed and are more or less the same as they were at the start. The cost of purchasing software and installing the hardware required to run the ERP are the two primary cost centers associated with ERP ownership. Aside from the purchase price, the costs of running the system, such as manpower, system software, acquiring software for security features and checking third-party incursion, license renewal fees, and so on, should be considered.

Direct costs: Costs that are directly tied to the processes and might be fixed or variable.
Indirect costs: Costs that are additional or extra costs to support a process, such as administrative fees.
Fixed costs: A fixed expense is one that cannot be reduced or increased. Fixed costs are expenses that do not alter in response to variations in output or sales volumes, but rather remain constant regardless of the amount of business activity.
Variable costs: A cost that fluctuates throughout the process. Consider labor charges.
Sunken costs: These are the costs incurred as a result of a process fault.

The implementation process entails various tasks, the most of which are now carried out with the support of external consultants, such as functional analysis of the organization to develop a 'as is' document. Similarly, for technical analysis and gap analysis, specialists or agencies are used to acquire the best results and independent judgment. These services are charged for, which raises the overall cost of ownership of the ERP. The man-hours spent by in-house staff to execute these activities are indirect costs in these processes; these expenses are commonly underestimated, but have a high priority influence on the total cost of ERP installation.
To provide adequate training, businesses must first invest a reasonable sum of money in hiring trainers or paying consultants who provide ERP training, then in hiring technical staff to support the ERP and training them according to the software, and finally in hiring or developing existing managers as ERP consultants for future needs. All of these factors contribute to the overall cost of ERP software.

The cost of tools and software required for integration with external entities, peerless ERP utilization, and integration with the current system also costs, and these prices vary depending on the breadth of deployment and the ERP software itself. Some ERP software may require a large number of these tools and applications, while others may not.
Conversion of Data
Another cost-involved task is data conversion, which varies based on the nature of the ERP and the format and media on which old data was stored. Only by combining all of these criteria can the exact cost of data conversion be determined, which can be fairly significant at times.

Testing of ERP components, performance, and user approval is a mandatory process that must be completed prior to going live, and this activity incurs a cost on the organization, increasing the total ERP ownership cost.

Conclusion: Odoo ERP Software Cost – Direct And Indirect Costs

According to the above fundamental points, some firms may spend more money on one process than others, but in order to calculate the actual and practical cost of ownership of ERP, all of these cost centers must be included.

ERP Cloud LLC, an Odoo Certified Partner, offers a variety of Odoo ERP services, including Odoo Implementation, Odoo Customization, and Odoo Integration, based on individual business requirements.

Our specialized team of Odoo professionals is ready to create and implement the best solutions for your businesses to achieve maximum outcomes in terms of leads, sales, and money.

Odoo, Moe Fawaz September 21, 2022
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