Budgeting and understanding ERP costs are multifaceted processes that require a thorough understanding of the initial costs and a clear understanding of their financial implications in the long run. To leverage the full potential of ERP systems, companies must integrate ERP software development costs and budgeting into their operations.
For a deeper insight into how tailored solutions can optimize these expenses, explore the benefits of custom ERP software and how it can enhance business efficiency.
As a business, you can utilize ERP’s full potential without being surprised by unforeseen costs. This guide will demystify the costs associated with ERP and make your budget planning more confident.
The global ERP Software market is estimated to reach USD 62.3 billion by 2028, up from USD 49 billion in 2023. The introduction of ERP systems has already revolutionized many industries, including healthcare, finance, supply chain, human resources, and customer service.
The primary goal of ERP software is to eliminate redundant processes and automate mundane tasks, enabling companies to enhance profitability and operational efficiency.
Well! In this blog post, we will discuss the cost of ERP software development in 2024, the factors that affect it, and the process of building successful ERP software for your business.
Table of Contents
What is an ERP?
The Enterprise Resource Planning (ERP) system helps ensure that various business functions are organized and streamlined by creating centralized databases and providing a user-friendly interface.
ERP systems are used worldwide to establish standardized business processes, develop more data-driven strategies, enhance efficiency, and facilitate better department communication.
ERP software enables businesses to automate internal processes, reduce duplication, optimize resource allocation, and reduce downtime. As a result of ERP, companies can minimize inaccuracies and duplicate data, optimizing their productivity overall. Thus, ERP automates business processes across departments to reduce costs and eliminate unnecessary repetition.
Importance of ERP Software Development For Your Business
With modern ERP systems, business units can gain visibility and intelligence efficiency through AI analytics and machine learning. In addition to enabling organizations to better satisfy their customers, ERP software also helps them adapt to changing customer needs.
A steady growth pattern, high software support demand, and rising costs are expected to drive the global ERP software market to approximately $100.7 billion by 2025.
If you don’t understand your actual needs, you can’t accurately estimate ERP development costs. If you plan to optimize your business resources, consider developing and implementing an ERP system for your organization.
Therefore, you may need to identify all factors associated with the ERP cost and then initiate the planning process to estimate the ERP development cost.
Factors That Affect ERP Development Cost
Several factors affect the overall cost of ERP software development. These cost factors include, but are not limited to, project size, complexity, added features, implementation costs, maintenance costs, location of ERP software developers, and support and maintenance.
The cost breakdown for ERP software development cannot be provided in a one-size-fits-all manner; therefore, the following overview outlines all the contributing factors.
1. Features and users
The number of features your ERP system needs is the first factor to consider when determining ERP development costs. The data analysis, automation, and reporting tools can all be included in your ERP system development.
Thus, the cost of ERP software increases as more features are added. In addition to the number of features, the number of users who can access your ERP system is another essential factor to consider when determining the cost of ERP implementation.
The more users your ERP system has, the more expensive it will be to develop ERP software because vendors typically charge per user. Your business can also grow as you scale, so you need to account for the new users.
2. Implementation
Changing operating systems, hardware, and software to ensure ERP runs smoothly is likely necessary, as ERP systems are complex software applications. If you are implementing ERP systems for the first time, it is recommended that you hire professionals to handle the installation & configuration.
You will need to include these implementation costs in the total ERP price; however, this will simplify and ease the process of implementing ERP software.
3. Software upgrades
When developing your budget, ensure that your ERP system is always current. An outdated system invites bugs and issues, which is the last thing you want.
It is possible that your vendors don’t include upgrades in the base software cost of your software. If your vendor provides for the cost of upgrades in the contract, ask about the frequency and the cost of software updates.
4. Technology Additions
It depends on the technologies you select and whether your ERP software will be more or less expensive. Your enterprise software development costs will increase as you incorporate more technologies, like blockchain and artificial intelligence.
5. Add-ons/customization
You can integrate third-party add-ons, such as enterprise instant messaging tools and social media logins, to provide your employees a comprehensive range of services and functionalities. Additionally, you can add modules, such as a supply chain management module, to enhance the system’s functionality.
Lastly, the price of these additional capabilities will depend on the vendors you choose and the extra features you select to include.
6. Training
When estimating the costs of an ERP system, it is essential to consider both training and customer support. Your employees might find the new system difficult to use, so the vendor might have to provide additional training.
When estimating the final cost of ERP system development, consider the cost of training, which is often included in the purchase price.
