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Are you looking at implementing an enterprise resource planning (ERP) system? No doubt one of the biggest questions you want answered is how much does an ERP cost? In this article we’ll look at the ins and outs of ERP pricing and highlight exactly what you need to know before budgeting for an ERP.
Every business is different, so it’s important you know how to choose the best pricing model for your enterprise. To help you make this decision, we’ll also analyse the cost-to-benefit ratio of ERPs and look at how you can get the most out of this innovative system.
When determining how much an ERP costs, you need to first consider the two typical pricing models. These can drastically change how much you’ll pay for an ERP over time.
If you want to host the ERP system using your own servers, you’ll likely be using the perpetual pricing model. This licence incurs a one-time fee, which is paid up-front and can be difficult for small businesses without the required infrastructure or initial budget.
Using a perpetual licence often means you’ll need to pay for management costs, such as maintenance, support and upgrades. The total fee differs depending on how many users you want and your level of customisation and modernisation.
Opting for the software-as-a-service (SaaS) subscription model means paying for a monthly or yearly subscription. This grants you access to a cloud-based ERP system, which your ERP service provider hosts and manages on a third-party data server. The reduced up-front cost can save businesses a significant amount of IT resources.
You’ll be expected to commit to a minimum contract length, which is typically a year or more. You can also modify your monthly or yearly payments by opting for more functionality and modules in the ERP system. Your monthly/annual fee will often also cover the cost of maintenance and upgrades.
Implementation costs comprise one of the biggest expenses for using an ERP system. They’re a big reason why smaller businesses opt for the SaaS subscription model. You will also need to know exactly how your ERP provider will be supporting your implementation, as this can differ between companies.
ERP software implementation costs typically cover the following:
You should also be aware of costs that may occur after implementation, such as for further customisation and training. We recommend saving a contingency budget of between 10-15% for these unexpected costs.
One of the biggest benefits of the SaaS pricing model, is that you save on ongoing costs. A good ERP provider should include support, maintenance and software upgrades in its pricing package. The SaaS pricing model is usually more cost effective as this model avoids any additional and unexpected costs for your ERP software.
If you’ve chosen the perpetual pricing model, there are ongoing costs that you need to be aware of. These expenses can vary depending on the system, provider and your business’ own resources. However, you should generally budget for the following expenses.
You may need to increase your in-house resources to manage the support function for your ERP software. It’s also possible to pay for additional support, which might include access to dedicated customer service management and on-site training.
Maintenance is almost always required for on-premise ERP systems (perpetual pricing model). It’s important to keep your software up to date, which may require additional hardware, IT labour and network fixes. Maintenance costs usually fall between 15-20% of the initial price of an ERP.
ERP systems, like all software, require regular upgrades to provide the best-possible service. Think about how often you’ll need to upgrade your ERP software. Also consider any additional hardware or training required to complement these updates.
ERP software provides substantial long-term benefits and savings. It’s important to have clear objectives for utilising an ERP to determine your ROI. The best ROIs are usually achieved by your ERP system achieving the following:
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