ERP pricing and advice

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ERP systems have been proven to improve resource and operations management in companies of all sizes, saving businesses time and money in the long run by increasing the efficiency of their processes. But making the switch from a legacy system to ERP software is an investment that has to be considered carefully. So, let’s talk about ERP pricing and advice on how to choose the right solution for your budget. 

How much does ERP cost?

The cost of an ERP system will vary greatly depending on a number of aspects business owners need to bear in mind. Whilst a study from 2022 shows that businesses spend an average of $9,000 per user for an ERP project, the truth is ERP pricing is generally based on the type and complexity of the systems, as well as the company size.  

Even though it is suggested that business owners should anticipate a cost of around $1,000 per year per $1 million in revenue, there are many factors that apply when budgeting for your new ERP software. Small businesses, for instance, could only be spending a few hundred pounds per month if they used cloud-based ERP solutions. Bigger companies needing to streamline dozens or hundreds of processes will certainly need broader budgets. Other factors influencing ERP pricing might be: 

  • Customisation needs 
  • Functional requirements 
  • Implementation costs 
  • Maintenance and support costs 

This is why it’s so important to make an audit of your business and plan accordingly, as well as researching about the most common types of ERP and ERP pricing models before choosing your new provider.  

ERP pricing models: what you need to know

ERP solutions come most often in four different types of pricing models.  

User-based ERP software pricing

Commonly used both for on-premise and SaaS, with the user-based ERP pricing model, a company will pay for a number of users to utilise the ERP solution. These users can be considered concurrent or named users. But what’s the difference? 

Concurrent users are those that will access your ERP software at the same time. In this case, you buy a number of concurrent users, and it’s only them who can use the system simultaneously. As it is a matter of user count, there is no need for credentials, which makes this system useful for businesses that keep their employees on a rota or where workers are distributed in different time zones. 

Named ERP users, on the other hand, must identify themselves with separate login credentials to use the software. Of course, it is possible to create a named user that will be a group of people, but only one real user can be logged in at a time. So, it is hard to trick a named ERP user-based pricing model. 

ERP Software Module Pricing

ERP solutions are most commonly suites of modules that can be grouped together by the user (and paid individually) or bought together as part of a licensed package. With module pricing, we talk about an ERP pricing model in which companies pay for the modules they use. Oftentimes, there is also a fee per users accessing those modules.  

Pricing by module is usually considered a more cost-effective solution, as companies have more control over the functions and users they pay for. Nevertheless, costs might escalate greatly as more features and users are added to the ERP software.  

Enterprise ERP software licenses

Enterprise licenses are negotiated for a period of time in a case-by-case basis by the vendor, adapting it to variables such as module usage, company size, and user count. For at least a year, companies can make use of the ERP software without restrictions in the hired functionalities, which makes this license a reliable and predictable solution. Of course, at the end of the contract, it can be renewed with newer terms should the company needs change. 

Resource/usage-based pricing of ERP systems

The newest ERP software pricing model is the result of the great analysis capabilities of SaaS environments. Usage-based pricing measures the actual usage of resources (computing power, network bandwidth, data storage, among others) in real-time and charges their customers only for what they use.  

Budget-friendly ERP alternatives: exploring open-source options

Whilst there is so much to be said about paid ERP solutions, we could not forget to mention the possibility of using open-source ERP software.  

Open-source ERP software is oftentimes developed by volunteers and free to download and use, and whose code can still be altered to suit the business better. However, despite the license for open-source software being usually free, business owners should keep in mind that there might be hidden costs related to it, such as the cost of hiring programmers that take care of the software. 

Budgeting advice on your ERP implementation costs

  1. Define clear objectives: start by clearly outlining your ERP implementation goals and objectives. Understand what specific functionalities and features your business requires, and prioritize them accordingly. This helps in allocating budget resources more effectively towards essential components. 
  1. Plan for hidden costs: anticipate and budget for potential hidden costs such as customization, data migration, training, and ongoing support. These expenses are often overlooked but can significantly impact your overall implementation budget. It is always sensible to allocate a contingency fund for unexpected expenses. 
  1. Prioritize essential features: determine which ERP features are essential for your business operations and focus on implementing those first. You can always add additional functionality later as needed. This approach can help keep costs down and streamline the implementation process. 
  1. Invest in training: allocate funds for comprehensive training for your employees. Well-trained staff are more likely to adopt the new ERP system effectively, leading to higher productivity and ROI in the long run. Consider both initial training for implementation and ongoing training for continuous improvement. 
  1. Monitor and adjust: continuously monitor your budget throughout the implementation process. Track expenses against your budgeted costs and adjust as necessary. Regularly review the progress of the implementation and be prepared to make adjustments to stay on track financially. 
  1. Negotiate pricing and contracts: lastly, it is possible to negotiate pricing and contract terms with ERP vendors to secure favourable rates and avoid unnecessary expenses. Explore options such as volume discounts, flexible payment schedules, and scalable licensing models that align with your budgetary constraints. 

Affordable ERP solutions for businesses

There is plenty of ERP implementation budgeting advice for businesses out there. But with such a big pool of suppliers to learn about and choose from, even the savviest business owner might become overwhelmed at some point in their search for an ERP partner.   

Let’s be honest: it’s not always easy to find the information you need when it comes to choosing a new software solution for your business. Some IT companies present all of their products in a tidy, accessible manner, whilst with others it might not be that simple to learn all you need to know about their solutions. From pricing models, to modules offered and hosting systems, there is just so much to take into consideration when making such a big commitment with a new IT solution. 

YourShortlist makes the whole comparative process of IT procurement a lot easier for business owners. After working with our customers to compile a comprehensive list of their IT requirements, we provide them with free expert advice and a bespoke selection of ERP vendors that match their expectations. 

We strive to make IT procurement into a simple and quick process for business owners. Contact us today and let our team of experts help you find your ideal ERP match.