7. Development hours
In addition to the total cost of developing ERP software, the time developers spend developing the ERP system is also a significant determinant. There is a direct correlation between the number of developers and the time to develop ERP software.
If your software is complex and you want fewer development hours, the team may need to hire more professionals to achieve tasks more quickly and efficiently. Additionally, developing ERP software is cost-efficient if it is less complex and requires only the essential features.
8. Location of software developers
Location is another, yet the most essential factor affecting the overall cost of ERP software development. For example, the cost of ERP software development in the USA and Canada differs from that of software development companies based in India and Ukraine.
Due to significant differences in the quality and cost of services worldwide, the pricing model is another key factor in determining the final ERP price.
Pricing models for ERP software development
Vendors often provide ERP software development services under two pricing models: subscription-based and perpetual licensing. Here are some details about ERP software development pricing models to help you better understand them.
1. Subscription plans
The most popular subscription pricing model for ERP software implementation on cloud-based servers is a subscription model. The ERP system is hosted and maintained by the vendor on a third-party server. Companies typically charge for software solutions monthly or annually.
2. Perpetual licensing
ERP software that is hosted on-premise is usually licensed on a perpetual basis. With this pricing model, they must pay the one-time, upfront cost of the ERP software. The cost of eternal licenses depends on the number of users and the level of customization. Maintenance and updates are not recurring costs when organizations use perpetual licenses.
The Process of ERP Software Development
Here are the steps included in the entire ERP software development process;
1. Analysis and planning
This stage’s purpose is to determine the company or division where the project will be implemented and identify key individuals who have a thorough understanding of the organization. They need to create an overview of what the ERP will do, including which processes will be automated, what roles will be required, and what data will be stored in the database.
2. Designing
This is the phase where ERP design takes place. This process involves selecting the architecture, developing wireframes, defining the hardware requirements, and establishing the functional specification and design of the system. The wireframes, architectures, organizational measures required to implement them, and the documents governing their operation are selected.
3. Development
Architects design an IT architecture by analyzing the relationships between modules, tools, functions, and design elements. As a result, software programmers and designers are tasked with converting old data, either from the current ERP or company documents, into the new ERP format.
The information sources are determined, and templates for system user roles are created.
4. Deployment
The system must be thoroughly tested to introduce the new ERP into the work environment, and staff members must learn to operate it confidently and efficiently. The first step is to integrate a smaller unit (ideally one that is smaller) into the workflow.
All business processes are integrated into the ERP system if everything goes smoothly.
5. Testing
The created software is checked for bugs, glitches, and design errors during the testing stage. All functions, tools, and interface elements are tested for performance and convenience.
Aside from ensuring that the database is accurate and complete, the software checks that the system performs effectively and that each item performs optimally. Once problems have been identified, they should be eliminated, and then tests should be conducted.
6. Constant Support & Maintenance
The service typically operates at maximum capacity for the first few months, so there will likely be a few non-critical errors, and people will ask for help when they encounter issues.
Once the ERP software has been tested and is ready to live, it must undergo regular support and maintenance to ensure there is no downtime and that it is working as expected. Additionally, the software engineers you hire for ongoing support and maintenance significantly impact the overall cost of ERP software development.
How much does an ERP System Cost?
The costs involved in developing such software range from a few thousand dollars to hundreds of millions. The planning, development, testing, and implementation of each project determine the overall cost of ERP system development.
The average cost to build ERP software may range between $15,000 and $2,50,000. However, this is an estimated cost, and it may increase or decrease depending on the project size, complexity, and additional features.
Several factors can affect the final price of ERP software development, including implementation costs, the hourly rate of developers, and the location of the software development company. Remember that the overall cost of ERP software development depends solely on the factors involved.
Conclusion
Hence, organizations of all sizes across various industry segments must adopt ERP software solutions to manage their customers & grow their businesses more efficiently.
An efficient ERP software solution can help improve productivity, enhance agility, automate internal processes, and improve real-time performance for organizations. Investing in an ERP system is not only cost-effective, but it also offers numerous additional benefits.
Additionally, it is possible to make an informed decision aligned with your budget and maximize the return on your investment by thoroughly analyzing your requirements, researching ERP vendors, and considering the long-term benefits of ERP systems. By utilizing modern ERP systems correctly, you can deliver a better customer experience and become more agile.
Moreover, consulting with a leading ERP software development company can help you build feature-rich, mobile-optimized, customer-oriented software for your business. Last but not least, companies must consider several key aspects, including the size, number of users, customization requirements, and complexity of their business, to determine the actual cost of ERP software development in 2024.
