Enterprise Resource Planning (ERP) is a critical business automation system that helps streamline various business functions and operations. With ruthless business competition, the ERP system can differentiate between success and failure for companies. Now, with such crucial functioning, it’s only fair for companies to look out for the ERP implementation process.
It’s also understandable for companies to ask, “how much does an ERP cost?”
However, asking about the actual cost of an ERP system is much similar to asking about the price of a new vehicle. That’s because it’s impossible to give you the precise cost of a car without understanding your actual needs. Do you want a sedan, truck, or SUV? Are you looking for a basic vehicle or a luxury car? Are you looking for a local or foreign brand? And so on…
The process of determining the actual ERP cost is much similar. Since there are various hidden costs involved in the implementation process, you need to be sure about the multiple technical specifications you need before someone can throw a definite value for the system.
How much does ERP software cost?
According to one 2022 study, the average cost of ERP implementation is around $7,200. Again, this is just the average price, and the actual ERP implementation costs may vary significantly depending on unique business needs. The size of the business, number of users, customization required, and complexity of the company are some of the crucial factors that influence the final ERP system cost.
If you, too, are looking to know everything about the costs of ERP implementation, continue to read. Below have come up with a free ERP cost and budget guide to assist you with the ERP evaluation process.
So, let’s get started…
What Is an ERP?
ERP or Enterprise Resource Planning is a crucial business automation system that helps streamline various business functions by creating a centralized database and user-friendly interface. Companies globally leverage ERP systems to develop standardized business processes as a means to improve efficiency, make better data-driven strategies, and improve data flow between different business functions.
ERP systems offer businesses comprehensive solutions for all business functions. Some of the more crucial modules of ERP software includes;
Accounting and Finance
The accounting and financial module of the ERP system helps companies to streamline their finances. The module brings more transparency and real-time visibility into the company’s core accounting and expense planning, revenue management, budget, and tax management.
Customer Relationship Management (CRM)
CRM module of ERP software assists businesses in coming up with enhanced client-facing operations. The module enables companies to improve the efficiency and effectiveness of sales, marketing, and customer servicing. By creating a centralized data repository, the CRM module allows employees to consistently track prospects and customers. In addition, the consistent data flow between various departments (for example, sales and marketing) enable teams to create better strategies to improve leads generation and customer service.
The supply chain is a crucial ERP module that assists companies in designing an effective products tracking mechanism from manufacturing to warehouse distribution to customers. Some of the core features of the supply chain module include; vendor scheduling, claim processing, inventory purchase, shipment tracking, and product returns.
The inventory management module in the ERP system is meant to assist companies with the efficient management of inventory stocks. Some of the core features of the inventory management module include; inventory control, inventory scanning, automatic ordering, purchase orders, and automated inventory stocking.
Manufacturing is a specialized ERP module specifically meant to help production-oriented facilities better manage shop floors and other elements, including; quality control, work orders, product lifecycle management, engineering process and planning, bills of materials, and others.
The human resource module of the enterprise resource planning system helps companies to create streamline and effective hiring cycles, covering everything from employee hiring to onboarding to succession. Some of the core features of the human resource module include; applicant tracking, performance management, attendance, payroll, and learning management.
Business Intelligence ERP module is a powerful and high-utility analytical component that lets companies analyze and process massive data from multiple sources and make intelligent business decisions. Some of the core features of the business intelligence module include; customizable dashboards, real-time data access, interactive visualization tools, report generation, and others.
ERP System Pricing Models
Now that we have a basic understanding of the ERP system and modules, let us move on with the central theme, “how much ERP costs?” and look closely at the costs of ERP implementation. In the section below, we will be discussing the various ERP pricing models and how each of these models works;
Perpetual licensing is applicable for companies who want to host ERP software on-premise (at their own servers). In such a setting, companies would have to pay the one-time up-front cost of the ERP system. The costs of a perpetual license are usually based on the level of customization and the number of users.
One benefit of perpetual licenses is that companies don’t have to pay recurring costs for maintenance, support, and upgrades.
Companies looking to leverage cloud servers for ERP software implementation would have to opt for subscription plans. In this setting, the vendor hosts and maintains the ERP system at a third-party server. Subscription plans for ERP software are offered as a Software-as-a-Service model, where companies would pay monthly/annual charges against the required software solution. Subscription plans are often offered to companies against a minimum contract length.
ERP implementation can cost a fortune. Again, as a complex process, it is difficult to estimate your total ERP cost of implementation. Some of the ERP implementation costs include;
Additional Modules not included in the base plan
As mentioned above, the total costs of ERP implementation will vary depending on the size, complexity, and customization requirement. Most ERP systems come with lower upfront costs for the basic package; however, you would have to pay additionally for each extra user or each extra module you need. For instance, the basic package may not include advanced features like e-commerce, payroll, or others, which would have to be added to the future costs. Similarly, there are various industry-specific solutions, which have to be paid separately.
