Are you planning to invest in ERP software in 2021? This blog features ERP Software Costing Guide to help you get to the right conclusion.
Enterprise Resource Planning is a crucial component for business operations as it helps businesses work in a planned and organized manner. From human resources, payroll management to inventory tracking, an ERP system can perform various operational tasks to ensure productivity and trackability in a better way. Businesses of every size are now seeking such lucrative solutions to take the burden of operations and management hassles off from their head by investing in ERP software. As it is now becoming cost-effective due to multiple options available in the market, it is an ROI-oriented process for businesses to invest in such solutions. This blog is the ERP software costing guide that helps you to get your calculations right before investing in ERP software for your business.
Cost Models for Purchasing ERP- Scale, Requirements, & Returns
ERP software solutions fit into the requirements of different businesses in a different way – Businesses need to access various factors before investing in ERP software to yield better returns. Since it is more or less dependent on the scale of business, employees/users, nature of the business, operations, activities/modules required, etc., it influences the ERP software costing in various ways. Nowadays, software vendors offer different payment models to businesses such as- subscriptions, perpetual licenses, monthly installments, etc.
The ERP-based SaaS (Software as a Service) Platforms offer monthly and annual subscription models for businesses to pay for the software. It also allows feature customization as per the business needs. The pricing may vary around $8- $2500.
It is a one-time upfront payment that ERP software providers charge as licensing fee to use the software. It is one of the popular payment models that companies usually opt for.
These kinds of software don’t have any licensing fee, but they may incur expenses in customizing the ERP software code as per business needs. The in-house developers or outsourcing are viable options to get customized features through open-source ERP modules. The businesses may also choose to integrate some of the open-source features in their custom development to increase the scope of functionalities.
Modules & Features – Prime Factors for ERP Software Costing
The businesses may work across different industries and may have various operations related to finance, HR, vendor management, procurement, etc. The modules are various components of a software package that offers the capability to perform different functions and operations to achieve desired business goals. These are developed to solve crucial business challenges related to specific operations. For ex- the warehousing management requires a holistic integration and may cost huge to the business. The features and modules are one of the prime factors that influence the pricing of ERP software.
List of some Modules & Features:
- Accounting & Finance
- Customer Relationship Management
- Supply Chain Management
- Payroll Management
- HR (Human Resource)
- Business Intelligence
Third-Party Integrations – Integrating Additional Features
In a holistic business environment, various partners or organizations work together to achieve efficient operability. The third-party integrations help businesses to easily integrate additional features to enable smooth workflow between various business activities and partners. Some examples of this are – logistics integration, data synchronization between partners, real-time reporting, etc. The ERP Vendors may opt to integrate third-party add-ons rather than developing new modules. It usually costs 10% of the licensing fee.
Data Migration & IT Infrastructure
As Data is a crucial business component, it is important to transfer essential data to the Enterprise Resource Planning software. It is one of the costs that businesses usually pay to vendors to safely migrate their data with various data points embedded in the software. Apart from it, if businesses are planning a custom on-premise software solution, they also need to think about IT infra cost for servers or cloud hosting which doesn’t apply if you purchase SaaS ERP software.
Total Cost of Ownership – Understanding Valuation for ERP Costing
The Total Cost of Ownership highlights all the pricing factors that valuate the pricing for ERP software. It may include all the possible pricing and costs that may occur in deploying ERP for your business.
- Implementation Cost:The implementation and development of software, inclusive of installing and setting up workflows.
- Customization Cost:
These are some of the extra costs that may incur over time if you plan to customize ERP products by integrating third-party apps, custom code for additional features, etc.
- Training Cost:
The staff needs to be equipped with sufficient knowledge about the new software to deliver the best outputs to the businesses with the aid of ERP software. This is a tenure where businesses usually need to spend time, effort, and money on Human Resources.
- Change Management Cost:
The businesses may expand and change their processes over a period of time. This can be a huge cost for the business to accommodate such changes in ERP software.
There is a requirement to update/maintain the software to adapt to the market’s technological changes. This is another factor that incurs costs for businesses over time.
- Support Costs:
The vendor may charge a support fee annually to assist your team in any issues pertaining to ERP software. This covers operational and tech issues.
The aspects discussed in the blog contribute to the pricing factors for ERP and may add to the cumulative costs. The ERP Software does offer a long-term value to the business and may yield good ROI over 3-4 years, delivering significant business advantages inclusive of profits and productivity. The best tip to get a cost-effective solution for your business is to research the best options and vendors available in the market. NOI technologies can help you with all these technical hassles to offer you the best ERP software along with crucial features as per your business needs.