Once you’ve decided that your business needs a proper inventory and accounting (ERP) software system, the selection process requires a large investment of resources but presents huge opportunities for future growth and cost savings. One aspect many companies struggle with during the software search is trying to determine an accurate budget for the new inventory and accounting ERP system. Many start off with an arbitrary cost estimate based solely on what they believe they should spend, and not based on any real-world frame of reference. Adding to the cost confusion and budget issue is the fact that many ERP software vendors are not transparent with their cost structures, using “bait and switch” tactics. This contributes to the sticker shock experienced by many companies when moving from an introductory system to a more advanced system.
Let’s review some information relevant to determining the true cost of an ERP system; the different software price tiers and factors that are included in and influence the cost of an ERP system. For more detailed information download our ERP Pricing Guide.
So how much does inventory and accounting ERP software cost?
There are 3 factors that almost always have an impact on cost: (1) the number of users, (2) the level of functionality and (3) whether or not your business chooses to implement via the cloud (hosted) or on-premise (in-house). Depending on the number of users and functionality needed, costs can vary significantly, and choosing to implement via the cloud will significantly reduce the required upfront investment. Other advantages/disadvantages in choosing to implement via the cloud are discussed in the ERP Pricing Guide.
Let’s consider 3 different ERP software tiers: introductory systems, middle tier systems and top-tier systems. Each tier provides different levels of functionality and can accommodate from only a few users to many millions of users. These different systems can range in price from $1,000 (or less) for a basic system for small and start-up businesses to millions of dollars for those larger businesses serving markets around the world. The ERP Software Pricing Guide contains more detailed pricing information.
It’s important to understand not only the costs associated with different software tiers, but also those factors that contribute to cost. These include license fees for on-premise implementations and monthly fees for hosted, maintenance fees, implementation fees, external consulting and customization costs, infrastructure upgrade costs and internal costs. Many of these costs vary significantly depending on the ERP vendor and needs of the business, but according to industry experts maintenance fees for on-premise solutions are typically 15%-22% of license fees, and license fees can range anywhere from $2,000-$5,000 per user. License fees and the cost of infrastructure upgrades are cost savings with cloud implementations, but all other costs are pretty much the same for each implementation type. Sometimes components that are not usually included in out-of-the-box software packages are available as needed at an additional cost, and can most often be added at any time. Examples include lot tracking and eCommerce solutions.
Just as there are various factors that contribute to inventory and accounting ERP costs, there are also several factors that can help businesses decrease these costs. For example, implementing a hosted (cloud) solution will significantly reduce the amount of up-front capital investment required, and being selective in the amount of data that gets migrated to the new system will also help to control costs.
Even though ERP software requires a large investment of resources, the benefits and cost savings gained as a result of implementing a new system will enable you to run your business more effectively and even allow you to repurpose staff or eliminate the need for new hires. Understanding how much inventory and accounting software costs will allow you to formulate an appropriate budget for the project. We remind business owners to treat a new software system like any other major investment (e.g. a full-time employee, truck, machinery).
Download our ERP Pricing Guide for the detailed answer to how much does inventory and accounting ERP software cost?