How Much Does ERP Software Cost? Key Considerations During Software Selection

First-time ERP software buyers often share one common question: How much does an ERP cost? The answer depends on several factors, including the number of users, deployment, training, implementation and more.

This article covers everything related to ERP expenses, such as implementation fees, pricing models, hidden costs, specific vendor fees and more. Let’s get started!

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Table of Contents

• How Much Does an ERP Cost?
• Factors That Affect Cost
• Implementation Cost Examples
• Non-Monetary Costs
• Pricing Models
• Pricing for Top ERP Software
  • Oracle JD Edwards
  • SAP Business ByDesign
  • Sage X3
  • SYSPRO
  • SyteLine
• Hidden Costs
• Creating Your Budget
• Predicting Your ROI
• FAQs
• Next Steps

How Much Does an ERP Cost?

The first thing you want to know when buying something is the total cost, correct? Determining the cost of an ERP varies according to industries, company sizes, the number of users and more.

Dmytro Umen, CEO and co-founder of software development agency Brights, gave us some ballpark estimates of ERP costs for numerous business types.

Generally, custom ERP development projects can cost anywhere between $25,000 to $5 million, making it a more expensive option when compared to the average cost of a third-party system for resource planning for small businesses.

“From my experience, I’d say that custom development costs for companies with more than 50 employees is $100,000–$200,000 and takes three to four months. For corporations, it takes from eight to 24 months and costs from $500,000 to $1 million.”

If you think about it, investing in ERP is like paying for a new car, house or home appliance. Umen described a few influences on ERP pricing.

First, customization level. The more tailored the solution, the higher the cost. Then, there’s integration complexity. Integrating with existing systems or third-party services can bump up the price. Also, deployment method matters. On-premise solutions often cost more due to hardware and maintenance needs, unlike cloud deployments.

“And finally, the vendor’s expertise and location can influence the cost. Vendors in high-cost areas (U.S., UK, Argentina) typically charge more compared to countries like Ukraine or Poland that also don’t compromise quality.”

Mark McShane, managing director of AED Training with experience managing multi-million-pound companies, shared that complexity and capability scopes are significant contributors to high ERP price tags.

[Complexity and scope of capabilities] aim to unify an organization’s operations, ranging from supply chain management to human resources, requiring advanced technology and extensive customization. However, by meticulously evaluating their needs, potential buyers can reduce costs. Shunning over-customization in favor of out-of-the-box functionalities that closely match their processes is key.

“Additionally, select a vendor boasting a transparent pricing structure. Negotiate terms of support and updates actively. This approach aids in cost management.”

Umen suggested opting for cloud systems to diminish ERP costs.

To reduce expenses, buyers can opt for cloud-based ERPs, which are generally cheaper than on-premise solutions.”

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Factors That Affect ERP Cost

There are several factors to consider before making your ERP selection. The total cost of ownership (TCO) for an ERP system can rack up thousands or millions of dollars.

This colossal variance in charge measures how different aspects contribute to a system’s final price. Some typical financial costs to review before deciding include the number of users, add-on features, deployment options and more.

Number of Users

You need to estimate the number of users that will initially have access to the program. Many ERP vendors charge per user, meaning the more people use it, the more expensive it gets.

You must also account for the cost of adding new users to your system and how that expense could increase as your company grows.

You’ll need to check with the vendor you’re interested in to see if they charge per user, especially if you have many employees needing access, as ERP costs can quickly add up.

Add-Ons/Customization

Program add-ons, customizations, or configurations aren’t cheap. You must find a system that meets most or all of your core needs through its out-of-box functionality.

Many vendors offer integrations with third-party add-ons or the option to include specific modules for increased functionality in your program.

The cost of these additional capabilities differs depending on what you decide to have and which vendor you go with for your base package.

Implementation Strategy

Depending on the technical expertise of your internal employees, you may use a consultant to smooth out your ERP implementation process. Most vendors offer support that may or may not include installation and employee training.

Some ERP programs list their most experienced consultants to implement the software successfully. Additionally, some vendors offer more consultative assistance, but this costs extra.

If you are looking at implementing ERP for the first time, you will likely need more dedicated technical assistance than a company with experience deploying this type of program.

Whether vendor-offered help or a consulting service is best for your business is critical in your ERP search.

Deployment Method

The upfront cost of deploying an on-premise ERP solution is more expensive than a cloud-based program.

However, the overall cost of these deployment methods evens out when you consider monetary factors such as training, maintenance and customization.

Both deployment methods have pros and cons, with upfront payment being one aspect that makes cloud deployment more appealing to some businesses.

Suppose you’re more interested in an on-premise solution, though. In that case, you should remember that although upfront costs are higher, companies with cloud ERP software end up paying about an equal amount for their solution in the long run.

