How much does an ERP system cost?
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 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.
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 what for?
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 of 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.
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 price 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, their price is lower.
The Off-the-shelf ERPs usually cost less than custom-developed, but you would have to spend more on their implementation and customization later.
However, the average budget 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, their 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 solutions cost 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.
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 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 price 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.
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