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Tips To Keep ERP Maintenance Costs In Check

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  • 1. ManagementTips To KeepERP MaintenanceCosts In CheckERP system implementation and itssubsequent maintenance costs, canbog down any organisation, especiallySMEs that run on tight budgets.But what if you knew how to tamethese expenses and benefit from thetechnology. Read on, to discover somebest practices... Vandana Sharma and Onkar Pandey BenefIT BureauF or any organisation with implementation costs of running an companies should do a proper ambitions to scale up and get ERP system. Here are a few insights assessment of their needs. The ahead of the competition, that emerged from our discussions: management should consider the prosdeploying an ERP system to automate and cons before deciding whether itits business functions becomes Don’t go by perceptions. Try IT should hire or buy an ERP solution.a necessity. But often, decision N Varadarajan, senior general In other words, does it need an on-makers have the notion that an manager—IT, Madras Cements, says: demand or an on-premise ERP model?ERP system is a high maintenance, “I don’t agree with the perception that Both have their advantages.costly affair. This perception is often it (ERP) is a costly affair. If we are sure While worries of implementation,based on their observation of other about our requirements, are thorough upgradation and the cost of an internalfirms that complain of overriding about our business processes and IT team can be avoided in the case of anERP maintenance expenses. Hence take sufficient care during the initial on-demand system suited to the needsmany firms tend to be wary of modelling, I think we can reduce of small firms with limited budgets;implementing an ERP system. the subsequent maintenance costs.” an on-premise system, though costly, But refraining from ERP adoption Sharanu Shirol, senior project manager, will serve a large company’s needs,because of recurring costs is not a TeamLease Services, seconds the which usually involve unique businesssolution, experts observe. There thought and adds that maintaining an processes that require a customisedare some best practices that can ERP system may seem costly but these ERP solution.help you to control overheads like expenses should be weighed against It’s not that you buy an ERP systemmaintenance costs. the benefits of an ERP system, as often and your worries are over; it’s a long- BenefIT spoke to a cross section the ERP system pays for itself. term marriage. It needs regular upkeep.of stakeholders—from ERP vendors So, how does the cost matrix of an ERPto users—to understand the best On-demand or on-premise? system stack up? What are the price-practices that can help curb the post Before going in for an ERP package, pitfalls a company needs to be aware of?10 / October 2010 / BenefIT
  • 2. ERP Special SeriesRemember: IT costs do not Best practices to tame ERPcomprise just the AMC costsAshok Dash, general manager, Here are a few ways to lower, if notImplementation and Support - India entirely avoid, maintenance costs:Geography, Ramco Systems, explains Select an ERP system after carefulthat there are many aspects to the evaluation: Choosing an ERP solutioncost of maintaining an ERP “An . is a big decision for any company.ERP system is a complex function. While an ERP system’s failure may Sharanu Shirol,Other than the annual maintenance senior project manager, lead to huge losses, its success can TeamLease Servicescosts (AMC) paid to the vendor, the help an organisation enjoy a jumporganisation needs to evaluate thecost of the IT infrastructure required “The organisation in revenues. Hence, it is critical to select ERP software (whether an on-to keep the ERP system running like should focus on what demand or on-premise solution) thata smooth and well-oiled machine. it wants to achieve eventually doesn’t end up becoming aThis would mean hardware upgrade with the ERP solution, burden to the organisation.costs, system software upgrade costs;and the costs involved in maintaining before going ahead Shirol suggests, “The organisation should focus on what it wants totrained manpower to keep the with the process of achieve with the ERP solution, beforeoverall system running. This is often implementation.” going ahead with the process ofoverlooked, and one tends to only implementation.”look at the AMC charges proposed by once the ERP system gets fine Apart from this, an organisationthe vendor.” tuned. wishing to minimise maintenance 2. The cost of customisation: costs should most certainly opt for anThen what should one As the ERP system is put into on-demand model as it allows you toexpect with regard to ERP operation, users may request concentrate on your core business,maintenance costs? some customisation that is adds Dash. “The responsibility ofThe ERP implementation cost essential for particular business database administration, updates,varies according to the complexity processes. Sometimes, even a infrastructure management, andof the system intalled. It costs less change in government policies, associated costs is entirely taken carefor basic modules such as finance, e.g, a change in the excise duty of by the vendor. The organisation cansales and purchase and inventory; structure, may require some also leverage online updates, which isand more for modules such as additional customisation. These not possible in an on-premise model,distribution, logistics, HR and payroll, requirements are ad hoc in nature owing to the logistics involved inmanagement accounting and plant and may continue to recur. applying updates/patches in a batchmaintenance. 3. Performance monitoring and mode,” he adds. Primarily, the cost of running an tuning costs: During the initial Keep an eye on futureERP system can be divided into three testing phase, only a few people requirements: Organisations needgroups: test the system and some to implement an ERP solution that1. Bug fixing: This is the cost problems may not show up at all, not only addresses the challenges involved in fixing bugs and giving the impression that all is of today, but is also in tune with the errors that were not detected working well. When all the users requirements of tomorrow. This calls and corrected during the begin to work on the system and for determining clear short-term and implementation phase. Normally, all modules are in operation, long-term goals, well in advance, these taper out when the ERP performance may be an issue. feels Shirol. Dash agrees and says, system is used by all stakeholders Users may complain about “ERP applications should be aligned (as opposed to just the testers slowdowns and blocks. This may with business imperatives, in order to during the implementation require tweaks in the ERP system, maximise the potential gains. In the phase). And hence the costs too which in turn, leads to higher same vein, companies should keep start to diminish in a year or so, costs. medium- to long-term objectives in BenefIT / October 2010 / 11
