Editors Note: This post was updated on February 12, 2017.
The advantages of a top-notch ERP (Enterprise Resource Planning) solution are well documented and no doubt as your business has grown and moved beyond such introductory offerings as Quick Books and Excel sheets, you’ve been pondering the advantages of a new system.
You will, of course, have lots of questions about functionality and maybe even customization, capabilities, third party add-ons and ROI. However, we’ve found that one of the most fundamental questions you’ll have to ask is whether your budget can support the cost of a new or upgraded ERP solution. In other words, “how much will it cost?”
Well, there is no way around the fact that implementation of an enterprise-wide integrated accounting and business system requires a significant investment, and even with the many variables to take into account, it can be helpful to have a general idea of what to expect.
There are some questions that will apply to most small to mid-sized businesses considering implementing an ERP solution:
- What is the type of business and how many employees plan to use the ERP solution?
Generally speaking, a mid-sized manufacturing company will have more complex requirements that say a similar sized professional services organization. Most ERP systems charge based on the number of users and the level of access they require. If yours is a manufacturing or complex distribution company, you might expect to pay around $4,000 for each concurrent user. On the other hand, if you have a professional services business, you might pay $2,000 for each concurrent user. If you have users who will require only limited access to the system, additional “light user” licenses could be priced at a few hundred dollars each.
- Will you require third-party software?
Third-party software products are designed to adapt the basic out-of-the-box software to better meet the needs of specific business processes that may be unique to your industry or preferred practices. Third-party add-ons typically account for 10% to 35% of the overall software cost.
- Implementation costs
Software-to-services ratio can be as low as 1:1, but more common is a ratio of from 1:1.5 to 1:2.5. The above-mentioned factors; industry, number of employees, unique requirements, and third party add-ons all enter into the price of implementation as do volume, scope, complexity and internal resources as well as the need for customization and training.
So, what kind of figures are we talking about?
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-premises implementation rather than a hosted or subscription-based solution, which might greatly reduce your overall costs.
We admit, this is a pretty big ballpark for an estimate, but it may help those just starting their ERP research to understand what factors influence the total cost of an ERP implementation. It should also give you a place to start when choosing an implementation partner. Beware of estimates that are way higher or way lower. Ask questions and be sure you know what you are getting for your investment dollars.
Quick Quote Tool
The ERP Software Blog has a very useful Quick Quote tool designed to help you in your budgeting for an ERP software solution. You’ll simply enter the answers to the questions above about your type of business, number of users and whether you would prefer on-premises or in the cloud application and the Quick Quote tool will automatically generate an estimate and email it to you along with recommendations for next steps.
Try the ERP Software Blog Quick Quote tool. It’s fast, easy and no commitment.
By ERP Software Blog Writers, Find a Local ERP Software Consultant