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How Much Does an ERP Implementation Cost?

Mon, Jan 05, 2015 @ 09:55 AM / 0 Comments / in ERP Software, ERP Implementation by Chandler Hutchison

Executive Summary:

The cost of implementing ERP varies depending on the type, size, and location(s) of the organization; the price ranges for medium to large scale businesses from $150,000 to over 10 million for the software itself based on users, and user types.  Other costs to consider include:

  • Cost of Database Management
  • Infrastructure Costs
  • Implementation Services from your VAR or CSP
  • Recurrent Costs

Updated: 04/20/2017 Determining how much an ERP implementation cost your organization can be a tricky affair. This is because no two implementations are the same. The type of system you want, size of your organization, functionality required, user access levels and other factors will all affect the cost.

However, there are some general guidelines that can help you determine the charges to expect.

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 cost by business size:

  • Small businesses: $10,000 - $150,000
  • Mid-sized businesses: $150,000 - $1 million
  • 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 for Operations can lower these costs deliniated 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.

 

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:

Cost_of_ERP

i) 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.

ii) Industry of the organization

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.

iii) 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. 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.

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:

Webinar Replay Dynamics 365 EnterpriseInfrastructure Cost

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.

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 $75 to over $200.

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.

Recurrent Costs

The recurrent costs of the ERP will vary from vendor to vendor. Some vendors lower their implementation cost but charge high renewal prices. Others do the opposite.

The standard license renewal fees for an ERP is 10% to 15% of the software costs. Therefore, if your ERP costs $1 million, your annual renewal fees will range between $100,000 and $150,000.

A typical ERP installation for a mid-sized enterprise will range from $150,000 - $750,000. In this article, we focused on a typical implementation costs of MS Dynamics or NAV systems. However, the information can also be used as a general guideline for determining the cost of implementing other ERP systems.

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 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 sales@clientsfirst-tx.com.  As Microsoft Gold Partner, our Clients First Texas and Minnesota offices offer Dynamics AX ERP to the medium to large manufacturer and MRO across the United States and in 11 countries and counting.


Inventory Guide to ERP 

Tags: ERP Software, ERP Implementation