  • 3. Managementmind at all times, and avoid short-sighted decisions.” For instance, if an organisationgrows and sets up a new plant orexpands its distribution channel, thatmay also entail a change or additionin people and processes. In that case,the software also needs to be flexible Ashok Dash, general Dinesh Victor, managingto allow for this kind of change, to manager, Implementation director, SIP Academy and Support - Indiadrive standardisation and enable this Geography, Ramco Systemsscaling up. If the ERP system doesn’t “In our company,have the capability to accommodate “The organisation needs many processes werechanges and upgrades, adding new to evaluate the cost of codified, re-engineeredcapabilities to the system after everynew development in the company the IT infrastructure and systematised, towill lead to cost escalation. required to keep the ensure that they fitted Don’t depend on vendors alone: ERP system running in with the ERP systemMaintenance activities can be like a well-oiled requirements.”outsourced to the vendor in casethe ERP system is of the on-demand machine.”type. In such a case, the companyneeds to pay only for an AMC. But following the best testing techniques compare it to the old practices andfor an on-premise ERP system, it is for standardising maintenance demand customisation. This may leadbest to have an internal IT team to procedures—all processes need to to additional costs.set up a self-sustaining system and be thoroughly reviewed to lower Thus, to ensure widespread ERPgradually wean the company away maintenance costs. adoption across the organisation, andfrom over-dependence on the vendor The involvement of the top its eventual success, it is importantfor support. This route may lead to management: It needs a leader’s to involve both the business andan additional strain on the users to vision to make ERP implementation IT professionals throughout thebegin with, but over time, this may successful. When there is a lack of process of implementation. This willhelp in attaining self-sufficiency a push from the top management make them feel more comfortablelot faster and minimise overheads and when ERP implementation is with the application and workflow,in the long run.Varadarajan agrees viewed as just an IT initiative and not post implementation, and help inand lists the practices that have a key organisational goal, then the keeping a check on the maintenancehelped in controlling ERP costs at implementation often gets delayed. requirements of the ERP system.Madras Cements. “We have a trained ERP fitment issues arise, leading to A dedicated ERP operationsinternal IT team so we ourselves can more customisation and support team should be formed to take careundertake some customisation work, requirements, post implementation, of operational support and changerather than approach the vendor. and hence higher maintenance costs. management. Another team mustAt present, about 40 per cent of this Ensure that employees are monitor the performance of the ERPwork is handled by our in-house comfortable with the new system: It system and take corrective actionsresources,” he says. is important to motivate and train (clearing blocks, deadlocks, long Adopt a detailed approach: For employees to adapt to the new running processes, etc) in real time,an ERP system to remain profitable, a system. When the IT and business advises Varadarajan.methodical approach needs to be put users within the organisation are Don’t tweak the ERP system tooin place, keeping the whole ERP life not fully geared to or are unwilling much: Every business has its owncycle in view. Right from identifying to cooperate and work on the ERP nuances; but the more it standardisesimplementation requirements and system, they may find fault with its processes, the fitter it becomesselecting a suitable ERP solution, to the new system. They will tend to to sustain and achieve efficiencies12 / October 2010 / BenefIT
  • 4. ERP Special Seriesof returns, in the long run. Thus, it a must, not only for the successfulis always good to not customise the implementation of an ERP solutionsystem every now and then, unless but also for its long term success.there is a fundamental or logical need The ideal implementation partnerto modify/add to the system, such would have the domain expertise oras a change in laws or regulatory previous implementation experiencerequirements. in your specific vertical. Such an Dinesh Victor, managing director, implementation partner is likely to N Varadarajan, seniorSIP Academy, which deployed general manager—IT, have a better insight into business Madras CementsRamco’s OnDemand solution, says problems and may even have manythat in his company, many processes “We have a trained pre-built templates, which in turnwere codified, re-engineered and help speed up work and keep the longsystematised, to ensure that they internal IT team so we term customisation and maintenancefitted in with the ERP system ourselves can undertake costs in check.requirements. “Along with effecting some customisation ERP implementation is a greatprocess synchronisation, we alsoensured that individual user roles and work, rather than leap for any organisation. But if an ERP system is not handledresponsibilities were clearly defined, approach the vendor.” carefully, it may turn out be aas that is also an integral part of the painful experience —forcing youstandardisation process,” adds Victor. adopt the global business practices to spend further on maintainance. The practice of often modifying offered by the ERP systems and go in As discussed here, by being awareor customising the ERP system for fewer customisations. of the pitfalls and by adopting agilemay not only add to costs but may Choose the vendor with care: practices and measures to dealeventually lead to the ERP system’s Almost everyone with whom we with these challenges, businessesfailure, too. Dash agrees and advises spoke to on this subject, agreed that can keep the ERP maintenanceorganisations to be flexible enough to a good implementation partner is costs in check. Does Moving Various Business Functions2010 Edition That Work In Isolation, On To One Integrated ERP System Seem Like AnA Sneak Peek into the November Uphill Task? Check out easy tips to ensure smooth migration to ERP... ERP Special Series www.benefitmag.com A Business Minded Computer Magazine BenefIT / October 2010 / 13