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Benefits And Downfalls Of Enterprise Resource Planning

1415 words - 6 pages

Enterprise Resource Planning (ERP) system cost:
Enterprise Resource Planning (ERP) systems is framed for companies to make more efficient decision by improving data access. Unfortunately sometimes due to wrong decision of company about the maintenance cost of ERP leads them to huge financial loss (Fryling, & Adviser-Richardson 2010). ERP is an ongoing process so proper estimation is required for its implementation cost as well as recurring maintenance cost.
According to a research the success rate of implementing ERP is thirty three percent and it is also researched that around ninety percent of ERP implementation are over-budget (Martin, 1998). Apart from all this it is also marked ...view middle of the document...

So it also means that to meet that 30 percent requirement the companies may have to customize the software which in turn incurs cost. Higher the changes in software higher will be cost of implantation.

• Hardware: In some ERP projects it necessary to invest in like disk storage system, routers, network switches, security firewalls and etc. Companies have to be very careful while buying all necessary hardware because even if a single piece is missed, it may give birth to weak system and company may have to face failure (Anderson, 2011).

• Data Cleansing: Cleaning junk data from ERP system is important part of process as this in turn helps company to maintain quality data and increase the speed of system too. According to the study (Ferriss, 1998) “Canadian automotive insurers cheated the market with the help of bad data in company’s database. The study marked that in 1 such case many insurance companies lost $56000000. So from this case study we can conclude that how important it is to maintain quality of data.

• Training and Change Management: It is also seen that improper training to employees may lead to failure of ERP implementation. (Fryling, & Adviser-Richardson 2010). Educating the users regularly with the system updates again adds expenses to the ERP implementation process.

Case Study to understand ERP Implementation cost:

In many of the cases we have seen that ERP implementation has been big failure. Avis Europe Ltd is one of failure, where they implemented ERP project in the year of 2014 and the expense on implementation was $54.5 million and the very well known case of ERP failure relates to the collapse of US $5 billion(Maguire, Ojiako and Said, 2010). Whereas there many companies which earned lots of profit with ERP implementation, such as 7-Eleven Stores Pty Ltd, Coca Cola Bottling Co. And many more. So this section will be highlighting a case study of company named Omantel to understand the different element of ERP implementation cost and its positive and negative effects on company.

Oman Telecommunication (Omantel): It is a fixed line telephony company and has monopoly in Public switched telephone network. Omanantel is an old company and also has subsidiary company of mobile service. The approximate number of employees working in Omantel and its subsidiary company is 2600(Maguire, Ojiako and Said, 2010). While coming to profit part this company did well and so in the year 2006 its profit is of 80 Omani Rial (Omantel Financial Statements, 2006).

The company wanted adopt higher technology to have proper control over whole work flow(Al Wohaibi, 2006) and they also wanted to fulfil the requirements of national development which was identified in United Nations (ESCWA, 2003). Later in the year 2005 February Omantel and Oracle signed the project and which had to be completed within twelve months . But the ERP implementation process took 6 months more than it was decided. In the June 2006, this process was completed and it...

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