Training/Customer Support

Training and customer support are two essential components to consider when estimating the cost of an ERP solution and how well a program will work with your company’s needs.

Some vendors offer training options on-site and via online tutorial videos and classes. However, depending on the vendor, this assistance may be included in your overall software price.

Additionally, more hands-on training options, such as having a specialist come to your business to help employees learn more about the program, typically cost more than receiving training through virtual self-paced courses.

Maintenance and Upgrades

You need to ensure your program continually updates as you develop your budget and ERP cost estimate. Additionally, the program needs upgrades that vendors may not include in your base software costs.

Ask your vendor how often you need updates and if they added them to the base price.

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Implementation Cost Example

Software implementation costs vary. Some vendors charge per hour or deployment options.

McShane described how multiple factors can affect the overall cost of ERP implementations.

Complexity of business processes, required degree of customization, data migration efforts and necessity for user training and support. More demanding needs elevate these costs due to increased time and resources needed to configure the system accurately and integrate it seamlessly with existing workflows.”

Umen also discussed the impact of indirect costs to watch out for:

Data conversion and migration, training costs for staff, ongoing support and maintenance fees after implementation. Additionally, indirect costs like system downtime and productivity loss during the transition can impact the budget. And if you’re using external consultants, their fees might exceed initial estimates, especially for prolonged projects.”

An ongoing myth states that the more money you invest, the more successful your ERP implementation will be. However, McShane debunks this misconception.

Success frequently hinges upon clear, strategic planning, efficient project management and solid user adoption — a well-articulated vision of the ERP system’s role in achieving business objectives combined with diligent execution and sustained support — is paramount for triumphal outcomes regardless of financial expenditures.”

We have a realistic example of how vendors leverage implementation charges.

Sage X3

Sage X3 says their on-premise and cloud costs exceed the overall subscription cost. The license fee is roughly $2,600 per user. Sage’s tCognition hybrid deployment model of onshore project managers governs offshore development teams. The prices are as follows:

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Non-Monetary Costs

The financial cost of ERP is likely what made you click on this article. However, significant non-monetary costs are associated with an implementation that you must consider as you prepare to select a program and undergo deployment.

Here are some other “costs” you’ll need to factor in as you install an ERP system.

Time

NetSuite says ERP implementations take about six to 12 months. It may be more or less, depending on the type of software, deployment options, data migration and training.

SMBs use, on average, seven internal resources, and enterprises use about 24 when deploying ERP. Therefore, you need to account for lost employee time and consider how you will make up any slack during this period.

For example, will different employees step up to the role of those committed to the project during this time? Will you hire contractors? These are essential factors to consider when conceptualizing your ERP implementation.

Productivity

With a group of your IT staff devoted to ERP implementation, productivity will likely decrease in the interim. This lapse in productivity is temporary and should increase once you successfully deploy the ERP solution.

You should expect projects to take longer and delayed answers to queries if you don’t have a backup plan for your staff members devoted to the ERP deployment.

Additionally, as you train users after deployment, productivity decreases due to courses, training and getting used to the system’s intricacies.

Pricing Models

Vendors typically use two main pricing strategies when developing the cost of an ERP system.

McShane described that the optimal pricing model relies on an organization’s needs.

Perpetual licensing may serve organizations wanting a single investment and possessing in-house system support. Conversely, businesses seeking minimal initial expenses, scalability and external IT management might find subscription models more appropriate.”

Umen described the pros and cons of both subscription and perpetual licensing.

Subscription models are often more flexible and scalable, making them suitable for businesses that anticipate growth or changes. However, for organizations with a stable, long-term plan, perpetual licensing can be more cost-effective in the long run.”

Let’s look at these different pricing methods and examine some of the intricacies of each.

Perpetual Licensing

Perpetual licensing is closely associated with on-premise deployment. This model allows users to pay a one-time upfront fee for access. This plan varies according to customizations and users.

This model often doesn’t include recurring payments for support, maintenance or upgrades.

Pros

• Costs less over time.
• Doesn’t rely on cloud providers.
• The software keeps working if you forget to renew your contract.

Cons

• Requires many updates to maintain security and operation.
• Higher costs.
• Lacks mobility options.

Subscription

A subscription-based pricing method gives customers access to the program monthly, yearly or multi-yearly. Subscription pricing is most applicable to companies that go for a vendor that offers cloud deployment.

Most subscriptions come with stipulations, such as a minimum duration contract and various pricing tiers depending on your company’s chosen functionality.

Pros

• Less expensive.
• More mobility and real-time access on any device.
• Your vendor keeps the system updated and performs maintenance.

Cons

• Can cost more over time.
• You rely on cloud vendors more.
• Need constant internet access, or the software won’t operate fully.

