If your company is investigating implementation of an ERP (Enterprise Resource Planning) system, no doubt you have a boatload of questions. But all things said and done, one of the most important, especially for a small to midsize company or a startup, is: How much will it cost?
Because implementation of a highly functional, integrated accounting and business system, such as one of the Microsoft Dynamics ERP family, can be a significant investment, you have every right to know up front what kind of costs you are looking at.
Although the various Microsoft Dynamics ERP solutions differ, there are some guidelines for pricing that will apply to most small and midsize companies regardless of the solution they choose. Here are some questions to consider:
What is your type of business and how many ERP users will you have?
Different businesses have different requirements. A mid-sized manufacturing company’s ERP necessarily requires more complexity than does a comparable sized professional service organization. And because most ERP solutions are priced based on complexity as well as the number of concurrent users and the level of access required by each, a ball park estimate for a manufacturing firm or a complex distribution company would be around $4,000 per concurrent user. A less complex distribution company or a professional service organization might pay around $2,000 per user. If you have some users who only need limited access to the system, you may only need to pay a few hundred dollars each for these “light” users.
Will you need third-party add-ons?
Most companies require industry specific third party add-ons in order to extend or enhance the out-of-the-box ERP system. Typically, this might cost between 10% and 35% of the total expenditure for your integrated ERP solution.
What can you expect to pay for implementation costs?
Industry, business size, transaction volume, scope and complexity are all factors that can affect implementation costs. Often calculations are made based on a ratio of software to services. The fewer add-ons and specializations required, the closer the software to services ratio may be to 1:1. For many companies of average size and complexity, software and service ratio may be between 1:1.5 and 1:2.5.
What customizations will you require?
ERP “out of the box” is a powerful tool. However, most companies will want a bit, or quite a bit, of customization in order to be assured that the ERP solution fully integrates with their desired workflow. More customization and scope necessarily will require more programming, testing, and training of end users.
So what should I expect to budget for my ERP?
Taking all of the above into account, a typical midsize company might expect to pay between $150,000 and $750,000. These estimates are for an on premise implementation assuming that the cost of hardware and infrastructure have already been met. Hosted, cloud based solutions, if suitable for your business can save you some of that money up front in exchange for ongoing subscription costs.
There is of course a wide range between $150,000 and $750,000. To help you home in on a closer estimate based on the particular needs of your company, The ERP Software Blog provides a
By ERP Software Blog Editors