ERP Pricing Guide: Understanding the Cost of ERP Software
Investing in your first ERP system or upgrading to a better one? We break down your options and costs. Get the best ERP system for your business requirements and save money by avoiding the costly mistakes many make.
In this article we cover
- ERP Price Estimation
- Comparing Costs of the Top 10 ERP Systems
- What is an ERP System and Why is it Worth the Investment?
- Comparing different ERP pricing models
- Comparing Costs of Different ERP Deployment Models
- Maximize the Return on Investment of a new ERP System
- How to choose the right ERP solution for your budget
- Summary and Conclusion
- Frequently Asked Questions
ERP Price Estimation
You’re here because one of the most important factors when considering a new ERP system is understanding the cost. However, comparing ERP costs between products and vendors can be challenging. Costs can vary greatly depending on factors such as the size of your organization, the specific features and functionality required, and the vendor or provider. But don’t let that discourage you. An ERP system can provide significant, long-term cost savings and increased efficiency for your organization, making it a worthwhile investment.
While ERP pricing varies, a general rule is for every $1M in revenue, expect to pay $1K/year. Upfront/recurring payments depend on on-premises or SaaS. For a company with $100M in revenue, costs average ~$100K/year over 5 – 7 years.
That’s the meat of it, but there is a lot more to cover. First, we’ll compare the top ERP system price ranges. Then we’ll compare different ERP pricing and deployment models. Finally, we’ll cover how to maximize your return on investment and explain factors that affect total cost of ownership (TCO) of an ERP system.
It’s important to remember that knowing your business requirements is crucial in estimating the cost of an ERP system. Additionally, it’s essential to consider the ERP implementation costs and the ongoing support and maintenance costs when evaluating the overall cost of an ERP system.
Comparing Costs of the Top 10 ERP Systems
If you want a high-level understanding of dollar amounts, this is the section you came for. However, it’s important to note that these are just general ranges with a sampling of products. The actual ERP cost will depend on many factors, such as the size of the company, the number of users, the level of customization, and the ERP modules needed.
- Epicor Kinetic (formerly Epicor ERP): This system offers a comprehensive solution for manufacturers worldwide. Suitable for small emerging businesses up to large multinationals, the scalable and modular offering includes supply chain management, manufacturing execution, project management, financial management, and much more. It offers quick ERP implementation that can easily expand as your manufacturing process grows. It’s cloud or on-premise deployable. Subscription-based pricing starts at $125 per user per month. The minimum ERP implementation cost is $50,000.
- EnterpriseIQ: This system is designed for mid-sized and large organizations. It offers features including manufacturing and quality management, financial management, and supply chain management. It is available in a cloud-based or on-premises version. Costs depend on users and features, and they generally range from $25,000 to $300,000.
- Global Shop Solutions: This system is designed for manufacturers. Its base features include financial management, supply chain management, and manufacturing management. It is available in a cloud-based or on-premises version. Pricing requires a custom quote, and the minimum ERP implementation cost is $20,000.
- IFS Applications 10: This system is designed for large organizations. It offers an integrated solution for enterprise resource planning, supply chain management, and enterprise asset management. It is available in a cloud-based or on-premises version. Pricing can vary significantly, from around $300,000 to $2,000,000. The minimum ERP implementation cost is $300,000
- Infor CloudSuite: This system is designed for mid-sized and large organizations. It offers popular features such as financial management, supply chain management, and enterprise asset management. It is a cloud-based system that can be accessed from anywhere with an internet connection. Prices start at $150/mo for each user.
- Microsoft Dynamics 365 BC: Microsoft Dynamics 365 Business Central is a cloud-based ERP solution that integrates finance, operations, sales, and customer service into one system. It offers a comprehensive toolset for managing financials, supply chains, operations, and customer relationships, with integration to Microsoft products like Office 365, Power Apps, and Power BI. It aims to provide efficient, effective operation management through its user-friendly interface, customizable dashboards, and mobile access. The cost is around $75/mo per user. The minimum ERP implementation cost is $35,000.
- NetSuite ERP: This system is designed for small and mid-sized organizations. It offers a wide range of features, including financial management, supply chain management, business intelligence reporting, and CRM. It’s a cloud-based system accessible from anywhere with an internet connection. The starting price for a monthly subscription is $99; however, the final cost will depend on the chosen solution. The minimum ERP implementation cost is $10,000.
- Sage X3 ERP: This system is designed for mid-sized and large organizations, and it offers a wide range of features, including financial management, supply chain management, and CRM module. It is available as a cloud-based system or on-premise ERP solution. On-premises pricing starts at $25,000. Cloud-based pricing starts at $75/mo per user. The minimum ERP implementation cost is $100,000.
