Why Is ERP So Expensive? (2024)

FAQs

Why Is ERP So Expensive? ›

There may also be adaptations you'll need to make to the software for it to fit your business. Depending on your current technology, you may require different customizations and integrations–if you need any. The more customization required, the higher the cost of your ERP system becomes.

Looking at the licensing cost, one of the critical components affecting ERP system prices is the licensing model, with on-premises and cloud options presenting distinct differences. The on-premises model involves a one-time licensing fee, typically 2.5-3 times that of a Software as a Service (SaaS) user.

ERP software price ranges between INR 8,00,000 to INR 1,00,00,000 depending on several factors in India. The factors like users, add-ons and implementation have the highest impact on ERP software price.

While SAP ranks as the second most expensive ERP system, it offers the fastest financial returns among its peers.

Much of the value of ERP can be traced back to the fact that all information from different departments is stored in one place. Without such a system, data is often spread far and wide across an organization in various applications and spreadsheets, making it harder for staff to track down whatever it is they need.

Poor communication between the IT team and business units. An unreliable ERP vendor or a software vendor who offers insufficient support. Software that requires too much customization. Poor planning, inadequate ERP research and testing of the software and lack of training for users.

Sage ERP solutions is one of the most expensive on the market, with ERP costs of $2600 per month, but this price accounts for three users.

You can plan to spend between 1% and 2% of your annual revenue on an ERP project. This includes the implementation services and the first year of software fees. If your business is under $3 million in revenue, you'll be closer to 2%. As your revenue scales up, you'll move into the range of 1% or less.

To start, the average cost of ERP software is between $1,740 and $9,330 per month, though this range can significantly increase depending on your annual revenue. To get an accurate estimate, you also need to know the number of users, implementation fees, and add-on functionality requirements.

As indicated, there's a lot of variation on the projected lifespan of an ERP installation. Accounting rules suggest replacing every five years, but many companies find that to be too soon. Other sources suggest a seven to 10 year replacement period. The ideal replacement period will vary from company to company.

Who is SAP's biggest competitor? ›

Oracle. Oracle is a world leader in SaaS and the world's most popular database management system (DBMS) as of February 2023. It offers not one but two powerful ERP solutions.

Will SAP be replaced? According to SAP, the company will be folding its ERP products into the HANA platform in 2025. Current customers will need to come up with a strategy to deal with these upcoming changes, including whether they want to continue using SAP's ERP solution.

Financial management

Although an ERP system will manage all of your business accounting requirements, it can also help manage a wider range of financial tasks, like budgeting, recording transactions, dealing with expenses, overseeing assets and collections, and measuring cash flow.

Key disadvantages include the high costs of ERP software, its complexity, slow implementation, and data migration. If you want your procurement process to be as efficient as possible, it's best to invest in a P2P solution that provides integration with an ERP system.

ERPNext is a free open source ERP software that is an awesome option for small to midsize businesses with limited resources who are looking to take advantage of some free ERP software solutions.

Implementation of a platform-based ERP solution for a midsized company may range from $50,000 to $1,000,000 (excluding software license fees) depending on the functional scope, customization, the number of users, integration scope, user training, organization structure, and more.

High upfront and customization costs

An ERP's price might deter small-to-midsized businesses that don't need all its features, especially if there's a need for training. A good example of what is an ERP disadvantage is the complexity and maintenance these systems require.

The factors that influence ERP pricing include the number of users you expect to have, the modules, customisation and integration you need and the way each vendor prices their software.

By providing real-time data on things like machine performance, inventory levels, and production schedules, ERP software can assist your production manager in making more informed choices that are better aligned with your company's goals and objectives — leading to improved efficiency and lower costs.