ERP implementation cost factors
The following factors impact the final ERP implementation cost:
- Functionality – the more capabilities and functional modules you implement, the more expensive the ERP implementation is.
- Customizations – most ERP vendors charge extra for modules not included in the core price, industry-specific features, and advanced functionality; so many companies with specific workflows opt for custom ERP development as a more cost-efficient option.
- The number of ERP users – many vendors charge per user, so the more people use an ERP, the more expensive it gets.
- Transactional volume – typically increases with the user count and is dictated by business size.
- Integration scope and integration approaches.
- User training – some vendors offer essential training services for free, but customized ERP training on-site comes with additional costs.
- Organizational structure and geographic footprint.
- In-house IT specialists’ expertise and availability to assist with ERP implementation.
- ERP implementation partner’s experience and implementation methodology.
Contact our experts to get a ballpark ERP cost estimation
5 tips to reduce ERP implementation costs
Here are some proven tips to help you save money on ERP implementation without undermining the solution’s value:
1 Negotiate software licenses
ERP vendors' licensing and pricing have become increasingly complicated and differ from vendor to vendor. Thus, thorough platform research, a flexible negotiation strategy, and a skilled negotiation team are a must to reach optimal software agreements. When working with ERP vendors for the first time, we recommend turning to professional ERP consultancy or hiring a trustworthy ERP implementation partner to help you decide whether a longer-term commitment in exchange for better ERP pricing is a good option.
2 Be meticulous about large cloud contracts
Many companies choose cloud ERP software for its low entrance fee, believing that long-term commitments will save them money. However, even though cloud ERP providers take care of software maintenance, the reality is that you can spend more on annual fees than on an on-premises ERP solution, especially if you have a large user base and huge transaction volumes.
3 Rationalize the use of external resources
Ensure your ERP implementation partner does not overstaff the ERP project. To avoid overprovisioning human resources, look for maximum accountability and transparency as well as focus on comprehensive project planning and timely delivery of project documentation.
4 Avoid excessive customization
Be mindful of your company's requirements and avoid unnecessary customizations. You can opt for packaged ERP software if it covers 80% or more of your functional scope. Firstly, customizations of most off-the-shelf solutions are relatively pricey and can result in cost overruns. Secondly, customized software might not get updates from the vendor since each release would require a change in the custom code.
5 Draw up the ERP feature set
ERP scope expenditure and uncertainty are critical reasons behind ERP project budget overruns. To avoid paying more for the functionality you don’t need, you have to carefully plan key ERP features based on your budget and key requirements. First, focus on the most immediate business needs and then consider additional functionality. Finally, when drawing up the functionality scope, try to remain flexible about accommodating business growth.
