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Aberdeen ERP TCO Midsize_July 2007

Aberdeen ERP TCO Midsize_July 2007 - July 2007 The Total...

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© 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 July, 2007 The Total Cost of ERP Ownership in Mid-Size Companies Total Cost of Ownership (TCO) remains a significant factor that influences Enterprise Resource Planning (ERP) strategies and decisions. While “total” costs can and should include a wide range of factors, recent Aberdeen research has shown that the cost of software, services, and maintenance are those which are most often measured and considered when evaluating software or measuring the Return on Investment (ROI) of ERP implementations. Costs vary significantly as companies grow in size. What can the average mid-size company with revenues between $50 million and $1 billion expect to pay for the business benefits that can be derived from ERP? Aberdeen TCO Series The Total Cost of ERP Ownership in Mid-Size Companies is influenced by a variety of factors, including: company size number of ERP users depth and breadth of functionality deployed business benefits gained from ERP deployment other factors This Sector Insight is one in a series of reports exploring the Total Cost of ERP Ownership. Please refer to Related Research identified at the conclusion of this report for further analysis. Who Cares? In June and July of 2007, Aberdeen surveyed over 1,680 companies of all sizes to benchmark ERP in Manufacturing , including 645 companies with annual revenues between $50 million and $1 billion. Functionality, ease of use, and TCO were clearly the top three selection criteria in ERP software decisions (Figure 1). In comparison to a similar study published in August 2006 , the importance of all three of these criteria increased year-over-year. Figure 1: ERP Software Selection Criteria in Mid-Size Companies 69% 39% 51% 52% 45% 74% 0% 10% 20% 30% 40% 50% 60% 70% 80% Functionality Ease of use Total cost of ow nership 2006 2007 Calculation of Averages The 2006 ERP in Manufacturing survey asked respondents to enter numerical values for actual costs. In order to improve response rates, the 2007 ERP in Manufacturing study respondents were provided with data ranges to choose from. Actual averages were calculated using the midpoint of each range. While this method is not as precise, it improved both the quality and quantity of data used. Source: Aberdeen Group, July 2007 The 2007 ERP in Manufacturing study measured the average number of ERP users, as well as the cost of ERP in terms of software, services, and maintenance of mid-size customers. This was done for six different ERP solution providers and was subsequently compared to the averages across all mid-size companies. www.aberdeen.com 040307a
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The Total Cost of ERP Ownership in Mid-Size Companies Page 2 © 2007 Aberdeen Group, Inc. Telephone: 617 723 7890 Costs Scale with Company Size One would naturally expect a correlation between the size of the ERP deployment and costs. Because Aberdeen’s definition of mid-size companies spans such a broad range, and because companies at the low end of the scale can be very different from those at the top end, we capture company size in finer granularity within the full range of mid-size companies. As a company
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