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Why Is ERP So Expensive?

Many businesses miss out on the benefits of enterprise resource planning (ERP) because of the system’s price tag. It costs an average of $30,000 for small and medium enterprises (SMEs), which not many companies are willing to spend. But if you consider how an ERP system can help a business, the cost is justified because you’re employing an all-in-one, centralized, and customized system that will organize your operations, make your teams work more efficiently and bring you better business results. Plus, with an SAP ByDesign reseller like Navigator Business Solutions, you can get ERP options that won’t break the bank.

How Much Does an ERP Cost?

Depending on the system that you implement (e.g. Microsoft Dynamics 365 versus SAP Business ByDesign), the cost of your ERP will vary. It will also change depending on the features that you use–if you employ a full suite, it will be more expensive, but if you pick apart the functions and keep only a few that are relevant to your business, then you can save a few bucks. Generally, though, an ERP costs an average of $30,000 for SMEs, but it can go as low as $5,000 and as high as $100,000.

Factors That Affect the Cost of an ERP

The costs you can expect to pay for an ERP varies based on the following factors:

Company Size and Industry

Larger companies will pay more for an ERP since they’ll require more features and functions. Plus, the scale of their implementation will be larger, and therefore, will need more manpower.

The industry your business is in will also affect the cost of an ERP. For example, companies in retail and manufacturing will pay more for ERP since they have more variables (such as production and inventory) involved.

Type of ERP

Whether your ERP is on-premise, cloud-based, or both will affect how much the system will cost. Generally, cloud-based ERPs are less expensive and also cost less to maintain. You’ll also have to consider the software licensing fees that come with the ERP.

Implementation and Customization

Implementing the ERP weighs a lot on your overall costs. You’ll most likely have to pay for a consultant, then you’ll need to hire a technician to employ the system in a company’s operations. There may be additional costs if the implementation is complex, such as if there’s a lot of data conversion involved.

Additionally, you’ll have to pay extra for some configurations to customize the system to fit your business’s needs.

Additional Servers and Hardware

You probably already have fragmented software in place even before implementing your ERP, and if you’re lucky, your chosen system might even integrate seamlessly with your existing technology. But if you’ll need additional servers and hardware to accommodate the new system and its features, then that will incur extra costs.

Testing and Training

After installing your ERP, you’ll need to test that the system works as it should, which would require paying for another technician. You may also have to provide training to your employees on how to use the ERP, which would involve hiring an expert or consultant and paying for logistics for seminars.

Support

Just like any other software or hardware system, ERPs need occasional maintenance, and that may entail hiring support staff or paying for support access.

Is an ERP Worth It?

The return on investment a business gets from employing an ERP far outweighs its cost. With an ERP, you improve your business internally by consolidating your workflows and data, which improves team efficiency, data transparency, and work management. In turn, you’ll see faster turnarounds, higher returns, and more opportunities to scale.

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