1. How much does an ERP system cost? When is it worth implementing?
2. What elements do we need to consider when estimating the budget needed to implement ERP software?
3. Let’s set strategic goals for our projects!
4. ERP functional scopes
5. How much does ERP cost? What are the possible payment models for the software?
We realize that if we talk about any improvements to our daily tasks in the company, sooner or later the question will be asked: how much do we have to pay for it? Is it worth investing and implementing a new system and will it pay for itself? How much does an ERP system cost?
It is impossible to answer this question unequivocally, so let’s estimate the costs of ERP purchase and implementation. If we want to do it reliably and honestly, we have to take into account several variables. The price is determined primarily by the size and individual elements of the enterprise that require improvement. If we buy basic software for small businesses, automating areas such as: accounting (including invoicing), online sales, then estimating the price of the ERP system is easy. Sometimes this area package also includes warehouse management. We do not need to implement such an ERP program in an advanced way. It is a well-thought-out and ready-made product, so the cost should be about several hundred zlotys a year.
However, if our company requires the implementation of an extensive ERP, the cost will be much higher. Being an entrepreneur, we will probably receive ERP implementation quotes from various IT companies. Let’s not be fooled by persuasions about cheap services, because over time they can paradoxically turn out to be the most expensive. If we need to improve a large number of areas because we have a large enterprise, then we should not make a purchase decision in a short time. Such an investment requires a lot of commitment and analysis from us, which can last up to several months. The costs of such services – including advanced implementation – may amount to tens of thousands of zlotys. In international corporations, however, several million euros.
As you can see, the costs of implementing an ERP system vary and are determined by various factors. Let’s discuss them. The price of software implementation is influenced by:
• which hosting and licensing model we choose (hosting is a service that allows us to place space on individual servers);
• the number of users that will use the software;
• whether we intend to expand the information technology infrastructure;
• whether we will choose a large number of different functionalities and tools, or will we rest only on the basic ones;
• the amount of fees that we will have to pay periodically for testing and updating the software;
• necessary employee training;
• whether we will implement additional modifications and necessary integrations;
• the amount of support the implementation company will provide us;
• the costs we will incur in connection with the transfer of our data to the new software.
Our biggest goal of implementing ERP software is to reduce operating costs. We also associate this overarching goal with increasing business and financial liquidity and automating many processes. If we run logistics and production activities, we would undoubtedly like to bring optimization and progress in production efficiency to this area. Focusing on the implementation of the ERP system will allow us to better communicate and provide customer service. Here, let’s quote two important business indicators on which we should base our ideas in the matter of ERP implementation. We are talking about ROI and KPI. So let’s explain them. The former is an abbreviation of the English phrase return on investment, which we translate as “return on investment”. The second of the indicators we provided is an abbreviation of the English key performance indicators. It is the key and most general performance indicator by which we assess the effectiveness of projects implemented in the company.
Let us remember that ERP systems are divided into different classes:
• global (with a wide range of functionalities);
• local (they are characterized by a narrow scope of functionality);
• industry – we dedicate them to companies that deal with a specific profession;
• universal – we dedicate them to various types of enterprises.
Most often, we want to streamline and improve such areas of our company as: accounting, online shopping, service, marketing activities, human resource. These are general assumptions. It is known that other areas also require automation, depending on what profession we represent.
In terms of payment for ERP system implementation and maintenance services, we have various licensing models at our disposal. Let’s note right away that there is no one right choice here and let’s treat everything individually. Let’s discuss them:
• on-premises – we choose this option if we have a large investment budget, so we want to serve a large company. Let’s be aware of the fact that we will always incur the highest implementation costs at the very beginning. Their amount is determined by the development of IT infrastructure and the need to pay for the ERP license. However, this model works well with a large number of employees. The downside of this option is the reduced scalability flexibility. To understand this problem, let’s explain “scalability”, because it may sound a bit enigmatic and puzzling. So, we translate “scalability”, from the English scability, as opportunities to increase activity in a given area or project. Thus, the “on-promises” option is unfortunately not very effective when it comes to small and medium-sized companies;
• ERP system in the SaaS cloud model – this model is most often chosen for small enterprises. If we do not have large investment budgets at our disposal, this is the solution for us! We do not have to incur high costs at the very beginning of ERP implementation. We are exempt from investing in our own infrastructure and we do not need to hire IT experts to maintain it. The costs we incur are usually proportional to what resources and licenses we actually use.