- SAP Business One: This system is designed for small and mid-sized organizations, with features including financial management, supply chain management, business intelligence, and CRM modules. It will cost around $5,000/mo per user, and the minimum ERP implementation cost is $50,000.
- Syspro: This system is designed for small and mid-sized organizations. It offers a wide range of features, including financial management, supply chain management, and CRM. It is available in a cloud-based or on-premises version. The base cost for SYSPRO ERP is $199 per user per month. However, as additional modules are added, the overall cost of the program will increase. The minimum ERP implementation cost is $25,000.
It’s best to compare ERP systems and get customized price quotes from the vendors directly for more accurate pricing for your specific needs. Every ERP implementation is different, and those costs can vary, as we discuss below.
What is an ERP System and Why is it Worth the Investment?
ERP, or Enterprise Resource Planning software, is business software that helps manage and automate various departments of a business and its operations. ERP systems aim to streamline and integrate these specialized business functions into one cohesive and connected system, from accounting and inventory control to human resources and customer relationship management.
But with all the different software systems available, why should a business invest in an ERP system? For starters, an ERP system can save complex businesses a lot of time and money. By automating repetitive tasks and providing real-time data, ERP systems can help businesses make more informed decisions and operate more efficiently.
The biggest benefit of ERP systems is that they help businesses grow. With a good ERP system in place, companies can scale their operations more efficiently and are able to respond to changes in the market more quickly. And as a business grows, a good ERP system can also scale to accommodate more users, functionalities, and data.
Before investing in an ERP system, or upgrading to a new one, it is important to consider the associated costs. This guide lays out the various factors that impact ERP pricing and suggests how to calculate the total cost of ownership (TCO) so you can find a new ERP solution that fits your budget. Let’s dive in and learn more about ERP systems, how much they cost, and why the right system can be a great investment.
The Factors that Affect the Price of ERP
When selecting an ERP system, various factors should be considered when assessing the cost. These include pricing models, implementation and customization fees, training costs, the number of users, total business transactions, and any hidden costs. Cloud-based ERP implementations tend to have lower upfront costs since the hardware does not need to be purchased or maintained; however long-term and ongoing costs may be higher with cloud-based subscription fees for software and hosting. On-premise ERP implementations may involve a higher upfront cost but offer more control and customization options as well as potential long-term savings. It is important to consider the organization’s specific needs and budget over time, before deciding which type of ERP to implement.
Common misconceptions about ERP pricing
There are a few common misconceptions that can lead to pricing confusion when selecting an ERP solution. Let’s set the record straight below:
- ERP systems are too expensive: Despite being a significant investment, ERP software should save your business time and money in the long run through efficiency and growth. It’s important to consider the potential return on investment (ROI).
- All Enterprise Resource Planning system costs are similar: Not true anymore! With the advent of newer systems in the last 10 years, ERP costs have become more competitively priced and can vary widely based on features and functionality and vendor, so it’s essential to shop around and compare different vendors as well as different products.
- ERP costs are only for the initial purchase: Not necessarily — some vendors offer subscription-based models with ongoing support that incur costs ongoing. You’ll need to consider the total cost of ownership over time. Make sure you understand the total costs from implementation through years of support.
- An Expensive ERP solution is better: In reality, some expensive systems may have limited or rigid features that require costly customizations, while more affordable systems may offer advanced and flexible capabilities in comparison. We encourage you to evaluate a few newer systems along with well-known brands. Consider your organization’s needs first, then compare at least 8 – 10 ERP systems (from different vendors, if possible), in the correct ERP tier, to find the best value.
- ERP pricing is non-negotiable: Not always — some vendors offer flexible pricing options that you can tailor to your organization’s needs. Ask about different options and be prepared to negotiate.
When researching ERP solutions, make sure to evaluate all of your options and understand the associated costs before making a final decision. By being aware of common misconceptions and asking the right questions upfront, you can find the best system at the right price for your business.
Comparing different ERP pricing models
Comparing the costs of ERP systems can be tricky, especially if you’re considering different types of licenses or deployment models. ERP system pricing models can range from simple to quite complex. Make sure you understand how different solution providers calculate their proposed costs – usually, it’s a combination of several different cost elements. Get familiar with all the components so you can choose the best system for your business. Following is a quick summary, but we also dive deeper into this topic in our related post ERP Pricing Models: How You Pay For ERP Software.
