How Much Do ERP Systems Cost and Benefits Of Owning One

ERP systems have been here for a while now. Being a tried and tested technology, ERP systems update businesses’ management practices to the gold standard and keep vital information flowing between various departments. Most ERPs are either structured in a cloud-based or on-premise network, and each will have separate pricing structures. Cloud-based ERPs are usually paid as a subscription fee anywhere from $25 USD to upwards of $500 USD per user per month, whereas on-premise ERPs are paid per license starting from free to around $4,000 USD per user. The costs only account for the software license and do not account for the hidden costs of ERPs. You might be wondering what ERP systems can do, or the cost of ERPs. You’ve come to the right place as all those questions can be answered below!

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What Do ERP Systems Do for Your Business?

Enterprise resource planning (ERP) systems are making a revolutionary turn in the world of business management. Originally used by large companies, this business management software has increasingly been breaking through in the world of small and medium organizations and helping with the management of day-to-day operations. What used to be a logistical and structural nightmare hidden across a web of spreadsheets and documents within each cloud drive, one that held on to employees’ attentions more than any employer would want, is now more manageable, more synchronizable across departments, and more adaptable than ever before with the implementation of new ERP platform.

Cost of rep system article banner cross functional capabilities include sales, data, customer relationship, HR, engineering, production, finance, distribution, sales, and data

ERP systems allow businesses to support their core operations by collecting an integrated, continual stream of data and standardizes it to be accessible by employees, stakeholders, and clientele alike. ERP connects finance (including accounting), HR, engineering and integration, marketing, business intelligence, production, logistics, distribution, and the people involved in each sector all in one defined software (Source). In the long run, ERP reduces the time and expenses needed to execute and convert daily operations into comprehensible formats for each department, creates trusted and transparent data for management, stakeholders, and clients, and protects from unwanted data breaches with the integration of various security systems on the market.

The Cost of ERP and Potential Returns on Investment

At first glance, ERP systems are incredibly pricy and may steer potential users away due to the large upfront costs that exist upon the implementation of ERP systems. Before you consider signing a contract with an ERP vendor, it is important to know where you can find returns from ERP systems given the price tag set on ERPs.

ERP systems are an investment for your business and will have a substantial return on investment in both direct and indirect forms. Though ROI for ERP systems will be different for every business depending on their goals, here are some examples of potential areas where your business could see returns with ERP (Source):

  1. Streamlined Business Processes – ERPs give you the organization you need to seamlessly go through the day-to-day operations of running a business. ERPs help you avoid critical errors that can derail the path of products and services from your business to your client, effectively saving money and protecting revenue.
  2. Efficient Resource Allocation – ERPs allow for a broader view of the flow of business, which can help management notice over-commitment and under-commitment of each resource to various operations and reassign resources as needed.
  3. Upgraded Equipment Management – At the end of the fiscal year, a lot of equipment will depreciate and ERPs can help a business track depreciation among other things. Being able to track depreciation offers benefits like making educated financial decisions on used equipment transactions, and knowing when to upgrade. As an example, computer hardware depreciates 30% (Source) per fiscal year, so knowing whether it is more financially sound to maintain the equipment or upgrade will save money for your company.
  4. Integrated Information Database – One of the main more sought out uses for ERPs is the integrated information databases that it will provide upon implementation in your company. Integrated information will allow smoother communications between departments and more efficient business practices within the company. An integrated database saves time and money where people will no longer have to decipher information that only makes sense to a specific department and as a plus, that information is readily available.
  5. Accurate Inventory Data – The ability to track inventory prevents crucial mistakes and mismanagement of stock to ensure you can continuously provide products and services without worrying about overheads, blockages, and shortages. ERPs will help optimize the number of materials you actually need to keep on hand, saving you money and keeping your clients happy.
  6. Improved Customer Service – With integrated customer relationship management (CRM) systems within the ERP systems available on the market, company-customer interaction and the maintenance of a clientele database becomes much easier logistically and improves the service that a customer can get. In the long run, this saves money by maintaining the quality of service and happier customers who are more willing to come back.

