Budgeting and understanding ERP costs are multifaceted processes that do not only require a thorough understanding of the initial costs but also what it means financially in the long run. To leverage the full potential of ERP systems, companies must integrate ERP software development cost 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 will be able to utilize the full potential of ERP without being surprised by unforeseen costs by using this guide to demystify the costs associated with ERP and make your budget planning with confidence.
It is estimated that the global ERP Software market will reach USD 62.3 billion by 2028, up from USD 49 billion in 2023. The introduction of ERP systems has already revolutionized a myriad of industries, including healthcare, finance, supply chain, human resources, and customer service. It is the primary goal of ERP software to eliminate redundant processes and automate mundane tasks so that companies can improve profitability and operational efficiency.
Well! In this blog post, we will discuss how much ERP software development costs in 2024, what factors affect the ERP software development cost, and the process of building a successful ERP software for your business.
Table of Content
What is an ERP?
The Enterprise Resource Planning (ERP) system assists with ensuring that various business functions are organized and streamlined by creating centralized databases and a user-friendly interface.
ERP systems are being used around the world to create standardized business processes to develop better data-driven strategies, improve efficiency, and communicate better between departments.
ERP software enables businesses to automate internal processes, reduce duplication, optimize resource allocation, and reduce downtime. As a result of ERP, companies are able to minimize inaccuracies and duplicate data and optimize their productivity in general. Thus, ERP automates business processes across departments in order to reduce costs and 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 be adaptable to changing customer needs.
A steady pattern of growth, high demand for software support, and steadily rising costs are expected to drive the growth of the global ERP software market to around $100.7 billion by 2025.
If you don’t understand your actual needs, you can’t give an accurate estimation of ERP development costs. If you plan to optimize your business resources, it is therefore time to consider developing and implementing ERP system software for your business.
Therefore, you may need to uncover all factors associated with the ERP cost and then start the planning process in order 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 the project size, complexity, added features, implementation costs, maintenance costs, location of ERP software developers, and support & maintenance.
The cost breakdown for ERP software development is impossible to provide in a one-size-fits-all manner, so here’s an overview of all the factors that go into it.
1. Features and users
The number of features your ERP system needs is the first thing to consider when determining ERP development costs. The data analysis tool, automation tool, and reporting tool can all be included in your ERP system development. Thus, ERP software costs increase as more features are added to it. In addition to the number of features, the number of users that will be able to access your ERP system is another important factor to consider in 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 make ERP run smoothly is likely to be necessary since 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, but this will make the process of implementing ERP software more simple and easier.
3. Software upgrades
When you develop your budget, you should ensure your ERP system is always up-to-date. Having 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 includes the cost of upgrades in the contract, ask about the frequency and the cost of software updates.
4. Technology Additions
It depends on what technologies you select and whether your ERP software will cost more or less. 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 like enterprise instant messaging tools and social media log-ins to provide a comprehensive range of services and functionalities to your employees. Aside from that, you can add modules like a supply chain management module to increase the functionality of your system.
Lastly, it will depend on which vendors you choose and what additional features you select to include that determine the price of these additional capabilities.
6. Training
Whenever estimating ERP system costs, it is imperative to take training and customer support into consideration. Your employees might find the new system difficult to use. Due to this, the vendor might have to provide additional training.
While estimating the final cost of ERP system development, you should take into account the cost of training, which is often a part of the purchase price.
7. Development hours
In addition to the total cost of developing ERP software, the amount of 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 taken to develop ERP software.
To achieve tasks more quickly and efficiently, the team may need to hire more professionals if your software is complex and you want fewer development hours. Additionally, the cost of developing software ERP is cost-efficient if it is less complex and requires only important features.
8. Location of software developers
Location is another yet the most important factor that affects the overall ERP software development cost. For example, the ERP software development cost in the USA and Canada is different in comparison to software development companies based in India and Ukraine.
Due to the significant differences in the quality and cost of services across the world. On top of that, another factor that is important in determining the final ERP price is the pricing model.
Pricing models for ERP software development
Vendors often provide ERP software development services under two different pricing models – subscription-based licensing and perpetual licensing. Here are some details about ERP software development pricing models so you can better understand them.
1. Subscription plans
The most popular subscription pricing model for ERP software implementation on cloud-based servers is a subscription model. On a third-party server, the ERP system is hosted & maintained by the vendor. Software solutions are charged on a monthly/annual basis by the companies.
2. Perpetual licensing
ERP software that is hosted on-premise is usually licensed perpetually. They have to pay the ERP software’s one-time up-front cost with this pricing model. The cost of eternal licenses depends on the number of users and customizations. 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
The purpose of this stage is to determine the company or division where to implement the project and key individuals who have an understanding of the organization. They need to create an overview of what the ERP will do, what processes will be automated, what roles will be required, and what 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: wireframes, architectures, and organizational measures required to implement them, and the documents governing their operation are selected, as well as wireframes.
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.
There is a determination of the information sources and the creation of templates for system user roles.
4. Deployment
In order to introduce the new ERP into the work environment, the system must be tested and the staff must learn how to operate it confidently and quickly. The first step is to integrate a smaller unit (ideally a smaller one) into the workflow.
All business processes are integrated into the ERP system if everything goes smoothly.
5. Testing
During the testing stage, the created software is checked for bugs, glitches, and design errors. All functions, tools, and elements of the interface are being tested for their performance and convenience.
Aside from ensuring that the database is accurate and complete, the software checks that the system is performing effectively and that each item is performing 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 most likely be a few (non-critical) errors and people will ask for help when they do something wrong.
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 it is working as expected. In addition, the software engineers you hire for constant support and maintenance affect the overall cost of ERP software development.
How Much Does an ERP System Cost in 2024?
There is a wide range of costs involved in developing such software, from a few thousand dollars to hundreds of millions. Planning, development, testing, and implementation of each project determines the overall cost of ERP system development.
The average cost to build ERP software may range somewhere between $15,000 and $2,50,000. However, this is an estimated cost and may increase or decrease based on project size, complexity, and add-on 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. Keep that in mind, the overall cost of ERP software development solely depends on the factors involved.
Conclusion
Hence, organizations of all sizes across various industry segments need to adopt ERP software solutions to manage their customers & grow their businesses more efficiently.
Having 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 provides many other 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 taking into account the long-term benefits of ERP systems. You can deliver a better customer experience and become more agile by utilizing modern ERP systems correctly.
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, businesses have to take into account several aspects, such as the size, number of users, customization requirements, and complexity of their business to determine the actual cost of ERP software development in 2024.