User-Based ERP Software Pricing
When it comes to ERP software pricing, user-based models are the most common. As you add more employees or expand implementation, your user count and costs rise. Understand how users are counted – e.g., concurrent vs. named – before deciding on how many you need. Skimping on users can limit the value derived from the application, so make sure to understand what is being offered now compared to what you had before if you’re replacing an existing ERP solution.
- Concurrent ERP Users: Counts users logged into the application simultaneously and can be policed by built-in mechanisms. This is an effective way to keep user numbers in check when workers are distributed around the world, but each user will generally have a higher price compared to named users.
- Named ERP Users: Identify each user with their own login credentials. Two people with the same “name” can’t log in at once, even if only ten other named users are active.
- Full or Limited Users: Generally, full users have access to all functions of the application, whereas limited users may only have access to specific inquiry-only functions or selected types of transactions.
ERP Software Module Pricing
Most Enterprise Resource Planning (ERP) solutions are suites of modules, such as general ledger, accounts payable, order management, accounts receivable, inventory management, and purchasing. These modules can be packaged and licensed individually ala carte, or grouped together (e.g., accounting modules). Paying a price for the different modules is often used in conjunction with user-based licensing, where you might pay a module fee plus users, or users might be confined to specific modules.
It’s important to investigate carefully what is included in your subscription or license, in general, and for each user. Consider if you’ll only be paying for more users after expanding the scope of your ERP implementation process or if there will be an additional per-module fee. Pricing by both module and user is favorable as you pay only for what you use; it also helps to maintain some cost control. However, it can limit growth as the cost escalates when adding functions and/or users — even when they become critical to success. All-inclusive licenses or subscriptions offer customers flexibility and full access to all features and functions, which yieldings more usage and overall value of the system.
Enterprise ERP Software Licenses
An enterprise license is typically negotiated for a set period, usually a year. Each vendor uses their own formulas for determining the licensing fees, so it’s important to read the small print and know what you’re getting. Licensing fees are often based on the type and number of functions used (modules, groups of modules, and extensions), the size of the business, and the number of users. The major advantage to this kind of license is its predictability over the term – it doesn’t limit the amount or type of functionalities available.
Resource/Usage-Based Pricing of ERP Software
ERP vendors typically use a combination of pricing models, but with SaaS emerged a new option that’s based on the consumption of resources, called usage-based pricing. This includes computing power, network bandwidth, and data storage. Usage-based pricing is estimated based on factors such as function requirements, company size, number of users, and amount of business transactions and may be tailored to suit one’s needs. A SaaS environment can accurately measure the actual usage of resources in real time, making it a great “pay for what you use” option.
ERP Implementation Costs Vary by Pricing Model
ERP installation costs can vary depending on the pricing model chosen. Factors such as additional fees for implementation, training, and ERP customization services should be taken into account when selecting a pricing model. Cloud-based systems tend to have lower implementation costs than on-premise solutions. To ensure you make an informed decision, make sure you understand all costs associated with the pricing model, including any hidden fees. A good ERP provider will help you compare different pricing models and pick the one best suited to your organization.
Comparing Costs of Different ERP Deployment Models
For businesses responsible for purchasing decisions, understanding the different ERP deployment models and associated costs is essential. While users may not have to worry about deployment options and payment methods, decision-makers need to understand the financial implications of their choices.
On-premise solutions require upfront capital expenditure for hardware and infrastructure, while cloud-based models involve subscription fees based on usage rates. Hybrid deployments offer a combination of both on-premise and cloud hosting options but with higher initial setup costs. Knowing the total cost of each model can help businesses make an informed decision that fits their budget and requirements.
The chart above is from the following research paper Cloud versus On-Premise Computing.
Costs to Consider for On-Premise ERP Systems
The first deployment model is on-premise, where businesses own and maintain all hardware, software, and related services onsite. This model presents a capital expense upfront, as businesses need to purchase their own hardware and infrastructure components before getting started. Additionally, businesses should allocate a budget for ongoing costs associated with maintenance updates and patches needed for their customized setup.
Cost Factors for Cloud-Based ERP Solutions
The second deployment model is cloud-based. This option requires lower upfront costs while allowing businesses to benefit from economies of scale by sharing resources with other users. When working with cloud ERP solutions, companies will pay subscription fees based on their chosen platform’s usage rates rather than invest in capital expenditures. Maintenance costs are usually included in these subscriptions but may vary depending on the level of service you require from your provider.
