ERP Software Development Cost: Estimating Budget in 2023

Saurabh Singh September 20, 2022
erp software development cost

ERP (Enterprise Resource Planning) systems are the backbone of modern digital businesses. They promise a digitally transformed organization through seamless integration of all the information flowing throughout the industry vertical. ERP system implementation has already redefined various businesses, be it supply chain, finance, healthcare, human resource, customers, or more. 

You can also Explore why does your healthcare organization need an ERP solution

The primary goal of developing ERP software is to drive company profitability and boost operational efficiency by eliminating redundant processes and automating mundane tasks.

Why Does Your Business Need ERP Software Development?

Modern ERP systems use the latest technologies such as AI analytics and Machine learning to provide visibility and intelligence efficiency across every business unit. ERP software also empower organizations to be adaptive to customer needs and optimize the customer experience. 

The global ERP software industry is expected to grow to around $100.7 billion by 2025 indicating a steady pattern and high demand for software support. Therefore, if you are thinking of optimizing your business resources, now is the time to develop and implement an ERP system software for your business.

Here’s also a graph exhibiting the primary goals of implementing ERP software systems: 

Popular Goals of Implementing ERP Solutions

When it comes to integrating ERP systems into business processes, the primary concern revolves around the cost involved in the process which leads us to this article. The ERP development cost estimate might range anywhere from $25,000 to $350,000 depending on your business requirements and complexity.  However, you might need to uncover all the factors associated with the cost and then start the planning. 

enterprise software development

In this article, we will discuss the estimated cost of ERP implementation and the factors that directly impact the ERP software development cost. 

Let’s begin:

Factors Affecting the ERP Development Cost in 2023

There are a number of different factors that carry a direct impact on the cost of developing an ERP system. These include implementation and training costs, location of developers, maintenance costs, and more. It is impossible to give a one-size-fits-all. Therefore here’s an erp software development cost breakdown based on all factors. 

 Let’s discuss each of these factors in detail below.

Factors Affecting the ERP Development Cost in 2023

1. Number of users and features

When deciding whether an ERP system is affordable for your organization, you need to consider the number of users that will initially have access to the system. Many ERP vendors charge on a per-user basis. This means that with the increase in the number of users, the cost of ERP also increases. You also need to consider the cost of including new users and how that expense could increase in the future as you scale your business.

Apart from the number of users, you also need to determine the features that you need to include in your ERP system. There are a few significant features that make ERP software stand out from other types of software. These include common databases, automation, interaction, data analysis, and more. The more features you add, the greater would be the overall ERP system development cost.

So, it is important to first gauge your exact requirement and then invest in a solution that matches those requirements. The right estimation can be one of the main strategies to improve the ROI of your system.

2. Add ons/customization

In order to offer a comprehensive range of services and functionalities to your employees, you can integrate several third-party add-ons like Enterprise IMs tool or social media logins. You can also include specific modules such as a supply chain management for increased functionality in your system. The cost of these additional capabilities will differ depending on what you decide to include and which vendor you choose.

ikea shopping app

3. Implementation 

ERP systems are complex software applications, so you will likely need to change operating systems, hardware, and software in order for the ERP system to run properly. If you are implementing ERP for the first time, it’s advisable to have professionals install and configure your ERP system.

This will make the process of implementing ERP software more simple and easy. But you will need to include these implementation costs in the total ERP price. Additionally, some vendors offer more consultative assistance, but this costs extra as well.

4. Maintenance

Until you are investing in a cloud-based ERP solution, your on-premise system will require frequent and timed maintenance to ensure that it system is up and running as expected, at all times. Maintenance costs of an ERP typically run between 15–20% of the initial purchase/implementation price.

5. Training

It might not be easy for your employees to start using a newly adopted ERP system right away. That’s the reason why they might require additional training on how to use such a system. Often, the ERP vendor provides training upon request at a standardized hourly rate. In such a case, you will need to factor these additional costs into your analysis when reviewing ERP systems for purchase or opting for a custom ERP system.

6. Upgrades

The moment a new version of your ERP solution is announced, you will have to start planning the upgrade. The last thing you would want is your system becoming obsolete and inviting issues and bugs. You’ll need to ask your vendor how often updates are made, and if the cost of these upgrades is included in the base price of the ERP system development.

7. Process redesign

When a business moves from a legacy system to an ERP system for organizational growth, it calls for a number of process redesign. And the same applies when you move from one ERP system to another. You will still have to bring some redesign to match your company’s business processes with the software’s processes. This, in turn, requires additional costs and affects the final ERP system cost.

8. Support

Over the lifetime of the whole ERP system, you will come across a number of issues and bugs that you will have to solve and provide support for, to your system’s users – something that will come with a cost.

9. Technology additions

The cost of your ERP system will automatically increase with the inclusion of technologies. The more technologies you add into the system, like enterprise blockchain or artificial intelligence, or even IoT, the greater would be your ERP system cost estimate.

10. Development hours

The total time taken by developers to build an ERP system also plays a huge role in deciding the total cost to develop ERP software. The time taken in developing ERP software is directly related to the number of developers. If your software is complex and you want less development hours, then the team needs more professionals to achieve the tasks more quickly and efficiently. And this means you need to spend more money.

