How much does an ERP system cost?
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Investing in software is an important step for any business. Especially if the software is somewhat like an enterprise resource planning system. These solutions are costly and their price depends a lot on the level of customization and deployment.
When it comes to cloud ERP systems, you can find out their cost by looking through the software distributor's website. Most of them like to put the system’s price on the main pages so the customer knows what sum they should be expecting. However, custom software development companies will rarely do the same. Most likely, they will provide the client with a quote after having a short interview with them to find out the ERP system cost. This way, development companies will know the main fortes of a company, its business focus, and other important details needed to create custom software that fits for a good price.
If you wish to get ready for the cost beforehand, this article will help you. We will look closely through all the aspects of ERP development costs and figure out how much will your ERP system cost you.
Relevant video about erp system 🎥
What is ERP?
ERP stands for enterprise resource planning, which is a process that helps companies manage their work processes and resources like sales, purchasing, human resources, finance, marketing, etc.
An ERP system is software that automates this process in order to make it seamless and smooth. These are applications that can integrate all of these processes, ensure real-time data reporting, smooth communication between departments, and unite all the important data in one source. The number of functions also affects the price.
ERP software may be SaaS, so users can access the data remotely.
Where the ERP systems are used and for what?
First of all, ERP is a system for the optimization of work processes so it is commonly used by large companies and enterprises with lots of processes that need to be managed.
But it can be used for small and midsize businesses. Its goal will still be an optimization tool and the price will stay the same but for small businesses, ERP software may change the game by making all the processes transparent.
Its broad number of features makes this type of software effective for any type of business there is but lifts up the price. However, an ERP system’s best feature is its ability to pay off this price. It has an incredible return on investment rate so you won’t regret putting your funds into the cost of its development. It’s projected for the ERP software market to reach $8.303.00 million by 2027 with an annual growth rate of 9.8% at a CAGR.
Most ERP software investors reach the expected ROI at the planned time. Faster work processes helped about 94% of businesses build a more effective workflow. It was recognized as a priority for implementation by 53% of IT decision-makers in 2018.
According to Panorama Consulting Group, by 2020 about 52% of companies are satisfied with an ERP software implementation no matter the price.
The most popular business domains for an ERP implementation are manufacturing and finance. According to Finances Online, they and IT domains together are 62% of all ERP users in the world.
Some of the main reasons and expectations for ERP implementation are as follows:
- shifting from legacy systems;
- visibility and improved reporting;
- improved workflow efficiency;
- business growth.
About 48% of businesses with implemented ERP systems report the improvement of their key business processes. This investment proves to be profitable even though the price can be high. So, let’s figure out what will be the cost of it.
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ERP systems cost: off-the-shelf solution vs. custom-developed systems
Before we dive deep into the comparison, let’s get one thing straight. The custom development of an ERP will cost more in most cases, but you will get a system tailored to your business needs.
Off-the-shelf solutions have a lower ERP system cost but we advise you to get this type of software only as a temporary option. Custom ERP will always give you more precise features aimed at your business needs.
Now, let’s look at it in more detail.
Ready-made ERP systems
Off-the-shelf ERP systems are the tested solutions that have a standard number of features for their cost. They often have a possibility for slight customization, however, it won’t allow you to tailor the software for your company completely. Hence, on-shelve ERP system cost is lower.
The Off-the-shelf ERP system cost less than custom-developed, but you would have to spend more on their implementation and customization later.
However, the average ERP system cost you have to count on is around $40.000 - $50.000.
Ready-made ERP systems have advantages that make them a good option for small businesses and the cost is one of them. For their price, these applications already have all the needed features for a small company and they are already tested by hundreds of users.
These applications might bring you comfort since you know that they’re updated regularly and used by other businesses like yours. Also, this ERP software cost is one of their most significant benefits. With these solutions, you’ll form a budget more easily since you’ll already know the price of an ERP system and how much its implementation costs.
Pre-built ERP systems are not appropriate for businesses with specific needs, like educational, healthcare, finance, and other similar domains. These systems won’t take into account your unique features and won’t be able to adapt to the changes in the workflow. If your business needs different features than those in pre-built ERP systems, you probably won’t be satisfied with it.
Even though the off-the-shelf ERP software costs less, you’ll still have to make a major investment without being sure that their price will pay off. It’s also important to know that integrating those systems into your existing software might also be more difficult and even cost more than custom software.
ERP Software Prices in 2022
There is no more evident information to detect actual ERP development costs than making accurate examples of it. We’ve collected 4 cases of ERP software development with up-to-date rates.
This Oracle-based ERP is famous for its customer-tailored rates. It makes the solution affordable for all scales of businesses. In brief, small businesses’ expenses for this ERP reach $2,000-$3,000 per month. Depending on the scaling and functionality required, pricing may vary.