Cost Considerations for Hybrid ERP Deployment
The last model is hybrid deployment which combines elements from both on-premise and cloud solutions by using a combination of local hardware and cloud-based services. This provides many benefits but also presents a higher initial cost for integration since both parts need to be set up separately compared to the single setup you get with either an on-premise or full cloud solution. Maintenance costs for this option can also be higher since multiple systems will have to be maintained simultaneously by external providers if you do not have sufficient internal IT resources available in-house.
No matter what type of ERP deployment model you choose for your business, understanding the different costs associated with each can help you make an informed decision that suits your specific requirements while helping you stay within budget.
Maximize the Return on Investment of a new ERP System
For businesses looking to maximize their return on investment from a new ERP system, planning ahead and understanding what’s involved is essential. Let’s look at how you can ensure your ERP implementation is successful and cost-effective.
Here are 5 ways to maximize ROI when purchasing an ERP system
- Establish clear success criteria: Define what success looks like for an ERP system implementation and ensure all stakeholders agree on the goals.
- Choose wisely: Select an ERP solution that fits the needs of your business, as opposed to one that requires extensive ERP customization or rewriting of code.
- Plan ahead: Get a comprehensive understanding of the services and costs associated with the project, and include any necessary expenses in the budget.
- Invest in employee training: Implementing a new ERP platform can involve complex tasks, so ensure employees have been appropriately trained to decrease implementation time and maximize efficiency gains.
- Monitor progress: Regularly monitor progress throughout the ERP implementation phases to identify potential issues before they arise and focus resources on quick solutions if needed.
Avoid Hidden Costs Of Customization
The best way to prevent the need for costly customization is to select an ERP solution that fits your needs instead of fitting the system to your needs by rewriting it. Does this mean you should never customize ERP systems? No. It just means you should never touch the source code. Selecting a system that requires many customizations to the source code will not only build barriers to future innovation, but you will add recurring additional costs to the project scope. Fortunately, with the many ERP products and options available today, there should be several affordable systems that fit your needs without requiring drastic customizations.
The split between upfront and recurring payments will vary significantly depending on whether you are buying a license to run on-premise ERP or subscribing to ERP Software as a Service (SaaS). Seven years is quite often the break-even for on-premise and SaaS. However, companies are more likely to use a five-year planning horizon. If so, it may make more sense to instead look at the five-year cost of ownership of your ERP. To get a reasonable comparison, estimate what you will pay over whichever time period you choose, and then divide by that number of years to get an average cost per year. That way, you will get a like-for-like comparison of prices, even when comparing very different options.
The total cost of ownership can be broken down into four general categories: ERP software, maintenance, hardware, staff, and services.
ERP Software Cost
Obviously, the cost of the ERP software itself is a significant component of the overall TCO, and many other costs are related/dependent upon the price of the software. For example, in the traditional on-premises world, ongoing maintenance is often priced as a percentage of the ERP software cost. More indirectly, the complexity of the software will also impact the level of support services needed.
In some instances, the application price is all-inclusive. Still, in other cases, you may also need to purchase middleware separately that is part of the platform/architecture on which the application is built.
For perpetual license on-premises ERP software, the cost is front-loaded, typically regarded as a capital expense (CapEx). Where ERP software is delivered as a service (SaaS), the cost of the software is most often a subscription, which is a recurring expense that can be accounted for as an operating expense (OpEx).
Maintenance is a recurring ERP cost that provides you access to technical support, bug fixes, and upgrades to the ERP software system. This is a cost element that is primarily associated with software that is licensed and run “on-premises.” Where software is delivered as a service (SaaS), including cloud ERP software, technical support, bug fixes, and upgrades are included in the subscription.
There are direct and indirect staffing costs associated with ERP. On the direct side, you may have employees assigned directly to support your business operations. These may be dedicated to ERP full-time, or they may support multiple applications. These tend to be Information Technology (IT) staff, but you may also employ some “super users” with skills that are more business than technology oriented. The burdened cost of any of these dedicated individuals contributes to the TCO.
On the indirect side, you may be able to reduce headcount through efficiencies and automation. If, in fact, you can reduce staff (typically clerical staff), this should directly offset the TCO of ERP. However, more likely, you will be able to free up employees from repetitive, menial tasks for them to work more strategically and add more value. These cost savings may not directly impact TCO but contribute to your return on investment (ROI), which is equally important. This is also harder to quantify, but simple growth statistics without added headcount can be a helpful metric.
The type and volume of services you need to pay for will vary quite significantly, depending largely on the complexity of your business and your installation/implementation.
The kinds of services you may need include:
- Evaluation and selection
- Business process design, which should include mapping business processes to your new ERP software
- Assistance in configuration/setup
- Data migration assistance
- Education and training
These all contribute to the total ERP cost. And don’t forget the one additional service that has historically added significantly to the TCO that you should avoid entirely. That is any invasive customization that involves code changes to the ERP software as we discussed above.
