Enterprise resource planning software offers businesses in every industry an integrated suite of applications to automate a wide variety of back-office tasks, ranging from basic accounting to human resource management. Adding an ERP software to your business can provide a lot of benefits, but there is a cost - literally.
This Price Guide explores how much you can expect to spend on a new ERP system. Before buying an ERP for your business, consider the true cost:
At first glance, adding an ERP to your business might be one of the most expensive things you can possibly do. What makes ERP so costly? It all comes down to the broad functionality: a single, standalone automation software providing all the tools necessary to run an entire business. Applications typically include:
Everything you need for your day-to-day operations, all in one place. It’s no surprise ERP systems tend to be expensive, even compared to other business software.
For a small business, implementing an ERP can cost thousands of dollars and take weeks to complete. For an international enterprise, the process can cost millions and take years. It’s not a process to start on a whim, or without a clear understanding of your budgetary expectations.
ERP Software Price Range: Anywhere from a few hundred dollars per month to millions upfront.
The cost of implementing an ERP at your workplace can be broken down into different areas:
When all these are put together, you can see why an ERP package can quickly get expensive. For instance, if you are installing software on-premises, you might need to buy new infrastructure to accompany it. Even if you’re just upgrading old desktop computers to the latest model, the cost of new hardware for each user or department can add up. Customization and add-on modules can also increase the base cost by hundreds or even thousands of dollars.
Finally, you have to consider hidden costs, such as labor and time. If you opt for premise deployment, you’ll need an IT department to handle the data migration, maintenance, and repairs. The larger the system, the more dedicated staff you’ll need to ensure it runs correctly. And you’ll need to consider the duration of the implementation process, which can take months or years. Until it is complete and your employees have been trained, you’ll have to rely on existing systems.
With such high upfront costs, it’s no wonder some businesses have decided against purchasing an ERP. However, there are also significant ERP cost savings to consider. When utilizing a single software to automate your back-office workflow, you can save time on tasks which once took hours or days. And with the right ERP modules, almost every department can gain some benefit from a new system.
The other major saving offered by an ERP is getting rid of other, single-function software. Accounting features? Covered. HR functionality? Done. CRM? Included. If you have standalone software for all those business processes, you can remove them once you have a comprehensive ERP as a replacement.
There are two main pricing models for ERP: one-time perpetual licenses and continuous subscriptions. A software license fee can be thousands of dollars since it is a single purchase. This upfront cost may include training, installation, and limited support services. And for some systems, there is a separate license fee per user, further adding to the total costs.
Many Cloud ERP solutions are software as a service or SaaS, meaning they charge a subscription for services. The subscriptions are usually on a monthly basis, though there are some which operate on quarterly or annual timetables. While these real-time plans are generally lower than a licensing fee, they can add up over the lifetime of service.
Of course, perpetual license and subscription plans are only the base price you can expect to pay for ERP software. Add-on modules and features can increase the total cost. Want the ERP vendor to handle installation? Make sure to include that in the software cost.
ERP implementation is a time-consuming process, and often an expensive one. In order to accurately calculate the final price, consider these variables:
For example, in a cloud-hosted system there are little to no hardware costs, since everything is accessed by app or web browser. In terms of cost, this means you won’t need to pay staff to procure new devices. However, you might miss out on in-person training which the vendor would have provided when installing an on-premise ERP.
Let’s imagine a small business in need of an ERP. Some ERP packages cost more upfront while others base their pricing on the number of users or transactions.
Let’s use two hypothetical cloud-based software vendors for this ERP price comparison of a small sized business:
The base price for “Starter” is $50 per month while “Advanced” starts at $40 per month. At first glance, Advanced seems like the more affordable solution.
Yet you need to take total users into account. Advanced charges per user, so the monthly cost can instantly double or triple based on your employees. Starter includes a certain number of users in a tiered pricing system per ten users, so the cost per month can also increase if your company expands significantly. As such, your actual monthly subscription for 10 employees is still $50 for Starter but $400 for Advanced.
With so many factors influencing the price of software, it’s important to study all the potential benefits and hidden costs during the ERP selection process. Start by reviewing the top ERP software options available. Consider all system costs you might encounter with your new software solution to avoid going over budget.