 

Cost of Cloud-based ERPs vs On-Premise ERPs

Typically, when you search the market for an ERP that suits you, one thing to consider is whether a cloud-based ERP or an on-premise ERP is more effective for your business model.

A cloud-based ERP is typically sold via a subscription model (i.e., per user per month or per user per year). Your ERP data is stored on the cloud and only needs a stable internet connection to access. Cloud-based ERPs are usually managed by the vendor and technical support is more readily available. Advantages of cloud-based ERPs include lower initialization costs, readily updated software, and highly accessible data. Of course, the more accessible the data the higher the security risk, yet most, if not all companies have already implemented state-of-the-art security measures, deployed security teams to identify threats and follow strict security standards to ensure that their cloud-based ERP users feel safe when storing sensitive information in their server.

Software Advice has a tool that can be used to calculate the total cost of ownership for each software over 10 years. The cost prices are not exact, and should only be used to estimate trends. Notice how the costs of both ERPs tend to converge over time.

On-premise ERPs are characterized by their high initial costs and in-office server. To offset the high costs, on-premise ERP vendors offer perpetual licensing of their current software. The high initial costs are a result of the large amounts of infrastructure required to implement and deploy an ERP in your own office’s servers, as well as quality testing to make sure the ERP is set up properly. In contrast to cloud-based ERPs, on-premise ERPs give the business more control over their security, though it is not recommended for businesses without a large or experienced IT department to cover potential security risks and update the system over time. Putting the ERP into the company’s control has a large advantage in ERP customization since the infrastructure is already built with the company’s specific needs in mind.

Below is a graphical summary of the differences between cloud-based ERP and on-premise ERP:

comparison on cloud era versus on-premise era costsPrice Ranges for Popular ERPs (Updated July 2021)

Many ERP vendors do not disclose pricing information, however, some companies and third-party implementation consultants will provide a price range or a starting price. Please contact a vendor directly for a custom quote. All prices are in $USD.

Oracle NetSuite

Like many ERP vendors, Oracle NetSuite does not disclose pricing information on its website.

According to BetterBuys, the base NetSuite license costs $999/month and with an additional access cost of $99/user/month. The prices vary with the modules selected, length of the contract, and size of the userbase. For a small business, NetSuite can be implemented for $25,000. A medium-large company can expect to spend around $90,000-110,000 (Source) to implement NetSuite with a few add-on modules.

Microsoft Dynamics 365

Microsoft Dynamics 365 sells its ERP system in separate modules called apps. The first Microsoft Dynamics 365 app will cost $50-$180/user/month, and any subsequent apps are an additional $20-30/user/month per extra app (Source). Implementation of Microsoft Dynamics 365 depends on the number of apps subscribed and the size of the company. For one app, the cost of implementation is around $3,000, whereas a full implementation of apps could cost well above $25,000 (Source).

Starting from July 2021, small and medium businesses can capitalize on a package called Business Central, which offers a combination of various tools for your business. Since Business Central is a standalone solution, it may not be compatible with other Microsoft Dynamics 365 modules. However, it can prove to be a cost-effective choice for your business starting at $70/user/month for Business Central Essentials and $100/user/month for Business Central Premium (Source).

For more information, read Microsoft’s licensing guide or contact Microsoft directly for a custom quote.

Salesforce

Salesforce is a customer relationship management (CRM) system that can function as a cloud-based ERP system when paired with its service cloud offering. Salesforce sells 4 packages with various degrees of functionality. The Essentials edition of Salesforce is a good choice for small businesses as it can support up to 10 users at $25/user/month and is useful for managing sales and accounts. At $75/user/month, the Professional edition is a more complete version of Salesforce which includes forecasting and lead registration/scoring capabilities. A step up from Professional is the Enterprise edition which costs $150/user/month. In addition to all of the benefits from the Professional edition, the Enterprise edition is highly customizable and can manage internal business operations including the regulation of workflow and approval. Finally, the Unlimited edition includes the perks of the Professional edition with 24/7 support and unlimited customization and costs $300/user/month. (Source). Implementation of Salesforce can cost between $10,000 and upwards of $50,000 depending on the customization of the solution (Source).

