ERP Pricing Guide: How Much Does an ERP Software System Cost?

Enterprise resource planning (ERP) systems are powerful types of business management software that help organizations automate, streamline, and optimize operations across various departments. With a single platform, companies can facilitate the flow of information, access data, manage inventory, oversee customer relationships, and collect valuable insights with real-time data. 

If you are considering an ERP system for your business, one of the most important considerations is, of course, how to budget for such an important purchase. Understanding the various factors involved in ERP cost, learning about the different pricing models vendors use, calculating implementation costs, and keeping an eye out for hidden costs, as well as understanding areas where ERPs are a cost savings, are all essential in determining the total cost of a new ERP system. 

The Average Cost of an ERP Software System

ERP systems contain a wide range of tools, modules, and features, and the average cost varies significantly based on these and other factors. The 2022 ERP Report by Software Path surveyed over 1,300 active ERP software selection projects, predominantly in North America but also in international markets including the UK. Based on this sampling, the report found the average cost to be USD $9,000 (£7,400) per user.

This broad benchmark may not seem helpful at first glance, however, since the price depends on unique business requirements and considerations, it’s essential to research the needs of your organization and get a clear understanding of what your company is looking for before attempting to nail down a price range for a new ERP system. 

8 Factors Affecting ERP Software Pricing

The following factors can substantially influence ERP system cost. Consider these elements in your research as you set a budget, calculate potential return on investment (ROI), and determine which software solution is the best fit for your business. 

1. Software Licensing Fees

Software licenses are one-time costs, while subscription fees are a recurring cost; regardless, organizations will have to pay on an ongoing basis to use the ERP system. The cost of the license or fee depends on the vendor, the number of users, the software modules purchased,  and whether the ERP software is cloud-based or hosted in-house (also known as on premise). Increasingly, cloud-based ERP systems are becoming more popular with users because the added features are usually included in the same subscription price monthly.   Cloud-based software also offers increased security, reliable uptime, disaster recovery plans, and more.

2. Industry

Many different industries have unique approaches to or requirements for ERP software. ERP systems for the food and beverage industry, the lumber industry, and the precious metal industry, for example, will have very different features based on what businesses need most. Based on the core features, the price of the ERP system will increase or decrease based on modules and functionality needed. 

3. Number of Users

Another key variable in ERP cost is the number of users who will access the software. Many ERP vendors charge per active user on top of base subscription or licensing fees. Other vendors create payment plans based on the size of the organization and total number of employees overall. Others opt for a more “unlimited users” approach to accommodate various integrations needed across your business. Be certain to clearly understand the pricing models and the implications as your business grows and changes.  

4. Deployment Method (Cloud-Based vs. On-Premises)

Cloud-based ERP solutions are hosted by the ERP vendor or a third party and are generally less expensive than systems hosted in-house. On-premises software is hosted in-house and requires either existing infrastructure and hardware or the purchase of new architecture, which can drive up the price both immediately and longer term.

5. Level of Customization

A critical factor in the cost of an ERP system is the level of customization required. Modifications of the base ERP features, modules, or functionalities require additional development and testing, which can drastically increase the cost of the software. 

6. Number of Modules

Basic ERP system plans include several modules that most businesses are looking for, such as inventory management and accounting. However, a range of additional modules are available, from customer relationship management (CRM) to budgeting and forecasting to quality management. If you want to add-on more modules to the ERP system, you will need to pay for these additional functionalities. 

7. Implementation, Integration, & Training Costs

Implementing an ERP system involves several additional costs, including user training, customer support, consulting fees, data migration, and integration expenses. These costs can add up to more than twice the cost of an annual ERP subscription or license, and organizations must allocate resources toward implementation in order for the ERP system to be installed correctly. 

8. Maintenance & Support Fees

Ongoing maintenance and support fees are also required for ERP systems. Covering technical support, bug fixes, and system updates are essential to keep the software running smoothly, and these services come at an additional cost. 

ERP Software Pricing Models

Most ERP vendors use two pricing models when it comes to ERP systems: subscription plans and perpetual licensing.  In order to choose the pricing model that makes the most sense for your organization, you should consider your existing architecture, estimate implementation costs, and calculate the anticipated growth rate of your business. 

