1. Management
Tips To Keep
ERP Maintenance
Costs In Check
ERP system implementation and its
subsequent maintenance costs, can
bog down any organisation, especially
SMEs that run on tight budgets.
But what if you knew how to tame
these expenses and benefit from the
technology. Read on, to discover some
best practices...
Vandana Sharma and Onkar Pandey
BenefIT Bureau
F
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 pros
deploying an ERP system to automate and cons before deciding whether it
its 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 internal
firms that complain of overriding about our business processes and IT team can be avoided in the case of an
ERP maintenance expenses. Hence take sufficient care during the initial on-demand system suited to the needs
many 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 business
solution, experts observe. There thought and adds that maintaining an processes that require a customised
are 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 system
maintenance 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 ERP
to 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 Series
Remember: IT costs do not Best practices to tame ERP
comprise just the AMC costs
Ashok Dash, general manager, Here are a few ways to lower, if not
Implementation and Support - India entirely avoid, maintenance costs:
Geography, Ramco Systems, explains Select an ERP system after careful
that there are many aspects to the evaluation: Choosing an ERP solution
cost 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 Services
costs (AMC) paid to the vendor, the help an organisation enjoy a jump
organisation needs to evaluate the
cost 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) that
a smooth and well-oiled machine. it wants to achieve eventually doesn’t end up becoming a
This 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 to
trained manpower to keep the with the process of achieve with the ERP solution, before
overall system running. This is often implementation.” going ahead with the process of
overlooked, and one tends to only implementation.”
look at the AMC charges proposed by once the ERP system gets fine Apart from this, an organisation
the vendor.” tuned. wishing to minimise maintenance
2. The cost of customisation: costs should most certainly opt for an
Then what should one As the ERP system is put into on-demand model as it allows you to
expect with regard to ERP operation, users may request concentrate on your core business,
maintenance costs? some customisation that is adds Dash. “The responsibility of
The ERP implementation cost essential for particular business database administration, updates,
varies according to the complexity processes. Sometimes, even a infrastructure management, and
of the system intalled. It costs less change in government policies, associated costs is entirely taken care
for basic modules such as finance, e.g, a change in the excise duty of by the vendor. The organisation can
sales and purchase and inventory; structure, may require some also leverage online updates, which is
and 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 in
management accounting and plant and may continue to recur. applying updates/patches in a batch
maintenance. 3. Performance monitoring and mode,” he adds.
Primarily, the cost of running an tuning costs: During the initial Keep an eye on future
ERP system can be divided into three testing phase, only a few people requirements: Organisations need
groups: test the system and some to implement an ERP solution that
1. 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. Management
mind at all times, and avoid short-
sighted decisions.”
For instance, if an organisation
grows and sets up a new plant or
expands its distribution channel, that
may also entail a change or addition
in people and processes. In that case,
the software also needs to be flexible
Ashok Dash, general Dinesh Victor, managing
to allow for this kind of change, to manager, Implementation director, SIP Academy
and Support - India
drive standardisation and enable this Geography, Ramco Systems
scaling up. If the ERP system doesn’t “In our company,
have the capability to accommodate “The organisation needs many processes were
changes and upgrades, adding new
to evaluate the cost of codified, re-engineered
capabilities to the system after every
new development in the company
the IT infrastructure and systematised, to
will 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 system
Maintenance activities can be
like a well-oiled requirements.”
outsourced to the vendor in case
the ERP system is of the on-demand
machine.”
type. In such a case, the company
needs to pay only for an AMC. But following the best testing techniques compare it to the old practices and
for an on-premise ERP system, it is for standardising maintenance demand customisation. This may lead
best 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 ERP
gradually wean the company away maintenance costs. adoption across the organisation, and
from over-dependence on the vendor The involvement of the top its eventual success, it is important
for support. This route may lead to management: It needs a leader’s to involve both the business and
an additional strain on the users to vision to make ERP implementation IT professionals throughout the
begin with, but over time, this may successful. When there is a lack of process of implementation. This will
help in attaining self-sufficiency a push from the top management make them feel more comfortable
lot 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 in
and lists the practices that have a key organisational goal, then the keeping a check on the maintenance
helped 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 operations
internal IT team so we ourselves can more customisation and support team should be formed to take care
undertake some customisation work, requirements, post implementation, of operational support and change
rather than approach the vendor. and hence higher maintenance costs. management. Another team must
At present, about 40 per cent of this Ensure that employees are monitor the performance of the ERP
work is handled by our in-house comfortable with the new system: It system and take corrective actions
resources,” 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 too
in place, keeping the whole ERP life not fully geared to or are unwilling much: Every business has its own
cycle in view. Right from identifying to cooperate and work on the ERP nuances; but the more it standardises
implementation requirements and system, they may find fault with its processes, the fitter it becomes
selecting a suitable ERP solution, to the new system. They will tend to to sustain and achieve efficiencies
12 / October 2010 / BenefIT

4. ERP Special Series
of returns, in the long run. Thus, it a must, not only for the successful
is always good to not customise the implementation of an ERP solution
system every now and then, unless but also for its long term success.
there is a fundamental or logical need The ideal implementation partner
to modify/add to the system, such would have the domain expertise or
as a change in laws or regulatory previous implementation experience
requirements. in your specific vertical. Such an
Dinesh Victor, managing director, implementation partner is likely to
N Varadarajan, senior
SIP Academy, which deployed general manager—IT, have a better insight into business
Madras Cements
Ramco’s OnDemand solution, says problems and may even have many
that in his company, many processes
“We have a trained pre-built templates, which in turn
were codified, re-engineered and help speed up work and keep the long
systematised, to ensure that they
internal IT team so we term customisation and maintenance
fitted in with the ERP system ourselves can undertake costs in check.
requirements. “Along with effecting some customisation ERP implementation is a great
process synchronisation, we also
ensured that individual user roles and
work, rather than leap for any organisation. But
if an ERP system is not handled
responsibilities were clearly defined, approach the vendor.” carefully, it may turn out be a
as that is also an integral part of the painful experience —forcing you
standardisation 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 aware
or customising the ERP system for fewer customisations. of the pitfalls and by adopting agile
may not only add to costs but may Choose the vendor with care: practices and measures to deal
eventually lead to the ERP system’s Almost everyone with whom we with these challenges, businesses
failure, too. Dash agrees and advises spoke to on this subject, agreed that can keep the ERP maintenance
organisations to be flexible enough to a good implementation partner is costs in check.
Does Moving Various Business Functions
2010 Edition
That Work In Isolation, On To One Integrated
ERP System Seem Like An
A 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