How to Estimate the Cost of ERP Software Development

Last Updated May 08, 2023

Modern organizations rely on ERP systems to function. They guarantee seamless integration of all data going through a business, whether it's linked to the supply chain, finance, human resources, customers, or anything else. The major purpose of ERP software development is to increase company profitability and operational efficiency by automating repetitive jobs and removing unnecessary processes. Machine learning and artificial intelligence are used in modern ERP systems to enhance visibility and intelligence efficiency across all business units. It also enables businesses to respond to changing client demands and improve the customer experience. The most typical question that arises while discussing the integration of ERP systems into business operations is the cost of the procedure. The costs involve not only maintaining the software up and running but also keeping it secure and updated. The projected cost of ERP deployment and the elements that influence the ultimate price will be discussed in the next article. 

Table of content

Let us see How to Estimate the Cost of ERP Software Development:
1. Popular ERP Implementation Objectives
2. Different ERP application development pricing models 
3. View the Case Study 
4. Last thoughts 

Popular ERP Implementation Objectives: 

Costs of ERP software development factors 

There are several elements that have a direct impact on the cost of establishing an ERP system. These costs include installation and training, developer location, and maintenance expenditures, among others. Let's take a closer look at each of these aspects. 

1. The number of users and the functionality available 

You must consider the following factors when determining if an ERP system is inexpensive for your company. Consider the number of people who will have access to the system at the start. Many ERP providers charge per-user fees. This means that when the number of users grows, the cost of ERP grows as well. You should also evaluate the cost of adding additional users and how that cost may rise in the future as your company grows. You must also choose the functions that your ERP system must offer, in addition to the number of users. ERP software has a few distinguishing qualities that set it apart from other forms of software. Common databases, automation, interaction, data analysis, and other features are included. The greater the total ERP system, the more functions you add. As a result, it's critical to first determine your particular requirements before investing in a solution that meets them. The correct estimation might be one of the most important tactics for increasing your system's ROI. 

2. Customization and add-ons 

You can connect third-party add-ons like Enterprise IMs or social network logins to provide a full range of services and features to your employees. You can also add particular modules to your system, such as supply chain management, to boost its capabilities. The pricing of these extra features will vary based on what you choose to include and which vendor you select. 

3. Actualization 

Because ERP systems are complicated software programs, you will very certainly need to upgrade your operating system, hardware, and software. need the ERP system to function properly If this is your first time installing ERP, you should hire professionals to install and configure your system. This will make the ERP software implementation procedure much easier. However, these installation costs must be factored into the overall ERP cost. Furthermore, some vendors provide more consultative support, although this comes at an additional expense. 

4. Routine maintenance 

Until you invest in a cloud-based ERP solution, your on-premise system will require regular and scheduled maintenance to guarantee that it operates as intended at all times. An ERP's maintenance costs are typically 15–20 percent of the initial purchase/implementation cost. 

5. Education 

It might not be simple for you. to immediately begin using a freshly implemented ERP system That is why they may need further training on how to use such a device. Frequently, the ERP provider provides training on demand at a set hourly fee. In this instance, you'll need to account for these additional expenditures when evaluating ERP systems for purchase or choosing a custom ERP system. 

6. Improvements 

You must begin planning the upgrade as soon as a new version of your ERP solution is announced. The last thing you want is for your system to become antiquated, causing problems and defects. You should inquire about how frequently updates are made and whether the cost of these upgrades is included in the contract. 

7. Redesigning the process 

When a company switches from a legacy system to an ERP system for organizational growth, certain processes must be redesigned. The same is true when switching from one ERP system to another. To align your company's business processes with the software's processes, you'll still need to redesign. As a result, more costs are incurred, affecting the overall ERP system cost. 

8. Maintain Throughout the life

of the ERP system, you may encounter a lot of difficulties and defects that you will have to resolve and support for your system's users - something that will cost money. 

9. Additions to technology 

The cost of your ERP system will rise in lockstep with inflation. The more technology you incorporate into the system, such as enterprise blockchain, artificial intelligence, or even the Internet of Things, the higher your ERP system cost estimate will be. 

10. hours of development 

The amount of time it takes developers to establish an ERP system also influences the total cost of developing ERP software. The number of developers directly affects the time it takes to develop ERP software. If your program is complicated and you want to reduce development time, you'll need additional pros on your team to complete jobs more quickly and efficiently. As a result, you'll have to spend more money. In contrast, if your software is less complex, you will have to pay less than the examples above. 

