general guidelines TO help you determine Your ERP IMPLEMENTATION COST expectATIONS
Updated 9/24/21: The cost of implementing ERP varies depending on many factors. For instance, the type, size, and location(s) of your business will change the cost and complexity of the project. Another consideration on the cost of implementation is whether or not it is a software as a service (SaaS/cloud) or on-premise deployment. The price ranges for small, medium to large-scale enterprise businesses can range from as little as $200 a month for a couple of users and up for the subscription based on user count and user types. Some software solutions now offer unlimited licenses for users (Acumatica Cloud ERP) at no additional cost with only modular pricing.
Learn from 4 businesses and their experience with the cost and benefits of their recent ERP implementation:
ERP implementation costs to consider include:
- Industry and/or multiple lines of business
- Cost of Database and management
- Is an IT administrator required
- Infrastructure Costs
- Implementation Services from your VAR or CSP
- SaaS and On-Premise Recurrent Costs
Determining how much an ERP implementation will cost your organization can be a tricky affair. Manufacturers typically have higher software and implementation costs than a distributor. Even make-to-order vs. repetitive manufacturing can impact costs. Professional services vs. Field Services is another example of an industry that can expect higher ERP overall costs and depend on the complexity of their customer demands. In addition, no implementations are the same. The type of system you want, size of your organization, the functionality required, user access levels, and other factors will all affect the cost.
How Much Does it Cost?
The cost of implementing an ERP varies greatly depending on the type of business, country, etc. Here is an estimation of the implementation costs by business size:
- Small businesses: $10,000 - $150,000
- Mid-sized businesses: $150,000 - $700,000
- Large enterprises: $1 million - $10+ million
The actual cost of the ERP software is only a fraction of the implementation. The majority of costs will go to internal and external human resources. Implementing a cloud solution such as Dynamics 365 Finance & Supply Chain or Acumatica can lower these costs delineated here of the budget percentage allocation:
- Database management system costs: 5% to 10%*
- Infrastructure costs: 10% to 20%*
- Software costs: 15% to 30%
- Human resources costs: 40% to 60%
Moreover, there will be annual recurrent fees to be paid that are not included in the initial implementation. Check the recurrent fees carefully as they will significantly affect your costs in the long term.
*this can be lowered or eliminated by a SaaS (software as a service) deployment
3 Factors with Your ERP Software Cost
Generally, software costs range from 15% to 30% of the total cost of implementation. Vendors have different pricing models but the software costs will generally depend on the following:
1. Number of users
The number of users that will have to access the ERP will determine the price. The more users that need to access the ERP, the pricier the licensing costs. However, Acumatica has an unlimited user license and allows for everyone to use the ERP. Microsoft Dynamics uses a user count, but you can add or subtract users anytime in your contract (as of 3/16/21) through a CSP provider like Clients First.
2. Industry and complexity
If your organization is in a more specialized industry, it may be difficult to find an ERP that will sufficiently address your needs. Thus, the implementation may require heavy customization and third-party add-ons, which will increase costs. Even manufacturing and MROs have higher costs software and service costs due to the addition of industry requirements. Organizations with multiple lines of business will also impact the software and implementation project costs.
3. Number of locations
If your organization operates in multiple locations, the vendor may charge more. Check the pricing model of the vendor to determine how your costs will be affected.
Cost of Database Management System
The licenses for the database management system of the ERP are usually bought separately from the system or can be eliminated by a SaaS/Cloud deployment. The cost of the licenses is normally not included in the cost of implementation, since it’s a different product made by a different company such as Microsoft or Acumatica.
Some vendors may use a free database system like MySQL while others may recommend pricey systems. Most ERP systems either use Microsoft SQL Server or Oracle. Both databases are priced based on the number of users and/or number of servers (CPU).
Check the following links for the current pricing options:
The cost of the hardware needed to run the ERP is included in the infrastructure cost. The cost will vary across companies but will usually include backups, storage, desktop computers, and server infrastructure.
Generally, the infrastructure cost can run between 10% and 20% of the total cost of ERP implementation.
SaaS/Cloud solutions can typically run on any workstation or Internet-enabled device and servers are not required to support the software. One thing to ask your ERP vendor is if their mobility includes offline database entry. Many ERP solutions have mobile apps and some will and some won't work offline.
Having a great Internet Service Provider (ISP) is critical. Many companies that move to software as a service will have two ISPs; one with high availability and bandwidth and hardwired, and then another one that is less expensive but delivered in a different manner such as satellite. In case one goes down, you have a back-up.
Cost of Human Resources
Most of the ERP implementation budget cost goes to human resources. The cost of employees’ wages can account for more than 50% of the total implementation budget.
The first cost is consultation costs. Most external consultants charge hourly rates ranging from $175 to over $225. (updated 3/16/21)
Your employees will also be needed during the ERP implementation phase. Some super-users may need to spend more than half of their working weeks working on the new system. Moreover, you may need temporary workers to replace the employees that will be working on the ERP project. Try to choose an easy-to-use solution, mainstream ERP if possible. Moe mainstream solutions have a larger workforce to hire from.
The recurrent costs of the on-premise ERP will vary from vendor to vendor. Some vendors lower their implementation cost but charge high renewal prices. Others do the opposite.
SaaS options are often month to month or have an annual renewal which can typically increase by 3% to 10%. (updated 8/16/21)
The standard perpetual or purchase of a license renewal fees for an ERP is 10% to 20%of the software costs. Therefore, if your ERP costs $1 million, your annual renewal fees will range between $100,000 and $200,000.
A typical ERP installation for a mid-sized enterprise will range from $150,000 - $750,000. In this article, we focused on the typical implementation costs of Microsoft Dynamics. However, the information can also be used as a general guideline for determining the cost of implementing other ERP systems.
Ask us for a Quote
At Clients First Business Solutions, rated in the top 1% of VARS, we provide a wide range of competitively priced ERP solutions that can modernize and streamline a series of business areas, ranging from inventory, services and manufacturing operations to sales and accounting, while putting mobility, BI and analytics at your fingertips. For more information about our products and services, contact our sales team at 800.331.8382 or email firstname.lastname@example.org. As Microsoft and Acumatica Gold Partner, our Clients First Texas and Minnesota offices offer Dynamics 365 Finance and Supply Chain and Acumatica Cloud ERP to the medium to large manufacturers, services and MROs across the United States and in 14 countries and counting.