5 Factors That Determine ERP Implementation Cost

Buying and implementing an ERP system involves lot of unexpected cost. The process of buying, implementing, upgrading and maintaining an ERP system can be staggering or it could be less than you think. So, how much does ERP implementation cost? The shortest and probably the safest answer would be it all depends on the size of the organization. But, in between that statement there are various factors involved. Let’s go a bit deep into the matter and see what actually determines the software implementation cost.

Factors that determine ERP implementation cost:

  • The size of the company: Every company has their own set of requirements. While a manufacturing company will require a more complex and lengthy ERP implementation process, a professional company of similar size would be devoid of such huge challenges. Most ERPs have their price tag set according to the number of concurrent users. So in comparison, a manufacturing company might have to shell out something around $4000 per concurrent user whereas it would cost around $2000 per concurrent user for a professional company. As mentioned, the size of the company and the kind of ERP system it plans to implement matters a lot when it comes to pricing. For instance, costing involved in the implementation and maintenance of Microsoft Dynamics AX is more than Dynamics NAV. The simple reason being Dynamics AX is more suitable for large organizations having a strong international presence, whereas Dynamics NAV is best for small to medium-sized companies. Today, many solution providers like Accendo Technologies are ERP implementation solutions for businesses of any size.
  • Cost involving implementation: Implementation cost depends on various factors like the size of the company, complexity of implementation, software integration (third-party), etc. Usually, implementation costs are determined via software to services ratio. If a company is able enough to handle the ERP system without the support of external vendors, chances of software-to-services ratio to become 1:1 gets more rational. Mid-sized companies with average complexity witnesses a software-to-services ratio between 1 to 1.5 and 1 to 2.5.
  • Third-party software integration: Often businesses utilize third-part software to enhance and expand their existing ERP system. Though it is beneficial for businesses, but integration of such automatically increases the overall cost.
  • ERP system customization: Another factor that determines a typical ERP implementation cost. In order to integrate the software in the workflow, most businesses resort to a certain amount of customization.
  • Brand factor: Different ERP systems come with different price tags. So, the cost automatically goes up if you are purchasing ERP software that is costly.

The aforementioned factors play a pivotal role in determining an ERP implementation cost. But, the size and the industry of an organization is probably the most important factor that determines the implementation cost of such software. Usually, total software and services cost revolves around $200,000 to $700,000. Other additional costs incurred by the company are billed separately including hardware and infrastructure expenditures.

So, have you already implemented ERP system in your business? If not, then keep the aforementioned guidelines in mind while implementing such. After all, it’s your hard earned money that you plan to invest!

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