The cost of ERP

9 March 2022

The cost of ERP

Focus on value

Inforlogic, looks at the cost of ERP and highlights why value, not investment, is the metric to focus on.
When it comes to ERP, all things are not created equal. Just as there is no one size fits all, there is no price that fits all. But by understanding the respective merits and value of all aspects of a solution, it’s easier to pinpoint the right one within a price range which is appropriate for your particular organisation.

What influences the cost of ERP?

ERP costs can vary immensely, but are influenced specifically by a number of factors to include:

1. Level of customisation

Not only do lots of additional features increase cost, they can also increase risk by impacting the system’s ability to scale.

2. Number of licenses needed

While more licences = more cost, the emergence of cloud can mitigate this burden by offering different models, therefore it is important to explore all options.

3. Hardware requirements

There’s no escaping the fact that data centres are costly, so it’s important to consider their merits versus a hosted model where up front hardware costs are absorbed by the provider.

4. Training

While training is expensive, by its very nature, it’s important. The good news is that systems are becoming increasingly intuitive, reducing reliance on skills and training, and in turn minimising risk.

5. Third-party products

Ensuring the right functionality for your specific business is arguably the most important aspect of ERP. You can’t manufacture a drone if your processes are designed to process pigs for example. Investment in this area is crucial as the smooth running of your business lives or dies by it.

6. Deployment model

While cloud clearly wins when it comes to TCO, and on-premise ERP typically commands the higher costs as a result of the associated hardware and licencing, it isn’t always cost effective to rip out on-premise and replace with a cloud platform. Often, spending time working with a partner to unlock functionality and add certain capabilities can be more cost effective, in the short term at least.

Payment options

Crucially, the way in which systems are paid for varies substantially also. Once, high up-front investment in hardware and a perpetual licence was the only way to access the capabilities necessary. Now, greater flexibility means that a whole host of options prevail, from platform-as-a-service, and software-as-a-service to multi-tenant cloud which is consumed as a service.

When it comes to the true cost of ERP, perhaps a better question to ask is around value. In the same way that it is wasteful to invest in a minibus to drive one person to an office twice a week, it’s important to ensure that you’re paying only for the capabilities and functionality that you need.

Of course, it’s important to have an eye on the future, as needs can change, but buying a system which is all things to all people on a grand scale is pointless if you are, say, a traditional bakery with plans to expand into the gluten free market, or a bike manufacturer looking to launch a range of products for agriculture.

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Proportionate, not preposterous

As the old adage goes, you get what you pay for, and technology is no exception. While ERP, by its very nature, is hugely valuable, therefore comes at a cost, modern platforms promise a much more predictable and proportionate investment than those of previous generations.

Flexibility is key, and through working with a specialist partner who understands both the software industry and market sector you operate within, the pricing models and options can be fully explored to find once which delivers the greatest value at the most reasonable investment point.

By honing specific requirements, and creating a robust business case with dedicated value and benefits, the cost of ERP not only becomes proportionate, but can be viewed by the business as a value add rather than a cost centre.

For more information on Inforlogic or the costs of ERP for your business, get in touch or call the team on 01606 720499.

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