ERP Software Logo

Microsoft Dynamics vendors provide comparisons and opinions to professionals in the ERP/Accounting software selection process

 
 

Greg Kaupp, ArcherPoint LLC

How Much Does a Typical ERP Implementation Cost?


Email | Print

Whenever a company considers implementing an Enterprise Resource Planning (ERP) system, one of the first questions they typically ask is, “How much will this cost?”

This is a fair question. Implementing an enterprise-wide integrated accounting and business system is a significant investment, and although there are many variables to take into consideration along the way, it can help to have a general idea of what to expect.

Although our company has primarily implemented Microsoft Dynamics NAV (formerly Navision) solutions over the past decade, there are commonalities when it comes to pricing. The following guidelines apply to most small- to medium-sized companies looking to implement any ERP system.

Type of company and number of users – Not all companies have the same requirements of their ERP system.  Generally, a moderately-sized manufacturing company will require more complexity than a similarly sized professional services company. Since most ERP systems are priced according to the number of concurrent users and the level of access each of these users will require from the system, companies should expect to pay around $4,000 per concurrent user for a manufacturing or complex distribution company and around $2,000 per concurrent user for a professional services or light distribution company. Additional licenses for “light” users (users only requiring limited access to the system) are usually priced at a few hundred dollars per named user. 

Third-party softwareThird-party software products are often available to extend the ERP software or enhance it with applications tailored for a specific industry or specific business process needs. Third-party add-ons typically account for 10% to 35% of the overall software cost. 

Implementation costs – There are many factors that influence the actual cost of implementation: the company’s industry, the size of the company, the anticipated transaction volume, scope and complexity of the implementation, and the number of third-party integrations, to name a few. Most implementation costs are calculated based on a ratio of software to services. The more the company implementing the ERP system can handle on its own without relying on external vendors, the closer the software-to-services ratio can get to 1 to 1. For most companies of average size and complexity, however, it is more common to see software to services ratios of 1 to 1.5 or 1 to 2.5.

Customizations – Very few ERP systems can be installed and used “out-of-the-box.” Therefore, most companies will require some amount of customization to integrate the ERP software into their workflow. The amount of programming, testing, and training is directly related to the size and scope of the effort.

The bottom line - For a typical mid-sized company, the total software and services cost will range between $150,000 and $750,000. Hardware and infrastructure costs are usually addressed separately, and typically these estimates assume an on-premise implementation rather than a hosted or subscription-based solution.

Admittedly, this analysis yields a wide range in price, but it should assist companies who are just starting the evaluation process to understand the factors that influence the cost of their proposed ERP implementation. Moreover, it should prompt companies to carefully evaluate estimates that fall significantly below or above the ranges discussed here to ensure there are no hidden costs and that the company is receiving the best business value while they seek to minimize cost and risk.

Greg Kaupp is the CEO of ArcherPoint, LLC, a Northern California Microsoft Dynamics NAV (Navision) partner. Greg has been involved in Dynamics NAV implementations for companies throughout the U.S. since 1997.

 banner 1

16 Responses to “How Much Does a Typical ERP Implementation Cost?”

  1. BestERP says:

    thanks for sharing the erp implementation cost … very nice.

  2. Jones says:

    These numbers are up there. I never knew it would take that much.

  3. Globalteckz says:

    Very nice information about the pricing for ERP implementations. My suggestion is to cover Open source v/s proprietary ERP implementation cost. This will allow user to understand the effectiveness of Open source incase of budgets are low.

    apart from the above which you covered there are other ERP costs also such as – support cost, future customization

    Thanks
    GlobalTeckz

  4. Topaz says:

    Good informative on SAP pricing , one mejor part is Hardware. i have found this site on vast SAP costing analysis and Return on your investment calculation. http://bgrajib.blogspot.com/2013/04/sap-hardware-sizing-and-cost-saving.html

  5. ERPdeveloper says:

    Hello Greg,

    I stumbled upon this article when doing a google search for SAP implementation cost and I must say you have included the most crucial points. I also agree to what Globalteckz says above. It would be nicer if this article covered costs involved when companies opt for free open sources. I am going to definitely use the information you posted here to talk to my future clients who need more information when choosing a solution that fits in their budget and I will push them this url in the process.

    By the way http://crmprogrammer.com does a great job in the cost effective Custom ERP/CRM applications using free open source. You might get some information from there.

    Thanks

  6. James Franco says:

    The average total cost of an ERP implementation was $2.8 million, or 4.6 percent of annual revenue.
    Thinking-minds.com

  7. lamin Sanyang says:

    Names of Governments using Microsoft Dynamics or Navision as a Financial Management System?

  8. upendra Awasthi says:

    We have our ERP system developed in asp.net and the price is less then you expect. contact me for further queries

    +91-8979792990

  9. Manuelbcd says:

    Thanks for the article, it’s interesting. But just one doubt: how many workers do you mean when talking about “middle-sized” companies?
    Regards

  10. Thank you so much for sharing such a informative post with us. I was searching on the internet for identical information and came across your blog post. It was proved to be a very helpful for me.

  11. Vikasthkur says:

    Hello!
    I am Vikas from Himachal. I need to buy a software solution for my Truck fleet management, fuel station and workshop management. The software shall be capable handling financial accounting, operations, payroll etc and multiple reports can be generated. Kindly suggest the best value for money solution.
    Your suggestion shall be helpful for me as I am confused what to do? What do you advice ?
    Thanks.

  12. raghu says:

    Very nice information about ERP Implementation Cost. Good information keep on posting my friend.

  13. Alex says:

    How to set up cash sales entry such as daily Petrol cash sales in Fuel Station, without passing a separate Receipt entry and Sales Entry in Dynamics GP 2013?

  14. eSupplier says:

    There are number of companies providing ERP solution SAP / ORACLE / MICROSOFT etc… It’s very important to deploy correctly to get maximum return.

  15. vara cn says:

    Hello,
    We are SAP Service provider company in Bangalore and USA.
    We are specialized in implementing SAP Business One for Small and Medium sized industries.To know more information,please visit url;www.sapintellect.com

    Thanks
    Vara

  16. Pratharv Raj says:

    ERP is the best solution when it comes to customizing businesses in your own way. There are multitude of benefits with ERP, such as low operational costs and effective utilization of information etc.

Ask This Expert a Question / Leave a Comment

 

 
 
Live chat by BoldChat
Show Buttons
Hide Buttons