ERP Cost Considerations

Enterprise Resource Planning (ERP) systems are today considered essential tools in many organizations, regardless of their size. However, for organizations to consider adopting ERP solutions, one of the most difficult evaluation factors is the cost. Thus, it becomes a challenge to dissect ERP software price, most specifically for markets such as Bangladesh, as well as review several other elements, including pricing of different components and factors, deployment models, and the possibility of hidden costs. In this blog, the following aspects will be covered to help you understand ERP software pricing, especially for the Bangladeshi market.

Why is ERP Pricing complex?

ERP pricing can be quite complex due to the number of variables involved. Unlike most software solutions, there is no standard one-size-fits-all cost. ERP systems are highly customizable, and every business has unique requirements. This often makes estimating the price of an ERP system a challenge. According to industry data, ERP implementations can cost anywhere from $10,000 to millions of dollars, depending on factors like deployment type, hardware needs, and additional services.

In Bangladesh, ERP adoption is growing significantly. As of 2023, the ERP software market in Bangladesh is valued at approximately $18 million, with a 13% annual growth rate expected. This increase is driven by both large enterprises and SMEs seeking more efficient business processes.

Deployment Types and Their Costs

The first and most significant factor affecting ERP pricing is the deployment type. There are three primary types of ERP deployments, each with different cost implications:

1. SaaS (Software as a Service)

• Monthly subscription for both infrastructure and software: SaaS ERP solutions operate on a subscription basis. Businesses pay a recurring monthly fee that includes both the software and the infrastructure needed to run it.
• Cost of services: SaaS is often the most affordable upfront option because it does not require the purchase of hardware or software licenses. For instance, the monthly cost for a SaaS ERP in Bangladesh can range from $200 to $3,000 depending on the features.

2. Hosted ERP

• Rental cost of hardware and infrastructure: Hosted ERP solutions involve renting hardware and infrastructure from a third party.
• Cost of services: While there is no need for a large upfront investment in hardware, hosted ERPs have ongoing service costs.
• Initial software license payment and annual license renewal: This deployment type usually requires a one-time software license purchase, followed by annual renewals.

3. On-Premise ERP

• Cost of hardware and infrastructure: For on-premise ERP solutions, companies must purchase and maintain their own hardware.
• Initial software license payment and annual license renewal: This requires a substantial initial investment, with annual fees for software updates and maintenance. In Bangladesh, an on-premise ERP solution can cost anywhere from $20,000 to $100,000 for a mid-sized company, depending on the complexity.

Hardware Requirements

Your ERP pricing also depends on hardware, particularly for on-premise and hosted solutions. Here’s a breakdown:

• Servers: The cost of servers varies based on the ERP system size and user base.
• Clients: Computers or devices required by end-users.
• Printers, cabling, and mobile devices: Additional hardware such as printers and mobile devices also adds to the cost.

For on-premise ERPs, hardware expenses in Bangladesh can range between $5,000 and $30,000 depending on the system size.

Software Licensing and Customization Costs

The software component of ERP pricing includes:

• Operating system: ERP software typically requires a compatible operating system.
• Number of users: Licensing costs often increase with the number of users.
• Add-ons: Additional modules like CRM, HR, or Supply Chain Management (SCM) can significantly increase costs.
• Upgrades: Over time, software upgrades will be necessary, which may incur additional fees.
• Annual License Fee: Most ERP vendors charge an annual fee for software licenses and support.
• Data migration/conversion: Moving data from existing systems into the new ERP system can be a costly process.

In Bangladesh, for instance, a basic software license for a small business might start at $5,000, while an enterprise-level solution can exceed $50,000.

ERP Implementation Costs

Implementation is one of the most expensive aspects of ERP adoption. It involves configuring the ERP to meet your specific needs. Here’s a breakdown:

• Consulting: Experts will help you identify your ERP needs and customize the system accordingly.
• Business modeling: This refers to the process of tailoring the ERP software to fit your business processes.
• Project management: Large ERP projects often require dedicated project managers to ensure successful implementation.

ERP implementation costs can vary but typically make up 30-60% of the total ERP price. For example, in Bangladesh, implementation costs for a mid-range ERP system can range from $10,000 to $2,50,000.

Training Costs

Training employees to use the ERP system is essential and can be another significant expense. The complexity of the ERP and the number of users will determine how extensive the training needs to be. Training costs are typically calculated per user, and they range from $500 to $2,000 per user, depending on the complexity of the system.

Support Costs

After the ERP system is implemented, ongoing support is needed to ensure it operates smoothly. Most vendors offer various levels of support, from basic helpdesk services to dedicated 24/7 support options. In Bangladesh, support fees typically range between 15-20% of the initial software cost annually.

Ongoing System Project Management

Finally, ongoing project management is necessary to ensure the ERP system remains up-to-date and continues to meet the organization’s needs. This may involve managing system upgrades, adding new features, or dealing with technical issues that arise over time.

Conclusion

In conclusion, ERP software price is not a simple figure. Multiple factors, such as deployment type, hardware requirements, software licensing, and implementation, contribute to the overall cost. In Bangladesh, businesses need to carefully assess their needs and budget for each of these elements to calculate the total cost of ERP implementation.