Are you wondering how much does an ERP system cost?
ERP (enterprise resource planning) system plays a significant role in the digital transformation of business operations in every sector.
95% of businesses have reported improvement in process times, team collaborations, and data processing. 23% of companies reported reduced operational costs, and 22% stated reduced administrative costs after an ERP system implementation.
The many benefits of ERP software for enterprises lead to a globally growing ERP market expected to reach $117.09 billion by 2030. 53% of businesses believe ERP solutions are priority investment options.
If you are also among business owners or CTOs looking to invest in the lucrative industry via an ERP software solution, you are making a viable decision. However, the first step to realizing your vision is cost feasibility.
You are at the right place, as in this article, we discuss how much an ERP system costs in detail.
How Much Does an ERP System Cost?
The final cost to implement an ERP system in your organization depends on multiple factors. There are two main ways to implement an ERP with associated factors and prices. These are as follows:
Ready-to-use ERP System
Several off-the-shelf ERP solutions are available in the market that you can buy and implement in your company. You need to consider the following aspects with a readily available ERP system:
Features of an ERP System
ERP systems have multiple modules, including human resources management, inventory management, accounting, customer service, etc.
Not every business needs all these modules. You have to analyze your business processes that require an ERP solution. The more features you add to streamline entire business processes, the costlier an ERP solution gets.
For example, a leading ERP service provider, Sage, offers multiple ERP solutions like Sage HR, Accounting, People, etc., to help enterprises meet their specific business needs. There are also additional capabilities, such as Sales App, Data & Analytics, etc., that users can get for an additional cost.
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The minimum ERP implementation cost varies with different ERP providers. For example, the minimum ERP cost by Global Shop Solutions is $25,000, whereas an ERP implementation by IFS Applications 10 intended for larger organizations starts from $300,000.
There is a huge possibility that a ready-made ERP system would not meet your business requirements entirely. You would likely require customization to the ready-made ERP system via additional plugins and third-party add-ons.
You might need to refactor the ERP code to meet your specific functional requirements, which is only possible if the ERP provider allows it and offers an open-source code base.
Open-source ERP software often costs less than proprietary software as they do not charge licensing fees.
To customize your existing ERP software, ERP providers may charge additional fees for add-on services. You would also require technical support to integrate these extra functionalities.
Similarly, if you plan to refactor an open-source ERP software implementation, you need ERP developers with skills in the technologies used in the ERP software.
The cost of developers would depend on the timeline of code refactoring. If you want to make detailed customization, the number of hours increases, and the total cost of developers increases.
You can hire a mid-level developer from relatively cheaper counties, such as Eastern Europe, at an average rate of $50 an hour to modify your ERP code and meet your business specifications.
You can opt for an on-premise ERP solution or a cloud-based ERP service. On-premise ERPs charge higher upfront costs, whereas low startup costs of cloud ERPs make them more appealing among small-to-medium-sized enterprises.
62.7% of companies go with a cloud-based ERP solution.
Aquilon Software, for example, offers an on-premises ERP solution starting from $1,500 per user to $3000 per user, depending on the selected ERP modules. The cloud ERP solution begins at $75 per user per month to $150 per user a month.
ERP vendors usually offer perpetual licensing with on-site ERP deployment or charge monthly/yearly/multi-yearly subscription fees for cloud-based ERP services.
The perpetual licensing includes one-time upfront fees that cost less over time. However, there are more expenses on security and maintenance updates. Subscription-based licensing is less expensive.
Small businesses can start using an ERP service quickly via minimum duration plans. ERP vendor is responsible for the security and performance maintenance.
Cloud ERP services tend to cost more in the long run. Also, there is an increased dependency on cloud vendors.
Number of Users
As you can see, the number of users in your company would affect the final cost of your ERP system. You need to consider the expected number of users in the near future, as the price for an ERP quickly increases with an increase in the number of users.
For example, ERPNext offers a free on-premise ERP solution for up to five users. Another ERP service provider, MRPeasy, offers every plan for only up to 10 users, and in case of more users, there is an additional fee of $79 a month for every 10 new users.
Training/ Support Requirements
You need to train your staff to utilize the new ERP system fully. Training material, such as tutorial videos and documentation, might be included in your pricing plan.
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If you need additional help and an ERP expert comes to train your staff, it could cause you additional fees.
Like any other software product, an ERP solution also goes through regular software upgrades. You need to confirm with the ERP vendors about the future upgrade support and if the base price includes the cost. For instance, ERPNext includes future security updates in its cloud deployment plan.
While the initial technical support is included in the initial fees, the long-term and consistent customer support can cost additionally.
For example, Dolibarr offers priority email support with premium cloud-based ERP deployment.
Custom ERP Development
You should opt for a custom ERP solution if you have unique business requirements, such as industry-specific regulatory requirements, complex business processes that an existing ERP cannot accommodate, legacy software that requires secure integrations, etc.
A custom ERP solution would be a better choice in all these specific requirements cases. Custom ERP development gives more control, security, and long-term cost-effectiveness. However, these benefits require more time and money.
We now list down the factors that affect custom ERP development cost, and you should consider these when deciding your custom ERP cost estimates.