Other Pricing Models

McShane discussed alternative pricing options, such as consumption- and value-based.

Beyond traditional pricing models, buyers might explore a consumption-based approach, paying only for utilized resources, or adopt a value-based model that links the ERP’s cost to its delivered outcomes or benefits. Such strategies ensure costs directly correspond with usage or received advantages, potentially yielding a more defensible ROI.”

Umen stated that usage-based and tiered pricing models can provide flexibility to companies with varying needs.

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Pricing for Top ERP Software

This ERP application offers on-premise and cloud deployments with a licensing cost of $15,000 to $400,000. You can allot 15 to 1,000 users. You must have a minimum one-year commitment, and you can access custom quotes and free trials.

Oracle JD Edwards

This ERP application offers on-premise and cloud deployments with a licensing cost ranging from $15,000 to $400,000. You can allot 15 to 1,000 users. It’s required to have a minimum one-year commitment, and you can access custom quotes and free trials.

SAP Business ByDesign

SAP Business ByDesign offers cloud deployment and runs on a subscription-license-based pricing model.

For self-service users, the standard price is $11/user/month. The SCM pricing model is $24/user/month. Project management offers $24/user/month.

SAP offers CRM sales team users $89/user/month with a minimum of 10 users.

Enterprise users require a 10-user minimum. Standard is $149/user/month. SCM users are $199/user/month.

Sage X3

This ERP platform offers license-based and subscription-based pricing models. The minimum commitment is one year. Custom quotes are available, but Sage does not offer free trials.

Licensing starts at around $2,600 per user. For 10 users, a perpetual license is $45,000 per year, and subscription pricing is approximately $26,640 per year.

Sage ERP X3 Version Seven has a cloud and SaaS model perpetual license of $2,600 per user. The user range is typically 20 to 1,000 or more.

SYSPRO

SYSPRO requires a one-year minimum commitment and offers subscription-based pricing models. Custom quotes and free trials are not available. It also offers on-premise, cloud and mobile deployment.

On-premise deployment types range from $25,000 to $500,000. Pricing varies depending on the number of users:

SyteLine

Lastly, SyteLine offers on-premise and cloud-based deployment options. It provides license and subscription-based pricing models. You need a one-year commitment for purchase. Custom quotes are available, but free trials are not.

On-premise costs start at $42,000 for 10 years. You also have to pay for annual maintenance and support agreements.

Compare ERP Pricing & Costs with our Pricing Guide

Hidden Costs

Similar to a car or an appliance, ERP costs also have hidden or additional fees to consider, from maintenance and customization to training and security.

Umen listed some surprise fees and said having a contingency fund is a smart choice.

You’ve got to watch out for hidden costs like system downtime, which can disrupt business during the setup, and post-implementation adjustments and future improvements to address changes in business, security issues [and] performance, which are often needed, but not initially budgeted for. It’s wise to have a contingency fund, usually around 10%-20% of the project cost, to keep things on track financially.”

McShane conversed on asking vendors for quotes to understand unexpected fees better.

To evade or prepare for these costs, [buyers] should pursue comprehensive quotes that cover such expenditures. Moreover, selecting vendors with inclusive pricing is advisable.”

Here’s a breakdown of some hidden fees:

• Maintenance and Support: Your software may encounter errors or need upgrades. Some vendors offer customer support packages (e.g., bronze, silver, gold) with 24-hour phone support, interactive portals, webinars and more.
• Security: Cyberattacks are common. Suitable security measures, such as data encryption, multi-factor authentication, user permissions and more, safeguard your information from hackers. Although cybersecurity can be expensive, it should be a high priority.
• Training: Whether you’re training your IT staff or employees to use your new ERP, suitable training materials are ideal. Accessing ebooks, seminars, guides, certification classes and more materials helps you and your team better understand how to navigate and utilize the system. Most vendors offer these and other resources.
• Additional Hardware or Software: Additional hardware or software can help you maximize your solution. For example, if you purchase a point of sale (POS) solution, you’ll likely need accessories like tablets, receipt printers, cash drawers and credit card readers to maintain purchases, tips or employee management.
• Add-On Modules: You may need add-on modules for your prospective system. For example, your program may offer accounting, CRM and manufacturing, but you may need inventory management tools. Your current system lacks inventory management, so you need add-on modules that merge with the new application. Think of this cost as buying different-colored controllers for your new game console because you’re not happy with the one that came with it.

Creating Your Budget

How much should your company spend on an ERP system? It’s necessary to know the answer before choosing a vendor. You’ll want to account for the different costs associated with an ERP system when estimating how much you will spend.

However, determining how much your company can spend while being clear might be the most critical aspect of ERP software selection.

