A model for evaluating total cost of ownership of university enterprise resource planning: case of Maseno university

Abstract

Enterprise Resource Planning, (ERP) makes it possible to improve institutional efficiency and effectiveness. There is, however, a great deal of difficulty reported in the normative literature when it comes to the evaluation of investments in ERP, with organizations often finding themselves unable to assess the full implications of their ERP implementation. Organizations looking to reduce technology costs typically look for ways to reduce the Total Cost of Ownership (TCO). When properly analyzed, TCO captures all direct and indirect costs related to acquiring, configuring, deploying, managing and retiring a particular asset or system. Each one of these categories is a valuable opportunity to save scarce resources, improve IT and increase productivity. This research is based on cost analysis of an ERP system solution in universities. It explores on how to develop a model for evaluating the total cost of ERP ownership in a university and to provide basis upon which to monitor costs over time. The study sought to identify the major cost drivers that can influence the TCO of ERP in universities, to analyze the TCO of university ERP and to develop a model for evaluating TCO of university ERP. The study identified the major cost factors that can influence TCO in university ERP system as; the number of implementation locations, scope of business impact, technology familiarity among users, life cycle of technology, and the system support. The proposed TCO model was built based on Gartner’s TCO model, the Distributed Computing Chart of Account as the theoretical framework. The proposed TCO model has five cost elements which are; procurement costs, hardware and software acquisition costs, implementation costs, operations and maintenance costs and end-user usage costs. The model has seventeen nodes and sixty five background factors. The developed TCO model was used to determine the total cost of owning Maseno University ERP system. The results obtained indicate that operations and maintenance account for 51% of the TCO of ERP system followed by end-user usage with 23%. Hardware and Software Acquisition costs accounted for 16 %, Implementation costs with 7% and the least cost was taken by Procurements costs with 3%. Case study was used in gathering both qualitative and quantitative data from Maseno University. Maseno University currently comprises four campuses; Main Campus, College Campus, Kisumu City Campus and Homa Bay Campus. Interviews, document analysis, questionnaires as well as observation techniques were used to gather the research data. It is hoped that the results of this study will help higher educational institutions improve management of their ERP systems.