26 May 2022
After making the decision to deploy an ERP system, setting a reasonable budget might be difficult. Unfortunately, many businesses spend far more than anticipated on ERP systems, which is absolutely a nightmare. However, if you have properly prepared your budget, considering everything that is vital, and being aware of the process, we believe that you will be able to implement ERP solutions within your budget. Here’s some advice on how to build your ERP software budget so you can spend less time investigating.
Major Factors Influencing Your ERP Software Budget
Before going into how to build a budget for an ERP system, it is crucial to understand several main factors which can affect ERP software budget. Let’s take a look at how ERP software is priced.
Hosting
ERP software can be installed on-premise or on the cloud and obviously, the pricing for these types is different. As for the cloud-based solutions, the costs will include annual fees and implementation charges. In the meantime, the costs of on-premises systems are split between implementation, maintenance, hardware infrastructure, and system engineers. Therefore, you should consider which server would be the most suitable for your business.
Customisation
Customisation price depends on the number of factors you want to add in. Most ERP systems these days come with a lot of outstanding capabilities. However, companies will need at least a few changes or connections with other apps or data sources to fulfill their specific needs.
Data Migration
Two more elements that will affect the pricing of your ERP deployment are the volume of data that needs to be migrated and its complexity. Ask yourself several questions such as: How many systems are you migrating data from? Is this data stored in different file formats? Do you want to clean up your data, for example, duplicate data or incorrect data before you move it?
Business Size
Most ERP software providers charge by the number of users who require access to the system. In fact, smaller businesses will require fewer licenses and often have smaller manufacturing and supply chain operations, resulting in less complexity when moving systems.
How To Calculate ERP Software Budget
Justify Purchase
Implementing a new ERP system may provide an opportunity to increase efficiency, improve business intelligence, accelerate the cash flow, and lower labor costs. However, in order to sell these benefits, you’ll need a credible Return on Investment (ROI) prediction.
Take the time to calculate the cost savings – in the form of lower inventory, lower material costs, lower labor costs, better decision-making owing to real-time data, etc. In fact, you should do a cost-benefit analysis over time. It’s also crucial that you consider associated risks to ensure that the benefits outweigh the risks. If you come into a cost where the dangers outweigh the benefits, try removing the associated features from your expenses.
Find Your Optimal Pricing Model
Subscription plans or perpetual licensing are the most common pricing strategies used by ERP companies.
- The perpetual licensing model
You can obtain the software license with the purchase and use the ERP system indefinitely with perpetual licensing. Aside from the license fee, this model might also include a one-time implementation service fee, project management fee, and training fee. Depending on each company’s need, annual maintenance fees, cloud hosting fees, and migration fees can be chosen as optional extras.
- The subscription model
With the subscription model, you’ll be able to host the system on the vendor’s server with an Internet connection. You won’t need your own infrastructure, which will save you money and space. A continuing subscription for the software license, support services, and new system updates will be in your charges.
Choose The Features You Need
Many available features in ERP solutions will sound great. However, keep in mind that anything unexploited is a waste. Choose only the essentials you need right away as well as those you’ll need in the future due to predicted future expansion. For instance, a manufacturing company will normally need some solutions such as production, inventory management, logistics, purchases, HR & accounting. Some features like project management, service, and contract management might be unnecessary.
Calculate Your Budget
Whichever server you choose definitely comes with a significant implementation cost. You will need to examine it thoroughly by discussing with your ERP vendor or consultants the total costs to implement the system. It’s a best practice to include a 10% contingency budget in your forecast for unforeseen costs.
Conclusion
ERP implementation is a huge investment for every business so make sure that this investment is worthy. There are many factors that you have to consider before adopting ERP software to enhance your company’s growth. Get more useful information from our article: Components Of ERP Services.
With more than 32 years of experience, Synergix Technologies has helped hundreds of companies in this digitalisation journey. Providing a customisable and fully-integrated solution, Synergix ERP System will fulfill your own requirements. We also work closely with government agencies to help you throughout the grant application to obtain up to 70% of the qualifying costs.
Should you have any further questions, do not hesitate to contact us now!
