How much does ERP cost?

One of the most asked questions about ERP is: how much does ERP cost?

It’s difficult to find accurate pricing data for ERP systems which makes it harder to accurately calculate a budget for your ERP project.

What makes this even more challenging is that an ERP will touch many areas of your business. It’s increasingly important to ensure that the system includes everything that you need, and is futureproof to support your business as it grows.

Using budget data from real ERP projects, we’re going to take you through how much ERP costs. We’ll look at the cost per user and break this down into yearly cost and monthly cost, as well as look into a total system cost for all users in the business.

There are many benefits to implementing an ERP, companies will have main objectives and goals as a result of using the new software. It’s important to factor these future goals into your ERP budget and expected return on investment. We’re using an example company to show you how their budget for ERP is calculated.

Company X has 500 employees, it’s a decent-sized business, therefore we expect 8.99% of employees to use the system. In smaller businesses, we’ve found there is a higher percentage of employees who will need to use the system typically as there is a higher degree of interdepartmental overlap here.

For company X, we’re expecting to pay for 45 user seats in our ERP system.

For companies of this size, we can expect the budget per user to be $7,400 over a five year period.

On average, the budget for an ERP across businesses of all sizes is $8,265.

The budget per user for larger companies tends to be a bit lower than average. Larger companies benefit from economies of scale which bring their cost per user below average, however, they usually pay a higher total system cost compared to smaller businesses that will have fewer users.

Let’s break this budget down.

For company X, we’ll be spending $7,400 on each user of the system over 5 years. This breaks down to a yearly cost of $1,480 or a monthly cost of $123 per user. 

We’ll need to pay for 45 user seats at company X. This amounts to $5,535 per month for all users of company X’s ERP system. This works out at $66,420 per year for all users of the system.

Our five-year breakdown of this cost is $332,100.

Companies of the size as company X implement an ERP to grain greater functionality. This is the leading reason that larger businesses are looking to change to a new system.

There isn’t a significant difference in the next most popular reason - increasing efficiency. Similarly, this reason is also focused on making gains in existing processes and improving them to become more effective and profitable. 

The third most popular reason was to consolidate disparate systems suggesting large businesses are searching to gain interconnectivity with the software they do operate in their business.

Companies often have different requirements when searching for an ERP system.

However, we found that most businesses were looking for a system to have accounting functionality.

Almost half of businesses required inventory management and purchasing. 

Additionally, sales and distribution features also made it into our top five list of must-have features when selecting an ERP.

Now that you’ve seen a breakdown of how much ERP costs, you can use our data to apply the same knowledge to your own ERP budget.

ERP budget varies depending on business size, you can use our ERP report to find accurate data on ERP budget for companies of the same size as yours. 

Don’t forget that cost is only one part of your ERP selection project, when you’re selecting software remember ACE: affordability, cost, efficacy.