Subscription Model

Under the subscription model, companies pay a monthly or annual subscription fee to access the ERP system, which is hosted and maintained by the vendor. These fees are often tiered, with increased functionality and additional modules available at a higher price. Today, this pricing structure is the most common model used by ERP vendors across the industry.  

This model generally relies on cloud-based hosting and therefore does not require significant architecture or infrastructure overhaul or a hefty upfront licensing fee.  

Advantages of the subscription model include lower upfront costs and easier scalability, while disadvantages include sudden increases in cost due to unexpected spikes in demand or long-term cost effectiveness when compared to the perpetual license model. 

Perpetual Licensing Model

With the perpetual licensing model, companies pay a one-time licensing fee upfront and, traditionally, then host the ERP software on their own in-house servers. This model allows businesses to deploy the ERP system on-premises and is especially ideal for larger businesses with existing infrastructure and architecture already in place. 

Perpetual licenses are usually priced based on the number of users, add-on modules, and the level of customization required by the organization. 

While the perpetual licensing model eliminates ongoing subscription costs, they do require substantial upfront costs, require established onsite infrastructure, and can be more difficult to scale than cloud-based ERP software. 

ERP Implementation Costs

The full picture of ERP system pricing includes implementation costs. The ERP implementation process is long, lasting months or even years, and can cost upwards of 100–200% of the annual subscription or licensing fee. 

Total implementation costs include infrastructure costs (hardware and hosting or cloud fees), customization costs, personnel costs (labor associated with ERP consulting, development, implementation, etc.), and training costs. 

As you consider which ERP system to purchase, don’t forget to include ERP implementation costs alongside other expenditures. 

Hidden ERP Costs: What to Look Out For

The following costs are often underestimated or forgotten about when anticipating ERP system costs. Consider these hidden costs as well as how you can mitigate them before investing in a new ERP. 

Hardware

During implementation, companies purchasing an ERP system with a perpetual license may need to purchase additional network hardware, servers, scanners, or other technology infrastructure to support the new on-premises ERP.  Even companies implementing a cloud-based, subscription-style ERP system might have to invest in hardware updates depending on whether their existing computers can access the updated software. These are important features in the success of the implementation and your software, so you’ll want to think through the needs across all lines of your business and departments when budgeting for your ERP solution. 

Data Migration & Conversion

Migrating data from legacy systems—including both data conversion and transfer—also adds to the total implementation and investment cost of a new ERP system. Many ERP vendors can automate this process, which while a convenient way to reduce data loss will increase the final bill. 

Staff Training

Staff training or retraining is another hidden cost that many companies forget to incorporate into their ERP system budgets. Companies will need to arrange training for any employees who will access the new software so they can learn how to use the system. Whether you want to send all employees to training sessions or have a few key users attend training and then train their teams in-house, incorporate staff training costs into the total ERP system price. 

Customer Support

Many ERP vendors include one year of customer support in overall implementation fees (although not all vendors do). However, after the year is up, ongoing, real-time customer support may cost extra.  

You’ll also want to consider what kind of support you’ll need. For example, support during normal business hours may work for you, or you may need 24 hour support available to you. You’ll also want to ask questions about support processes: does “support” mean several 15 minute blocks of time and playing round-robin to resolve an issue? Or does the vendor have a more open-ended support policy? These factors will be crucial to your success.  

Unanticipated Customizations

If you discover during the ERP implementation process that your business requires additional, unexpected customizations, adding those customizations will increase the bottom line, driving up both the cost with the vendor and likely the time your internal team unexpectedly spends on implementation and testing. 

ERP Price Transparency: What to Ask Before Buying

When evaluating ERP systems, it’s important to gain clear insight into all pricing factors and potential costs. ERP vendors can provide a variety of pricing structures, and it’s important to ask the right questions to ensure you’re fully informed before making a purchase.

Here are some key questions to ask to help you understand ERP pricing:

1. What’s Included in the Base Price?

Understand exactly what you’ll be paying for with the base price. Does it cover only core modules, or does it include additional features like customer support, training, and updates? Knowing this upfront can prevent unexpected costs later.

