How Much Does An ERP System Cost?

How Much Does An ERP System Cost?

Figuring out how much an ERP system costs (or perhaps fair market value) is a tricky question to answer. And the right answer for it is “it depends”, thus this article is intended to provide you some general guidelines as a basis for further research.

I’ll focus on costs for mid-market solutions in this article. Dynamics GP and Dynamics NAV are positioned by Microsoft as ideal for companies with $20Mil – $700 Mil in annual revenues. Both of these two ERP systems base the software licensing on concurrent users (# of users that can be in the system at the same time) instead of named users (actual # of people that will ever need to be in the system).

High Level Summary Costs of 3 Different On-Premise Scenarios (See Below For More Details):

  • (1) 3 CONCURRENT USERS – FINANCIAL MODULES ONLY
    This scenario is about $20,000-$30,000 (software & implementation services. Hardware is extra).
    Presumes that no customizations are needed. Presumes no integrations are needed.
  • (2) 7-10 CONCURRENT USERS – FINANCIALS, SALES & INVENTORY FUNCTIONALITY
    This scenario is about $60,000-$90,000 (software & implementation services. Hardware is extra).
    Presumes that no customizations are needed. Presumes no integrations are needed.
  • (3) 12-15 CONCURRENT USERS – FINANCIALS, SALES, INVENTORY FUNCTIONALITY
    This scenario is about $120,000-$180,000 (software & implementation services. Hardware is extra).
    Presumes that few customizations are needed. Presumes little to no integrations are needed.
  • (For clients needing; project accounting, manufacturing, eCommerce, etc functionality then please contact Calsoft for pricing for your specific needs.

Here Are More Details About The 3 Different Pricing Scenarios

(1) COSTS FOR A 3 CURRENT USER SYSTEM – FINANCIAL MODULES ONLY

  • Software: About $5,000 – $8,000 (includes one-time software purchase and first year of annual maintenance). First 3 users are $6,000 and it’s roughly $3,600 per additional concurrent user.
  • Implementation Service: About 90-120 hours (set-up, configuration, testing, training and maybe a very brief requirements analysis [i.e. 8 hours]). As a reminder vendors typically charge $150-$195 per hour. Presumes that no customizations are needed. Presumes no integrations are needed.
  • Hardware & Related: Roughly $12,000 – $20,000 if you don’t have any of the hardware & related items.

(2) COSTS FOR A 10 USER ON-PREMISE SYSTEM – FINANCIALS, SALES & INVENTORY MANAGEMENT

  • Software: About $30,000 (includes initial software purchase and first year of annual maintenance). Roughly $6,000 for 3 users and roughly $3,600 for each additional user.
  • Implementation Service: About 220-320 hours (includes; requirements analysis, set-up, configuration, testing, training and go-live support services). As a reminder vendors typically charge $150-$195 per hour. Presumption that no customizations are needed. Presumption that no integrations are needed.
  • Hardware & Related: Roughly $25,000 – $40,000 if you don’t have any of the hardware & related items.

(3) COSTS FOR A 15 USER ON-PREMISE SYSTEM – FINANCIALS, SALES & INVENTORY MANAGEMENT

  • Software: About $48,000 (includes initial software purchase and first year of annual maintenance). Roughly $6,000 for 3 users and roughly $3,600 for each additional user.
  • Implementation Service: About 300-450 hours (includes; requirements analysis, set-up, configuration, testing, training and go-live support services). As a reminder vendors typically charge $150-$195 per hour. Presumption that few customizations are needed. Presumption that little to no integrations are needed.
  • Hardware & Related: Roughly $35,000 – $55,000 if you don’t have any of the hardware & related items.

Cost Components Of An ERP Project

1. Requirements Analysis Service

  • The detailed requirements analysis (RA) is typically the initial phase of the project.
  • Most vendors will provide ballpark pricing until a detailed RA has been completed.

2. Software Costs

  • Monthly subscription pricing (if evaluating SAAS solutions).
  • Initial software purchase (for on-premise solutions).
  • Annual software enhancement (valid for on-premise solutions). Typically 16% – 25% of the retail price of the software annually. Annual enhancement typically entitles the client to software upgrades (and sometimes technical support services).

3. Service Costs

  • Implementation costs ($150-$195 is the average hourly rate of service providers).
  • Typically one-time costs for set-up, configuration, training, etc.
  • Technical support services (ongoing costs that vary and depend on the client needs). $135 – $175 is the average hourly rate of service providers in the mid-market.

4. Hardware Costs (If Needed)

  • Server and related server software.
  • Firewall (this is not really an ERP project requirement but a business class firewall is always recommended if one is not already being used).
  • Database back-up solution (if needed).
  • Fail-over solution (if needed).
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