Microsoft Dynamics 365
Developed by Microsoft, Microsoft Dynamics 365 offers a customized approach to each client. Despite that ERP is not a custom in its essence, it offers a wide range of tariff plans that depend on the number of users subscribed and the service pack offered. For Microsoft Dynamics 365 Professional Edition, an average cost is $65 per month per 1 user subscribed + $20 for each subsequent user. The most customer-tailored edition that is Microsoft Relationship Sales will cost you $165 per month for 1 user.
Containing all the business will need from an ERP, SAP ERP is not the cheapest good on the shelf. It offers both an annual license for $3,213 per user and monthly subscriptions that start from $108 per month for 1 user.
Odoo offers customized tariff plans that include the selection of services a business may need from an ERP, additional integration services to the choice, hosting type, and implementation services that could be also customized. The total cost may vary greatly from $20 per user per month to ten times more. Yet there is a trial Odoo Community Edition that allows testing the functionality of the ERP.
Custom ERP software development
Custom ERP systems cost more but are easily tailored to whatever business needs your company has. Without further adieu, let’s get to the point.
Custom ERP software costs more since it covers all of your business needs and requirements. It’s a unique product that you own, it is developed for your business specifically and will be aimed at your bottlenecks to fix them. There is a higher possibility for you to get a high ROI, however, you need to have funds to cover custom ERP software development costs.
Such ERP software cost starts from $150.000 and can go up to $750.000. However, there are ways to make the development price a little lower.
More than 50% of companies are satisfied with custom ERP software implementation and its price. With the custom development services, you will have endless support and top effectiveness. If you get your ERP software developed at RexSoft, you also can have post-release support and maintenance for the price you pay.
Custom ERP system development costs more but grants you software that fits your company’s needs with the highest level of customization. If you need some specific feature, it can be added, and if some of the standard functionality is unneeded it won’t be in your app.
Such an approach uplifts the possibility to reach ROI in the planned time or even sooner.
The only significant disadvantage of custom ERP software development is its cost. The custom ERP software cost can be lower if you’re working with a trustworthy and understanding software company.
One more issue you may encounter is a poorly qualified software partner. This is why we advise you to look through their portfolio closely.
Custom ERP System Cost Example
There is a brilliant example of an implementation and development of a custom ERP system that we have in our RexSoft portfolio. The ERP we’ve developed for BROKCARS project. The matter of that business lies in used cars transportation by companies’ trucks to a customer. The logic of the process includes the interaction of a customer who needs a car to be transported, a dispatcher, who controls the process, and a truck driver whose duty is to deliver a car to a customer.
In that ERP, we needed to implement the following processes:
- The communication between a customer and a dispatcher.
- Sending BROKCAR’s form to a customer to file it via the web version of ERP. Transferring an order to a driver.
- Tracking the route by a driver.
- Making photos of a car before its transportation by a driver and uploading them into an app via a mobile version.
- Sharing these photos with a customer and a dispatcher.
- Signing in a contract by a customer using a digital signature.
- Delivery of a car including unloading at the destination and acceptance by the customer.
- Tracking all the stages of transportation by a dispatcher.
- Planning further issues of transportation.
All these were planned to develop in the form of both mobile and web applications. To perform the task, RexSoft’s team has spent 1,110 hours in total. These included 80 hours of PM’s work, 40 hours of IT architect’s work, 200 hours of designer’s work, 320/360 hours of back/front end developers’ work, and 110 hours of QA’s work. The total cost of a custom ERP like that reaches $40,000 and that’s quite a loyal price for the work done. Add to this short term for launching the project (it was done from A to Z in 3 months) and you get the most detailed estimate for a custom ERP system.
ERP system development: how to pay less
We have three tips on how to cut costs you spend on ERP software development without losses in quality.
Plan what features you want in your ERP beforehand. This way the software will cost less since your devs will work less. And less work means a lower price if your developers have an hourly rate.
Outsource / Outstaff
Offshore development costs less than nearshore; when nearshore specialists take $150 per hour, offshore might take three times less money for the same amount of work. This way you can adjust the price of an ERP development. Outstaff also might be a good idea, this way you will be able to change the development team whenever you need to, pause the development, and control the app’s cost completely.
Choose the right cooperation model
Work with the companies who give you options. RexSoft provides several payments and engagement models. You can engage people for monthly or weekly payment, work with part- or full-time experts, and control how much the development costs.
ERP system is not a light investment but it has a great ROI for its price. You will most likely end up on the top with highly effective business processes after taking this risk.
It is proven that ERP systems help businesses grow and scale, so if you’re aiming for big success, seamless and optimized processes are a necessity. Even if it costs more.
Oleksandr KryvotsiukHEAD OF MARKETING AT REXSOFT