2. Are There Extra Fees for Customization?

Customization can be a significant cost factor. Some ERP vendors offer out-of-the-box functionality, while others may require additional custom work. Be sure to ask about the potential costs for customizations, including any ongoing fees.

3. What is the Pricing Model for Ongoing Maintenance & Support?

It’s important to clarify the ongoing costs for maintenance and support. Ask whether this is included in your subscription or if it’s a separate fee. Understanding these costs ensures that you don’t face unexpected expenses down the line.

4. How Do You Handle Scaling & Growth?

Your business is likely to grow, and your ERP system should be able to scale with it. Ask how the vendor’s pricing will evolve as you add users or modules, and whether they offer flexible pricing options that can accommodate your business’s growth over time.

5. What’s the Total Cost of Ownership?

The total cost of ownership (TCO) includes not only the software price but also implementation, training, and long-term maintenance. Be sure to ask for a comprehensive breakdown of all these costs to ensure you’re prepared for the full financial commitment.

6. Are There Any Hidden Costs?

Ask if there are any hidden fees, such as for data migration, integration with existing systems, or third-party integrations. Sometimes, vendors may charge for things that seem like standard features, so it’s important to identify these up front.

7. What Happens If We Need to Upgrade or Downgrade?

Business needs change over time, so it’s crucial to understand how flexible the ERP vendor is in terms of scaling up or down. Ask if there are penalties for downgrading or if there are additional costs when upgrading to higher-tier plans or modules.

8. Is the Pricing Based on Users, Modules, or Both?

Clarifying how the pricing is structured will help you determine what factors will influence future costs. Are you being charged per user, per module, or both? Knowing this helps you better predict how costs may evolve as your business grows.

9. What’s the Renewal Process & Costs?

Ask about renewal terms, especially if you’re choosing a subscription-based pricing model. Some vendors may have price hikes or hidden costs when the contract renews, so it’s important to understand the terms for both the initial contract and future renewals.

10. Can We See a Demo of the System Before Committing?

While there may not be a free trial, ask if the vendor offers web-based demonstrations or online videos showcasing the software. This will give you a closer look at the system’s functionality and how it aligns with your business needs before making a commitment.

How to Budget for an ERP System Costs

Step 1: Assess Your Business Needs

Before diving into ERP pricing, understand your business’s requirements. Define the essential features and modules that will influence the overall cost.

Step 2: Choose the Right Pricing Model

ERP vendors typically offer two pricing models: subscription and perpetual licensing. Subscription plans are more cost-effective upfront, while perpetual licensing involves a larger upfront cost but no recurring fees.

Step 3: Estimate Implementation Costs

Beyond the software itself, ERP implementation involves setup, training, and integration. These costs can sometimes exceed the cost of the ERP system itself, so be sure to allocate resources for the full implementation process.

Step 4: Consider Ongoing Maintenance & Support

ERP systems require ongoing maintenance for updates, troubleshooting, and technical support. Ensure you account for these recurring costs, which vary depending on the vendor and system.

Step 5: Account for Hidden Costs

Hidden costs like data migration, customizations, or additional hardware can significantly impact your budget. Be proactive in identifying these expenses early to avoid surprises later.

ROI Calculation: Is an ERP Worth the Cost?

Calculating the ROI of an ERP system is essential to determine its long-term value. Focus on key areas such as time savings, process efficiency, and reduced operational costs. An ERP can streamline workflows, reduce manual errors, and improve decision-making, all of which contribute to cost savings. Additionally, by tracking improvements in productivity and customer satisfaction, you can better gauge the return on investment. Ultimately, while the upfront cost is significant, the potential for long-term gains often makes it a worthwhile investment.

Streamline & Optimize Business Operations with Cost-Effective ERP Solutions from CAI

At CAI, we create innovative, production-oriented software to help our customers across a variety of targeted industries streamline business processes and optimize their manufacturing, processing, or distribution environment. Our goal is to provide you with industry-leading ERP solutions that improve your business operations, all with excellent service and support. 

Whether you are looking to automate production, increase your return on investment, reduce costs, or streamline operations, we can help. With our suite of tools and access to our expert team, optimizing your business processes is easier than ever. 

Contact us today for a free consultation.