11. Software developers' locations 

Another important factor in determining the cost of ERP software is its location. The cost of ERP software development in North America, for example, differs from that of software development firms in Ukraine or India. This is owing to the fact that services vary greatly in terms of pricing and quality around the world. Aside from the aforementioned elements, the pricing model is another component that influences the final ERP price. So, let's have a look at the various pricing models on the market. 

Different ERP application development pricing models :

There are two basic pricing structures that are commonly used by businesses. Plans for everlasting licensing and subscriptions. In this section, we'll learn more about the two pricing structures and how they work. 

Permanent licensing 

Organizations that want to host ERP software on-premise can use a perpetual license. Companies are obligated to pay the ERP software's one-time up-front cost in this situation. A perpetual license's price is determined by the level of customization and the number of users. Perpetual licenses provide the advantage of not requiring organizations to pay recurring expenditures for support, maintenance, and updates. 

Plans for subscriptions 

Subscription plans are available for companies wishing to use cloud servers for ERP software adoption. The vendor hosts and maintains the ERP system on a third-party server in this pricing arrangement. Companies that choose subscriptions must pay monthly or annual fees for the software they need. Companies are frequently provided subscription programs with a minimum contract period. 

What is the price of an ERP system? 

ERP software development might cost anything between $20,000 to $350,000. In other circumstances, it may even be more expensive. This is, however, a very approximate estimate. The ultimate pricing can be affected by the elements listed above, such as implementation expenses and the location of the software development company. Now that you have a good understanding of the various pricing models and the typical cost of ERP installation, let's move on to one of the most important aspects of the ERP development and deployment process: ERP implementation. The procedure for implementing the ERP system, as the name implies, is the process of integrating the system into everyday business processes - a step that is by far the most important in the entire process, especially when assessing ERP software costs. 

View the Case Study :

Process and Timeline for ERP Implementation 

The installation of an ERP system in a firm is the one factor that determines the ERP system's success or failure. When done correctly, it can propel your company to new heights, but when done incorrectly, it can complicate otherwise well-planned operations. And it is for this reason that the phrase is included in most ERP development cost estimations. Let's have a look at why the ERP implementation procedure is lengthy. 

Process of implementing ERP 

Analysis and planning (1-2 weeks): Key persons who are most familiar with the organization or department where the project will be implemented are selected at this stage. They will collect and create the project's goals and objectives. They will help specify the ERP system to be constructed and supply up-to-date information because they have a full understanding of the company process. They can spot operations that aren't fully automated and could be enhanced. Understanding how business operations are related to one another is critical at this point. The ERP system is designed by the project team at this stage (1-2 weeks). The enterprise architecture has been chosen, and the hardware requirements have been determined. The wireframes are created, and the organizational measures required for the system's execution are decided. The development team constructs the ERP system during this phase (3-12 weeks). IT architects examine the relationships between each tool, design, and module in order to create a suitable architecture. The old data (from the current ERP or company documents) is converted to the new ERP format. The new ERP's information and data requirements are also outlined. Testing (2 weeks-3 months): After ERP development, the system must be tested before going live. Bugs, faults, and malfunctions in the software are checked. The performance of tools and functions, as well as the usability of the interface, are being evaluated. If the tests are positive, Deployment (3 weeks): The ERP is deployed into the work environment after it has been tested and the team has learned how to use it. First and foremost, it is carried out on a modest scale. If everything goes well, the ERP system is integrated into the company's whole business process. Support and maintenance (ongoing): Once the ERP system is operational, the support and maintenance procedure begins. This continual procedure investigates and maintains the system to the letter, ensuring that it is operating as intended. This entire implementation procedure takes varied amounts of time depending on the business size in which it will be implemented. Typically, the timeline looks like this – 

  • One to three months for small firms  
  • Three to six months for medium-sized firms 
  • Large companies – six to twelve months 
  • Request assistance. 

Last thoughts 

The advantages of establishing an ERP system far surpass the expense of developing ERP software. Modern ERP systems, when utilized appropriately, give you a competitive advantage by providing you with a higher degree of operational intelligence, allowing you to be more agile and provide better client experiences. If you want to invest in ERP systems, you should talk to a reputable business software development firm like Syoft.  The professionals will walk you through the entire procedure and assist you in improving your operational efficiency. 

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