Implementing an ERP system requires a significant financial investment, and when you decide to undertake such a project, you will naturally consider the various costs involved. Usually, after discussing your requirements with an ERP provider and attending a product demonstration, the provider will present you with a quotation. In this article, we will discuss the main types of costs you are likely to find in such a quotation, as well as some possible ways to optimize them.
Licensing Costs
These are the costs associated with the software solution itself. In general, providers may offer two licensing models:
License purchase costs – you purchase the licenses and become their owner.
SaaS (Software as a Service) costs – in this case, you effectively rent the software. You pay a monthly subscription fee for using it without becoming the owner of the licenses.
As more and more companies migrate to Cloud technology, purchasing perpetual licenses is becoming increasingly uncommon, with the SaaS model now being the preferred option.
In addition to avoiding a large upfront capital investment, subscription-based licensing also offers the advantage of being able to adjust the number of licenses on a monthly basis. Customers can add new licenses or give up some of their existing ones depending on their needs.
If you would like to learn more about the advantages of a Cloud implementation, we recommend our article: The Benefits of Implementing Business Central ERP in the Cloud.
Regardless of the option you choose, licensing costs are directly related to the number of users who will work with the ERP system. It is therefore important to determine how many people will actually use it.
At the same time, you should also consider what each user will need to do within the system, as different types of user licenses may be available. For example, Business Central offers a license for “light” users (Team Members) who mainly have read access and limited editing rights. These licenses are significantly less expensive than standard user licenses.
Implementation Service Costs
The provider’s quotation will normally include an ERP implementation project plan divided into several stages. Each stage will have a certain number of hours allocated to it, together with the corresponding cost of the resources involved, such as consultants, developers and project managers.
To some extent, the project plan can be adjusted if you know exactly what you expect from the ERP implementation. This means having a well-prepared requirements specification in which all your business requirements are clearly documented.
If you want to reduce the financial impact of implementation services, our recommendation is to carry out the implementation in two phases.
Ideally, the first phase should focus on the functionality that is essential for running your business. The second phase can then cover the remaining functionality — features that you would like to have but can manage without for a certain period of time, commonly referred to in project management terminology as “nice-to-have” features.
This approach can also make the transition easier for your employees. They will need to adapt from the way they were accustomed to working in the old system to the processes and workflows introduced by the newly implemented ERP system, and this transition is rarely an easy one.
The project plan will also include the cost of customizations, meaning modifications made to the standard solution. Some customizations may be unavoidable, but each one generates additional costs. Therefore, whenever the standard functionality of the system can meet your requirements, using it can help reduce both implementation costs and implementation time.
Hardware Costs
As mentioned above, most ERP implementations today are Cloud-based, which means that hardware-related costs are generally minimal.
The ERP application is accessed through a web browser, and the hardware requirements for individual workstations are relatively modest because data processing takes place in the Cloud.
Hardware costs may arise when the ERP implementation also requires additional devices, such as barcode scanners.
Support and Maintenance Costs
Although these are not strictly part of the implementation costs, they will certainly influence your purchasing decision.
The way support is provided, as well as its pricing, varies from one provider to another. Generally, the estimated support requirement is calculated as a certain number of hours, to which the hourly rate of the relevant resource — such as a consultant or developer — is applied.
It is also important to understand the provider’s response times for incidents and how incidents are categorized. For urgent issues, for example, the provider should be able to guarantee sufficiently fast response times.
Costs Not Included in the Provider’s Quotation
The overall picture would not be complete without considering the costs that are not included in the provider’s quotation. One of the most important is the amount of time your own implementation team will need to invest in the project.
In addition to the time already included in the project plan for interviews and training sessions, your project team will also need to allocate time for testing, internal training, preparing and processing data for migration to the new system, and other implementation-related activities. At the same time, team members will still need to manage their regular day-to-day responsibilities.
If you already have employees within your company who have been involved in an ERP implementation before, it is highly advisable to include them in the implementation team.
You may also want to consider bringing in external support, such as an experienced project manager or consultant who can represent your interests in your relationship with the ERP provider.
Cost will undoubtedly influence your decision when choosing an ERP implementation, but it should not be the only criterion.
At least equally important is the implementation provider itself. The provider must be able to understand your business requirements and configure the ERP system so that it supports the way your business needs to operate.
ELIAN Solutions has been active since 2008 as an implementer of Microsoft Dynamics 365 Business Central . With a team of over 80 specialists and a portfolio of more than 400 clients, ELIAN Solutions is one of the leading ERP partners.