How to choose the right ERP solution for your budget
Step one is to know what you need and what problems your system should solve. Once it’s determined which features are needed, you can begin to assess which systems work well for your needs, and then narrow by those that fit your budget. Researching vendors and their offerings, prices, and customer service options will help you make a more informed decision. But the best and final cost assessment will come after you have met with the vendor to discuss your project in detail.
When in discussions with sales representatives, don’t forget to factor in any long-term costs associated with the ERP system, such as maintenance fees, upgrades, employee training, and consulting services. Additionally, make sure it’s a system you won’t outgrow in 5 years. With some thorough research and thoughtfulness when making your selection, you can find an ERP that fits your budget and start to have deeper conversations with those that sell and support it.
Gut check price upfront
A real quote will not be possible until the potential vendors have a thorough understanding of your needs, but you should ask for a general ballpark estimate upfront. It makes no sense to invest time and effort evaluating a solution that is clearly out of your price range. Ask the vendor what the minimum fee to implement is, for your employee and revenue size. You may have to estimate the number of users and identify which functional areas you want to address (e.g., departments in your organization), but with that, the vendor should be able to give you a solid range. Also, ask for the average cost ratio of services to software. Should you expect to pay $1 for service for every $1 you spend on software? More? Less? priced as a percentage of the ERP software cost.
Summary and Conclusion
Comparing prices of ERP can take a lot of time and effort, especially considering different types of licenses or deployment models. With so many different variables, it can be hard to create a reasonable and accurate ERP budget. But here, we’ve at least given you a starting point. At Top10ERP, we understand the challenges and have built our helpful ERP comparison tool that allows you to compare ERP pricing options side-by-side. You can also quickly request demos and customized ERP price quotes.
Frequently Asked Questions
Is it possible to try ERP software before buying it?
Yes, most ERP vendors offer demos or free trials for their ERP software. This allows you to become familiar with the software user interface and features without spending any money. You can compare different software demos and see if one feels right for your needs. In fact, to simplify your search, you can compare multiple ERP systems and request their free ERP demos directly from our site with one simple request, instead of having to hunt down each vendor separately.
Is ERP software worth the cost?
At Top10erp.org, we have witnessed firsthand how ERP (Enterprise Resource Planning) software helps businesses to achieve greater efficiency by streamlining business functions, improving inventory management, and automating processes. Our goal is to help businesses find the right system to grow and succeed. ERP systems have many benefits and can improve a company’s profitability over time. When the right system is selected, it provides a great return on investment.
Why is ERP software so expensive?
ERP software systems are expensive primarily due to their complexity. ERP systems are designed to integrate and manage different business functions such as accounting, inventory management, and human resources, which makes it costly to develop and implement. Mobile ERP functionality has also added to software development costs as systems need to provide easy, full-featured, user experiences from mobile devices. Additionally, customization of the system to meet the customer’s requirements can add to the overall cost, especially in complex manufacturing scenarios. ERP systems also require maintenance and support, which includes software updates, security patches, and technical support. Some ERP software is hosted on cloud-based platforms and comes with a subscription fee; however, this eliminates the costs associated with hardware and infrastructure and version updates. Furthermore, setting up an ERP system requires specialized knowledge and expertise, which can add to the cost. Finally, scalability is another factor that could raise costs depending on the number of users or functionalities needed by a company that is planning for growth in the future. Despite all these factors, ERP software can provide significant cost benefits like improved efficiencies and improved business processes, giving a business a competitive edge.
How much does a small business ERP cost?
The cost of an Enterprise Resource Planning (ERP) system for a small business will depend on the type and complexity of the system. Generally, you can expect to pay anywhere from a few hundred dollars per month for online packages, to tens of thousands of dollars for more comprehensive solutions. The right ERP can save your business time and money in the long run by streamlining processes and increasing efficiency. For a small manufacturing business see our post on the best ERP systems for small manufacturing businesses. And you can also see comparisons for small businesses in our ERP comparison tool.
What is the best-priced ERP system for a manufacturing company?
Ultimately, the best-priced ERP system for a manufacturing company will depend on the specific needs, industry, size, and budget of the business. Before choosing an ERP system, it’s important to thoroughly research the options and assess their features, pricing, and support to determine the best fit for your business. You can also read our general guide to selecting manufacturing ERP systems. We provide the Top10erp.org site information to support your ERP research. Should you wish to speak with us for recommendations, and get pointed in the right direction, please reach out to us directly.