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Trying to select an ERP system is complicated and so is comparing pricing. That’s because there are so many variables that affect the cost. If you want to determine if your business can afford an ERP system, remember to take into account the ROI it will provide as well as how it can help your company compete and grow.
To give you a quick idea of ERP system cost, this 2021 ERP Software Report shows an average cost of $8,265 per user with an average of 26% of employees as users. As you go through the process of selecting an ERP system, you’ll need a systematic approach to determine ERP cost. This article provides a comprehensive breakdown of the variables to consider when trying to determine ERP software price as well as an explanation of each. In addition, here is an ERP Cost Template to use as you go through the process of calculating ERP system prices.
If the ERP system you choose has gaps in some areas, you may need to add some other software applications. Maybe you need stronger capabilities in a specific area such as manufacturing, so you need software that can accommodate those needs. Since the add-on(s) is not part of your ERP project, there will be an additional licensing cost that you’ll need to add to your total licensing costs.
The cost of implementations can vary depending on many things, but it is the most expensive part of your ERP purchase, however, it is a one-time cost. You can anticipate that it will cost you between 1.5 to 2.5 times the cost of the software itself.
Hiring a good ERP consultant can prove to be very useful, especially if you do not have an internal resource who is experienced with implementing an ERP system. It will be important to have someone who knows your industry well to be effective. They should both know the ERP system you plan to use as well as have experience working with other companies that are similar to yours.
Consultant Implementation Pricing Models
As with any contract, read it carefully and ask questions about anything concerning. Carefully consider how much time you will need from the consultant. It may be a lot if you are new to ERP so even though a fixed price contract might seem appealing, it might not make sense if it doesn’t end up covering all of the work you’ll need from them. You could end up paying a high hourly rate to complete the job after the contract expires. Think all of the options through and be sure to have a clear definition around your agreement.
Based on how your business operates and how flexible you are on adapting your processes to the system, you may need customizations to the software to have it work with your unique processes and needs. Your provider will charge you for customizations so try to keep them to a minimum. When implementing a modern ERP system, it probably makes sense for you to adjust your processes to work with the software since it is most likely based on best practices for today’s businesses.
When you customize a system, it can potentially cause merge issues with software updates and upgrades since the program no longer works as it originally did. If you need a lot of customizations, the system may not be the best choice for your business and you may want to reconsider your selection.
This is an important cost and one that is often overlooked.
You will need to have data entry, testing, and data conversion to migrate data from your legacy system to your new system and to ensure your data is set up properly for your ERP system. Your vendor may help with some of this, but data migration will mostly be your responsibility, so use staff or temps for these tasks. Remember that data migration is often under-budgeted, so keep that in mind as you determine a figure for this expense.
Your vendor may provide some free basic training, but often it is at an additional cost (e.g., travel costs) particularly if it is done at your site. Training is crucial to ensure your staff is comfortable with the system and using the software to its full potential.
Implementing an ERP system is not an inexpensive venture so you want to be sure you get the most out of your system. Don’t skimp on good training. You will be able to have some people train first on the system and then teach others, but those staff must have a solid understanding of the system before they begin instructing others.
As mentioned earlier, IT staff will be needed for an on-premise solution to manage any technical difficulties that might occur. You’ll need someone that can troubleshoot issues to ensure users stay productive.
Most vendors have a knowledge base on their website and provide basic support for some time. It may be wise to also consider a paid plan that covers more advanced support to ensure if you have a problem you can get the help needed.
With cloud ERP, annual maintenance and upgrades are often included in the subscription pricing. However, for on-premise, there is a fee that covers annual maintenance and software upgrades. It’s a good idea to keep your software up-to-date to ensure it is supported and to have the new technologies upgrades offer.
When putting together your ERP budget, here’s a bulleted list of the important things to take into consideration no matter what type of system you choose.
As you can see, there are a lot of variables and considerations when determining the cost of an ERP system. Unfortunately, it isn’t straightforward as every vendor can be different in how they handle pricing. A cloud ERP system is the simplest since you don’t have to add any servers or worry about your IT infrastructure or maintenance. Cloud ERP licensing fees are also considered operating expenses whereas on-premise ERP costs are considered capital expenditures.
To help you break down the complexity of ERP system price, you can download our template to help you in the process. If you are a manufacturing or distribution company and would like information on an industry-specific ERP system contact our team who will be happy to answer any questions.
The post ERP System Price: Breaking Down ERP Software Costs appeared first on ERP for Manufacturers | Manufacturing Software | OptiProERP.
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