Companies often require ERP customization to meet their unique business needs. However, the customization can quickly add up to the cost of the implementation. Thereby, companies should only go with customizations that they need the most and only add up with time.
The complexity of the ERP implementation process means you need a professional consultant for successful project completion. Thereby, when planning the cost of ERP implementation, you should add up the costs for the implementation consultants.
Companies willing to go with perpetual licensing (on-premise hosting of ERP system) would also have to invest in procuring data servers and other related hardware infrastructure to host the ERP system adequately.
When estimating the cost of new ERP software, you should also add the training costs. While some major vendors do offer free essential training services, most of the time, these are not enough to fully get started with the system. Also, the majority of the vendors would ask for additional costs to arrange customized ERP training at the client’s site.
Overall, the ERP implementation can cost between $175,000 and $850,000 for small and medium-sized businesses with basic to moderate ERP system requirements. Alternatively, for large companies with higher-level customization requirements, ERP implementation can cost anywhere from $1 million to $10 million.
Ongoing Costs to Consider
Apart from the implementation costs, ERP systems often also incur recurring costs, which aren’t included in the base price. These may include;
Managing ERP systems is complex. Companies would often require expert IT staff to manage on-premise deployment and handle any technical difficulties for the ERP system.
ERP packages often come with a primary support package that includes email support and a knowledge base. However, companies often need more inclusive and advanced help to ensure full utilization of the system and minimize downtime due to any technical issues. For additional support, companies would have to pay additionally to the basic price of the plan.
Maintenance and upgrading
On-premise ERP doesn’t receive any automated software upgrade or system maintenance services. Thereby, companies would have to pay additional costs for annual upgradation and maintenance of the system. Contrarily, such upgrades and maintenance are typically included in the cloud deployment models.
Open-Source ERP Software
The majority of the ERP system are closed source or proprietary solutions, which means that users don’t have access to the source code.
However, there are some open-source ERP systems available with open access to source code. By implementing open-source ERP systems, companies can easily access the source code for any required customization. While this may be a too technical task for most companies, with the right internal IT staff, such an option could save future costs for ERP customization from vendors.
Additionally, since there isn’t any licensing fee for open-source ERP software, companies can also save upfront ERP implementation costs. However, the most significant limitation of the open-source ERP system is that it requires highly experienced and expert IT staff to implement, maintain, and upgrade such systems; since there is no dedicated support available.
ERP System Vendor Pricing
To give you a pleasant surprise, we have come up with the estimated ERP software costs from different vendors. Remember, vendors don’t publicly offer pricing details; thereby, these are only researched estimated prices. You may want to contact vendors directly for a quotation.
Microsoft Dynamics 365
Microsoft Dynamics 365 is one of the most powerful and comprehensive ERP systems in the world. Microsoft Dynamics 365 is known for its advanced modules and robust features that streamline entire business processes. The Microsoft Dynamics 365 offers individual module purchase for companies. For instance, the Sales Professional Module from Dynamics 365 costs $65 per month, whereas the Sales Enterprise Module costs $95 per month.
NetSuite is yet another powerful and highly preferred ERP system. Developed by Oracle, NetSuite ERP is known for its robust and advanced modules, strong support, and consistent upgrades. The base license for NetSuite ERP starts at $999 per month (additional $99 per-user costs).
Aquilon Software is a reputable ERP vendor offering perpetual as well as subscription-based ERP pricing models. The licensing for the ERP system is based on the number of users. Perpetual licensing from Aquilon Software costs around $1,500 to $3,000 per user (depending upon the number of modules you choose for the system). The cloud licensing cost for Aquilon Software range from $75 to $150 per user per month (depending on the number of modules you choose for the system).
BizAutomation Cloud ERP
BizAutomation Cloud ERP is yet another reputed ERP vendor with average costs of around $79.95 per user per month (minimum five users plan). The subscription price for the BizAutomation Cloud ERP includes all modules (except for e-commerce). If you wish to use the e-commerce module, the monthly price may increase up to $149.95 per month.
Dolibarr ERP & CRM
Dolibarr ERP & CRM is an open source ERP system, assisting companies to manage their business functions better. While the Dolibarr ERP & CRM is free of cost, some plugins available at DoliStore may require a nominal fee for integration.
The cloud-based deployment for Dolibarr ERP & CRM is offered in two packages; Basic and Premium. The basic package starts at $9.74 per user per month, whereas the premium package states at $32.46 per month (an additional $12.98 per user per month).
ERPNext is a popular open-source ERP system free for on-premise deployments (up to 5 users). The cloud deployment model for ERPNext starts at $50 per user per month (all modules included).
By now, you must have gotten a fair idea of how to estimate ERP installation costs. Various factors influence the overall cost of the ERP system. For a reasonable estimate, you may put ERP implementation and maintenance costs at one to two percent of the company’s annual revenue. The key to successful ERP implementation is understanding your company’s pressing need for different ERP modules. Make sure you only choose modules that you definitely require.