Shopping for an enterprise resource planning software is no easy task, especially if you have no idea as to how much you should spend in such tools. And platform vendors are not helping either, keeping their pricing plans to themselves. These complications can lead to purchasing consequences from unmet business requirements and worse, losses from hidden costs of some ERP tools. There are several factors that determine an ERP solution’s final price. Normally, after choosing an ERP system, a buyer negotiates terms with the vendor after which the parties seal the deal with a contract.
ERP solutions are priced differently with user requirements exerting a major influence. For small businesses, pricing usually comes by quote, based on plan features, user subscription or single pricing models. This is due to the fact that most small businesses go for inexpensive packages, which are usually offered by cloud-deployed platforms and they rely mainly on ERP software rankings. Large enterprises, on the other hand, require much more complex and often pricey ERP software. These tools often come in pricing packages that are based on the number of users, customized quotes, and feature sets.
The major enterprise resource planning (ERP) software vendors are notoriously cagey about the ERP Software Cost and if you’re reading this, chances are you know this software isn’t cheap. There are a number of factors that influence the final “price tag” of an ERP system, and the end result can be highly variable. Typically, when a buyer has selected an ERP vendor, both parties will negotiate the terms and enter into a contract. This can be a long, drawn out affair depending on the size of the company purchasing the software and their requirements. However, the total price is generally influenced by several major factors. The main determinants of price include:
- Cost Dependent on Users, Customization Requirements
- Pricing Structure Differs by Deployment Model
- What Companies Are Willing to Spend
The cost of implementingvaries depending on the type, size, and location(s) of the organization; the price ranges for medium to large scale businesses from $150,000 to over 10 million for the software itself based on users, and user types. Other ERP Software Cost to consider include:
- Cost of Database Management
- Infrastructure Costs
- Implementation Services from your VAR or CSP
- Recurrent Costs
The cost of implementing an ERP varies greatly depending on the type of business, country, etc. Here is an estimation of the cost by business size:
- Small businesses: $10,000 – $150,000
- Mid-sized businesses: $150,000 – $500,000
- Large enterprises: $1 million – $10+ million
The actual ERP Software Cost is only a fraction of the implementation. The majority of costs will go to internal and external human resources. Implementing a cloud solution such as Dynamics 365 Enterprise for Operations can lower these costs delineated here of the budget percentage allocation:
- Database management system costs: 5% to 10%
- Infrastructure costs: 10% to 20%
- Software costs: 15% to 30%
- Human resources costs: 40% to 60%
Moreover, there will be annual recurrent fees to be paid that are not included in the initial implementation. Check the recurrent fees carefully as they will significantly affect your ERP Software Cost in the long term.
Let’s take the company with 100 employees that decided to go with SAP. One time fee of $ 2,975 per user already means $297,500. Ok, $300,000, evidently.
Add up annual maintenance fee (18% = $53,550), installation and configuration costs (with $195 hourly rate taking around $10,000 or more) and you have $360,000.
Then add customization services and training (say $100,000 each), additional functionality a company might need, and you have the cost exceeding $500,000.
Also, it’s useful to know that the price of the software itself is the lesser part of the cost. Most of the ERP cost will be spent on employees, external consultants and so on. Generally, the total ERP cost distribution looks like this:
- 15-30% go for the software itself,
- 5-10% go for database and system management,
- 10-20% go for the infrastructure,
- 40-60% on human resources.
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