Workday

As is common practice with many ERP vendors, Workday does not disclose pricing information on its website.

Workday started as a human capital management (HCM) software but is gradually adding new financial and ERP functionality each year. Although Workday is relatively newer in the ERP market, it is nowhere close to being less proven, guaranteeing that the software will be online 99.5% of the time in their contract (Source). Forbes lists the subscription cost of Workday at around $100-200/user/month. Workday requires a minimum 3-year contract in their terms. Typically, Workday implementation costs around 1.25x the cost of the annual cloud subscription (Source).

Additional ERP Options & Summary Chart

 

ERPPricing MethodUser MinimumImplementation CostCost Range
(per user per month for subscriptions)
aAce3On Premise Perpetual10Contact VendorStarting at $22,500 +
20% annual maintenance
Subscription5Contact Vendor$99 + $199 monthly hosting
Aquilon4On Premise
Perpetual
N/AContact Vendor$1,500-$3,000 / license
+ annual maintenance
SubscriptionN/AContact Vendor$75 -150
BizAutomation Cloud ERP5Subscription5Contact Vendor$79.95 + $149.95
for e-commerce
Dolibarr ERP & CRM6SubscriptionN/AContact Vendor$9.74 (basic)
$32.46 (premium)
ECount ERP7SubscriptionN/AContact Vendor$55 (month) $50 (year)
Epicor7
On Premise PerpetualN/AStarting from 1:1 price of license$4,000-6,000
SubscriptionN/A$834-2,500
ERPAG9SubscriptionUp to 20Contact Vendor$25
ERPNext10On Premise PerpetualUp to 5Contact VendorFree
SubscriptionN/AContact Vendor$50
Microsoft Dynamics 36511Subscription2$3,000 - over 25,00012$70 (Essentials)
$100 (Premium)
+ Customer Service
Professional
$50 and/or Sales
Professional $65
MRPeasy12SubscriptionN/AContact Vendor$49 (Starter)
$69 (Professional)
$99 (Enterprise)
$149 (Unlimited)
+ $79/10 users
after first 10
Oracle NetSuite13
SubscriptionN/AContact VendorStarting from
$99+$999 base cost
Odoo14SubscriptionN/A$3,060-$21,250 (New Customers)$24 (yearly)
$30 (monthly)
$3,600-$25,000+ customizable apps ($12 - 96 per app
Pilot ERP15On Premise Annual3Contact Vendor$1,995 ($665/license)
- 7,995 ($399.75/license)
+ 15% annual renewal
Subscription3Contact Vendor$99 - 499 + $125
- 669 setup fee
SAP Business One ERP16On Premise Perpetual LicenseUp to 5Contact Vendor$1,357 / license (Starter)
+ maintenance
N/AContact Vendor$1,666 / license (Limited)
+ maintenance
$3,213 / license (Professional)
+ maintenance
Subscription
(Cloud Hosted)
3, Up to 5Contact Vendor$110 (Starter)
3Contact Vendor$99 (Limited)
$132 (Professional)
Salesforce17SubscriptionUp to 5$10,000 - $50,000$25 (Essentials)
N/A$10,000 - $50,000$75 (Professional)
$150 (Enterprise)
WorkBook18SubscriptionN/AContact VendorStarting at $20/feature
Workday19SubscriptionN/AAround 1.5x cost20$100-200 w/ 3 year min
xTuple20SubscriptionN/A$2,000Starting from $175

 

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Mindfield Consulting has helped organizations lead their industries by creating powerful resource planning technologies birthed from spreadsheets and paper documents that allowed our clients to redefine a global business process to reduce risk and increase the delivery velocity of key products. We help organizations find the right mix of packaged and custom software from planning service delivery to remote locations to global trading systems for precious materials and resources. Mindfield Consulting has over two decades of experience delivering technology that meets every mission. Our clients win when they are empowered with the right technology and the right people for over 19 years across Canada. Mindfield specializes in custom software development, e-learning for corporate training, and Jira expert consulting.

 


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