ERP Development Team
You need the following qualified professionals to undertake the custom ERP development process successfully:
- A project manager working with you during the entire development process from project planning to deployment for 3 months minimum and on an average hourly rate of $40;
- 2 backend developers working full-time for minimum 3 months and an average hourly rate of $40;
- A front-end developer working full-time for minimum 3 months and an average hourly rate of $35;
- A UI/UX designer working for a minimum of a month at an average hourly rate of $30;
- An ETL expert for data migration and verification working for a minimum of 2 months and at an average hourly rate of $40;
- A full-time QA engineer working a minimum of 2 months at an average hourly rate of $30.
The total hours required to develop your custom ERP depend on the number of ERP modules you want for your business processes. The complexity of design and features also determines the total time and cost of an ERP implementation.
The hourly rate of developers depends on their experience and expertise. You can find freelance developers at a relatively low rate on freelance marketplaces.
However, a complex ERP implementation project requires senior developers on your team with experience working with various software architectures, development methodologies, backend technologies, etc.
Senior developers cost more than entry-level developers, but their specialized skills help manage junior developers on your team and select the correct development approaches.
The result is high-performance software that successfully meets all your planned requirements.
ERP Development Stages
The overview of ERP development stages gives a better estimate of the time required and the associated cost to complete an ERP implementation project.
ERP development life cycle includes the following steps:
- Requirement Analysis and Planning require an average of 2 weeks. The project manager and people from the organization who are knowledgeable about process requirements are involved in specification planning;
- ERP System Designing takes 3 weeks to complete on average. Various decisions take place during this phase, such as software architecture patterns, database designs, application user interface wireframes, etc.;
- ERP Development extends from 4 to 20 weeks on average. Developers understand the connection and working of every module, code every feature, perform API and database integrations, etc.
- Testing is a comprehensive stage that takes 1 to 3 months to complete. The testing team tests every feature for bugs, ensures modules integrate seamlessly, data stores accurately, etc. They also review the performance and security of the application.
- Deployment takes 3 weeks on average. Developers deploy the application for end-users and ensure each module integrates seamlessly with existing processes.
Tools and Technologies
Your developers can use open-source software platforms to develop your ERP, but some software tools are proprietary, and you need to pay for their license.
For instance, if your team plans to build an enterprise ERP using .Net technologies, Microsoft Visual Studio would be the best IDE platform as it is made primarily for C# developers.
Your developers could use several out-of-the-box development utilities for C# and .Net programmers. Visual Studio streamlines code writing, compilation, debugging, etc., and makes development easier for developers.
However, the Visual Studio enterprise edition suggested for enterprise-level development is a paid software product.
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You might decide to use third-party APIs for efficient product development. While most popular APIs for data visualization, text-to-speech conversion, locations, etc., are free, some API services might charge a price.
You also need to take into account the development infrastructure while estimating the cost of your custom ERP project. This could include data storage, application servers, memory management, networking, etc.
We suggest you opt for a cloud computing architecture. Leading cloud service providers, such as Amazon Web Servers, would offer you computation and storage resources at fewer startup costs. You would also get access to the latest technologies without heavy investment.
For example, you could opt for the following AWS services for ERP development:
- Amazon DynamoDB is a flexible and fast No-SQL database technology. The service costs $0.02 per 100,000 read operations or $0.9 per GB. It offers 25 GB free every month for the first year.
- Amazon SageMaker that your developers could use to build, test, and deploy machine learning models with managed infrastructure and tools. It comes with a free tier and paid plans;
- You could also utilize Amazon S3 storage for high data availability, security, and performance. 5GB of standard S3 storage is free for 12 months.
Cloud providers, including AWS, offer different pricing models. Some services to develop, test, deploy, and manage software solutions are free, while some cost according to on-demand usage or provisioned capacity.
You should opt for on-demand pricing if you have uncertain workloads and application traffic. If you have consistent traffic and workload, then provisioned capacity mode would work fine for you.
ERP System Maintenance and Support
ERP software maintenance is essential to ensure high performance and security in the long run. You would require developers to keep your ERP application up-to-date with newer software versions and hardware upgrades.
You would also need IT staff to provide ongoing support for the ERP system. IT individuals would help your users in case of any glitch in the ERP system.
According to a general estimate, the ERP maintenance price is 15-20% of the initial development cost.
Ready to Develop an ERP Solution for Your Enterprise?
An ERP system cost for your organization would mainly depend on the size and complexity of the ERP modules you want to implement, whether you opt for an out-of-the-box ERP solution or custom ERP development. The final cost of an ERP for a small-to-medium-sized business starts from $12,000 on average.
DevTeam.Space can help you via its field-expert software developers community if you need expert professionals to help you develop a feature-rich, scalable, and secure ERP system for your enterprise.
Every developer is vetted for software development expertise using the latest technologies and follows an AI-powered agile development process.
You can also partner with these high-quality developers for your ERP project by sending us your initial project specifications via this quick form.
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FAQs on How Much Does an ERP System Cost
ERP systems can get expensive depending on the complexity and customization of features you want for your organization. On-premise ERP installation costs more than cloud ERP software. The number of users and training costs also increase the total ERP implementation costs.
ERP costs lie between $15,000 and $35,000 a year if you implement a readily available ERP from ERP vendors, depending on the number of ERP functionalities you opt for for your business, such as a supply chain module, inventory management module, CRM module, business intelligence module, etc.
Customization of comprehensive ERP systems or custom ERP development from scratch could drastically increase ERP pricing. ERP systems tend to be elaborate as they integrate multiple business processes and are developed on the latest technologies that add to the final ERP budget.