How much does ERP cost?
The perennial question, the one which comes up at the very start of the sales process in software sales, “how much does ERP cost?”, is dreaded by ERP salespeople the world over. Not least because, it’s a difficult question to answer but certainly legitimate, and fair to ask.
If you have googled “how much does ERP cost?”, and landed on this article, I promise you will leave with a much clearer idea. But first, please permit me to go round the houses just slightly.
While it’s a great question to ask, and essential to understand as you go on your software procurement journey, there isn’t a single answer.
How much does ERP cost? – It depends on the software
Like anything else in life, there’s best of breed, and then there’s ….. well….. not best of breed. Just like there’s a price variation between makes and models of cars, there’s similar variations with software.
Best of breed software is not necessarily the most expensive on the market but you can expect to pay more for Oracle, SAP or Microsoft than say, a small independent software vendor with a smaller geographical or sector reach.
When you procure from a vendor, like the aforementioned, you are paying for things such provenance, reliability, reputation and lots (and lots) of experience.
That doesn’t mean that it’s unaffordable. On the contrary, lots of best of breed software vendors have designed starter editions for small companies or priced their midmarket software so as not to be cost prohibitive. The market drives the price after all.
NetSuite is the world’s fastest growing cloud based software. If it was unaffordable, it wouldn’t sell.
How much does ERP cost? – It depends on the features and functions (pricing model)
Nearly all software vendors operate an upsell pricing model which means your price will increase in line with your usage. Each software vendor will take a different approach to this which will impact on costs.
Let’s compare two well known mid-market cloud based ERP products – SAP Business ByDesign and NetSuite.
SAP Business ByDesign will sell you their entire suite of software, whether you plan to use it all or not, but the price will vary depending on the user license types. A CRM user might be relatively low cost but a supply chain user will be much more expensive. The configuration of users dictates the cost. This could be a useful pricing model if you plan to consume lots of the software but have few end users.
NetSuite, on the other hand, an Oracle owned product, will offer you some core software (typically finance and/or CRM) alongside full permission users (General Access users) for a relatively low cost. Your price then builds in line with the amount of software consumed. The price will increase according to the number of add-on modules you buy.
As a side note, I’ve heard this described by other vendors as “hidden costs” but this is a rather misleading description – it’s just a pricing model. You might like to add some advanced inventory modules, or some project management modules. The idea is that you don’t over consume the software, instead you buy exactly what you need. Many people take a phased approach to NetSuite implementation where they implement the necessary modules first, secure that they can extend the functionality at a later point by adding more.
In any case, you are unlikely to find a software vendor take a “flat fee” approach, there will always be optional extras that increase your cost.
It depends on your size and complexity
The bigger you are, typically the more software you will consume. That goes for both the complexity of your business and the number of users.
Some software vendors offer price breaks to allow smaller companies to take advantage of a preferential price. For NetSuite, they have a Limited Edition version for companies with fewer than 10 users. The Mid-Market Edition caters for up to 1000 users whilst their Enterprise Edition is for over 1000 users.
Many people take a phased approach to NetSuite implementation where they implement the necessary modules first, secure that they can extend the functionality at a later point by adding more.
It depends on your implementation partner
You might want to procure your software directly from the software vendor or you might prefer to use a VAR (value added reseller). Both can resell you the software and both can handle the implementation, but they are not the same experience.
A reseller of the software might be local to you, they might be more readily on hand to drop into your business during the implementation. A VAR might also have alternative software or software extensions which can add value to your implementation. They might be a specialist in your particular sector (like CloudTamers’ Property Lease Management for NetSuite). You might also find a VAR partner is less likely to charge you “London prices”.
As well as charging a more favourable day rate, you might find your VAR partner will have better or more relevant experience. This impacts on your costs positively, since more experience equals a faster and lower risk implantation.
At CloudTamers our consultants have been implementing NetSuite for as long as anyone in the UK and with over 50 NetSuite implementation under our belt, we know our onions.
But, what it all comes down to is size and scale. A reseller is likely to be smaller and offer a more bespoke, hand-held implementation service and added focus. The software will cost the same under every circumstance so where VARs compete, both with each other and with the distributor, it’s in the implementation experience.
So, how much does ERP cost?
Getting back to the original question (because, let’s face it…. You still need to know…..) there are some general rules of thumb you can apply.
You can expect to pay circa £800-1000 per user per annum for your full suite of software and user licenses.
You can expect implementation (the one off fee you pay in year one to get the software up and running) to be circa 2- 2.5 times the price of the annual licenses.
For a cloud based, mid-market, best of breed solution with circa full 20 users and a “reasonable” amount of software, you might expect to pay between £20-25k per annum for the software and circa £35-40k for implementation (depending on complexity and partner)
Now, the question you should really asking is – how much will it cost not to buy ERP software.
For a complete and accurate quote of how much ERP costs please contact us. CloudTamers are one of the UK’s longest standing and most experienced NetSuite partners.
Written by Emma Stewart – Sales & Marketing Director at CloudTamers (one of the UK’s longest standing NetSuite Partners)
CloudTamers is specialist NetSuite partners and have built exclusive HR for NetSuite and Property Lease Management for NetSuite native applications. To learn more about our 30 year business history, 12 years NetSuite history or our 50+ NetSuite implementations, get in touch