ERP software can be a significant expense. You will need access to your company’s operating financial data and budgeting information when developing your ERP budget. After all, you don’t want to lose your financial footing while implementing your solution.

You must account for recurring fees associated with ERP and ensure your company’s finances can support these ongoing costs.

You wouldn’t want to invest much money into a program only for it to become obsolete or difficult to operate in a handful of years.

To begin creating a software deployment budget, you’ll want to take note of the ERP costs listed above. If you don’t feel like scrolling or can’t remember them off the top of your head, these factors are:

• Training
• Maintenance
• Support
• Deployment Method
• Customizations/Add-Ons
• Upgrades
• Number of Users

Based on your company’s needs and the quoted prices from relevant vendors, you’ll want to develop an estimate of what the entirety of an ERP program would entail.

You’ll want to ask yourself: “Can my company support this financially?” and “Will the ROI of an ERP solution be worth the initial cost?”

When creating your budget, secure more funds than you’re estimated to need for your ERP project. Why? ERP implementations frequently exceed expectations.
The last thing you want to do is have the finish line in sight but be unable to reach it because you don’t have enough capital left to complete the project.

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Predicting Your ROI

When you purchase a new ERP solution, you garner a huge ROI across different business sectors and metrics, from increased productivity to lowered costs and more.

McShane advised that establishing measurable metrics is vital to gauging ROI.

Buyers seeking to quantify their ROI from a new ERP system implementation must define explicit metrics, such as enhanced operational efficiency, cost reduction and revenue expansion that capture the system’s influence. Possible indicators include diminished downtime, minimized inventory expenses, fortified cash flow or amplified sales through superior customer relationship management.”

Umen gave an example of how a company could measure sale conversions during post-implementation.

Let’s take a practical example. Say, after implementing the ERP, your sales conversion increased by 10%. If you were averaging 100 contracts per month and each contract has a lifetime value of $10,000, the calculation of your ROI would look something like this: 100 contracts multiplied by $10,000 multiplied by the 10% increase. That gives you an additional $100,000.

“So, in essence, the ROI from an ERP implementation is all about linking the system’s impact to specific business outcomes, and then quantifying these improvements in a way that makes sense for your business’s bottom line.”

Here’s a breakdown of where you should expect significant ROI.

• Boosted Productivity: When you automate routine tasks (i.e., allocating invoices, monitoring orders, paying employees), you save time and pinpoint your focus on more high-priority duties. Your newfound focus increases your productivity numbers.
• Increased Supply Chain Visibility: You can supervise your supply chain with real-time updates for on-time deliveries, bottlenecks, vendor reliability and more.
• Enhanced Customer Satisfaction Rates: Automating tasks and boosting productivity increase your on-time delivery and satisfaction rates. The right CRM tools help you maintain leads and client satisfaction to maintain new and regular customers seamlessly.

FAQs

What are ERP costs?

From our SME insights, ERP costs can range from $25,000 to $5 million or more, depending on customization, deployment, hidden fees, the number of users, training, implementation and more.

Why does ERP cost so much?

Customizations, complexity and scope of features, deployment, and more can affect an ERP’s price tag.

Is ERP cost-effective?

ERP systems can be cost-effective if you choose the ideal pricing model that suits your company’s worth and size. You can try perpetual, subscription, usage-based, tiered or other pricing models.

ERP systems can also garner ROI with increased productivity, supply chain visibility and customer satisfaction rates. You can establish other metrics to ensure you’re getting the right bang for your buck.

How do you calculate ERP cost?

You have to consider the number of users, deployment, the number of customizations you add, implementation and more.

As our SMEs mentioned, asking vendors for inclusive quotes and considering a 10 to 20% contingency fund for regular and extra expenses is essential.

Compare ERP Pricing & Costs with our Pricing Guide

Next Steps

An ERP’s cost doesn’t solely depend on licensing, deployment and users. You have to account for implementation and hidden fees.

Buying an ERP is like purchasing a car. You want something practical without spending an arm and leg. Formulating an adequate budget while allotting additional fees diminishes surprises and keeps you from exceeding your expected price.

Check out our free pricing guide for an in-depth analysis of what leading ERP systems cost.

Which ERP costs did you run across in your buying journey? Let us know in the comments!

SME Contributors

Dmytro Umen, the CEO and co-founder of Brights, is a seasoned technopreneur with over a decade of experience in software development and tech leadership. Dmytro provides expert consulting across diverse industries, including fintech, retail, edtech, healthcare, logistics, and manufacturing.

Mark McShane, managing director of AED Training, owns multiple businesses and multi-million-pound operations across heating, training, first aid, solar and digital PR niches. McShane was featured in PHAM News, Electrical Times, Heating & Ventilating Review and other publications. He also earned the Gold Feefo Customer Service Award in 2021 and 2020.