By Deeana Radley
As businesses grow, they will eventually reach a point when they need to change how they track customers, inventory, billing, etc., and adopt a more automated, robust, and integrated solution. Pen and paper, Excel files, and other short-term “good enough for now” options will eventually need to be replaced by an enterprise resource planning (ERP) system that can connect the company’s various data points—ensuring efficiency and accuracy.
This can be a daunting move; never mind dealing with change management challenges and the re-engineering of company processes, an ERP system can be a significant investment for any company in terms of time and money. What follows are considerations regarding the pricing of a new ERP system. The post aims to help you understand what to expect from ERP software pricing, how much to budget for a new ERP system, and how to keep your overall ERP software costs down.
ERP Pricing Overview
“How much will an ERP system cost me?”
The question is largely impossible to answer due to the high variability case by case. Overall, a small to medium business (SMB) can expect to pay anywhere from $10,000 to $500,000 for an ERP solution, which is a wide range indeed.
To start to get a little more helpful, it is important to consider, at least, all the pricing variables at play, so that you are best fit to understand and explore pricing options without surprises.
At a high level, you need to consider the cost for several factors:
- the ERP software solution itself,
- the implementation by a third-party contributions or participation of your own employees,
- customization, data management, and infrastructure, and
- training and ongoing support.
Being aware of these areas can help you assess the full cost of the ERP system for your organization while guiding you as you gather information about the solutions you’re considering.
The overall cost of an ERP system can also vary according to the size of your company and/or number of employees, the pricing model or package that you pick (rent vs. buy; standard vs. premium), and the deployment model that you choose (software-as-a-service [SaaS] vs. on premise, though SMBs typically go for SaaS).
Skip the Big Guns
Solutions by large, well-reputed players such as SAP, Oracle, and Microsoft are extremely powerful, but they can be too powerful. They are likely not only to go beyond the needs of your organization, but also tend to be priced well out of your reach. While it can be possible to get scaled-down versions of big-name software solutions, there are fortunately numerous smaller players in the ERP space with offerings suitable to the requirements and budgets of SMBs.
Get Only What You Need
Quite often, ERP vendors are willing to negotiate on price, if they’re not outright flexible on pricing. They understand the expense that a system represents, and are sympathetic to businesses that want to pay for only what they need. As such, it is critical to know, well, what you need!
In choosing an ERP system—or really any business software—an important early step is to carefully consider all that you need the software to do. This means gathering requirements from internal parties and stakeholders that will be affected by the ERP system, and then comparing those requirements against the functionalities of the ERP systems you’re considering.
The price benefits of this step are twofold:
- Negotiating based on your needs will enable you to perhaps pare down what you’re paying for, in turn lowering the price.
- Knowing what you need increases the chances of the project being a success. This will translate to fewer resources and less time needed to get it right, minimizing potentially costly customization after the fact.
Flexibility Is a Virtue
The move to an ERP system is itself an adaptation to growth. With that in mind, SMBs require ERP solutions that can scale as they continue to grow their business. As you identify your present requirements, consider the needs you will likely have further down the line. This will allow you to choose a solution that offers not only those features, but also a clear path to implementation when the time comes and an idea of that future cost.
Get As Much Information As Possible
In addition to sorting out your present and future requirements, arm yourself with as much of the full picture as you can. Being better informed about ERP software will help your bottom line.
Don’t be shy to ask for a demo for any software you’re considering. See if it feels like something you can work in, and gauge how well it performs the functions you’re looking for. Ask about similar businesses that have had success with that specific ERP software solution and let the vendors make their case.
Finally, all these considerations would be top of mind for any expert ERP software selection consultant. Yes, there are people out there who specialize not only in helping you make this major decision for your company, but also in steering you through the software pricing negotiation process. Being experts in vendor negotiations, ERP software selection consultants can help you get the best price for the ERP software system you’re looking to buy.
About Technology Evaluation Centers
Technology Evaluation Centers (TEC) is a global consulting and advisory firm, helping organizations select the best enterprise software solution for their needs. TEC reduces the time, cost, and risk associated with enterprise software selection with its advanced decision-making process and support application, software selection experts, and extensive resources. Over 3.5 million subscribers leverage TEC’s industry-leading research and detailed information on more than 1,000 leading software solutions across all major application areas.
Business & Technology Writer
Areas of Expertise: Enterprise Resource Planning (ERP) | Customer Relationship Management (CRM) | Business Intelligence (BI)
Deeana Radley is a business and technology writer with over 5 years of industry insight. She has written extensively on technology trends, software solutions and market developments, and particularly enjoys rendering complex topics accessible to beginners.