On the other hand, if your software is less complex, you need to pay relatively less as compared to the above case.  

11. Location of software developers

Location is another factor that plays a vital role in deciding the cost of ERP software. For e.g., the cost of ERP software development in North America is different from software development companies in Ukraine or India. This is due to the fact that services around the world vary significantly in terms of cost as well as quality.

Besides the factors that are mentioned above, the pricing model is another thing that helps in deciding the final ERP price. So, let’s see what are the different pricing models available in the market.

[Also Read: The ultimate guide to software development]

enterprise software development

Various Pricing Models of ERP Software Development

Commonly there are two main pricing models that are worked around by the ERP software vendors – perpetual licensing and subscription plans. In this section, we will dive deeper into the two pricing models and understand how they work.

1. Perpetual licensing

Perpetual licensing is applicable for organizations that want to host ERP software on-premise. In such a setting, companies are required to pay the one-time up-front cost of the ERP software. The costs of a perpetual license depend on the level of customization and the number of users. One key benefit of perpetual licenses is that companies are not required to pay recurring costs for support, maintenance, and upgrades.

2. Subscription plans

Companies looking to leverage cloud servers for ERP software implementation can opt for subscription plans. In this pricing model, the vendor hosts and maintains the ERP system at a third-party server. Companies opting for subscriptions need to pay monthly/annual charges against the required software solution. Subscription plans are often offered to companies with a minimum contract length.

How Much Does an ERP System Cost in 2023?

The average cost to develop ERP software might range from $20,000 to $3,50,000. In some cases, it may even cost more. However, this is a very rough estimate. The above-mentioned factors such as implementation costs and location of the software development company can increase or lower the final price. 

Now that you have got a fair idea of different pricing models and the average cost of ERP implementation, let us come to one of the significant parts of the whole ERP development and deployment process – ERP implementation. 

To give you an idea of cost factor significance, here’s a graph depicting the share of factors and costs involved. However, keep in mind that the costs may vary depending on the level of factors involved.

erp system cost

The implementation process of the ERP system as the name suggests is the process of adding the system in the everyday business process – the part that is hands down a very crucial part of the whole process, especially when it comes to estimating the cost of ERP software.

ERP Implementation Process and Timeline

ERP Implementation Process and Timeline

The implementation of an ERP system in a business is the one factor on which both success and failure of the ERP system ride on. When done right, it can take your business to great heights but when implemented wrong, it can make your otherwise averagely planned processes complex.

And this is the main reason why the step finds itself in the average ERP development cost estimates.

Well, let us look at what the ERP implementation process entails.

1. Analysis and planning (1-2 weeks)

At this stage, key people are identified who are most acquainted with the company or department where the project will be implemented. They will gather and formulate the goals and objectives of the project. 

Given that they have a thorough knowledge of the business process, they will help specify the ERP system to be built and provide up-to-date information. They can identify processes that are less automated and thus need to be improved. At this stage, it is essential to understand how business processes are related to one another.

2. Designing (1-2 weeks)

At this stage, the ERP system is designed by the project team. The enterprise architecture is selected, the hardware requirements are specified, the wireframes are developed and the organizational measures necessary for the implementation of the system are determined.

3. Development (3-12 weeks)

During this phase, the development team builds the ERP system. IT architects analyze the connections between each tool, design, module, and design an appropriate architecture. 

Old data (from the current ERP or company documentation) is converted to the format required by the new ERP. The information and data needed in the new ERP are defined as well.

4. Testing (2 weeks-3 months)

Following ERP development, it is essential to test the system before it goes live. The created software is checked for bugs, errors, and glitches. The performance of tools and functions and the convenience of the interface are also being tested. If the tests are conclusive, users are trained in the system.

5. Deployment (3 weeks)

After the system is tested and staff learns to use the new system, the ERP is introduced into the work environment. First, it is done on a small scale. If everything is fine, the ERP system is integrated into all business processes of the company.

6. Support and maintenance (constantly)

Once the ERP system is made live, the whole process of support and maintenance starts. This ongoing process looks into and takes care of the system to the T, ensuring that it is performing exactly as it was intended to.

This whole implementation process takes different times according to the different business sizes it is going to be deployed in. Usually, this is what the timeframe looks like –

  • Small businesses – One to three months
  • Medium businesses – Three to six months
  • Large businesses – Six months to a year

Typically, you can also carry out a timeline by understanding how many professionals are involved, calculating the time they spend and multiplying these numbers by their hourly rates. 

For instance, here’s an ERP software development timeline estimate (in %) depicting how much time professionals spend on each phase. 

Development Phase Front-end Developer Back-end Developer Quality Control
Concept/design 4% 6% 2%
Development 12% 20% 14%
Testing 2% 5% 4%
Support services 2% 4% 5%
Total 20% 35% 25%

This timeline again varies according to the complexity of software and level of research and development.

ERP software development pricing is not easy to understand, therefore, you must have a thorough understanding of your cost elements just so you don’t overrun your budget. It is also essential to consult industry experts from the very initial phase of your ERP software development to get an accurate ERP development cost analysis. 

How Can Appinventiv Help You With ERP Software Development?

The benefits of implementing an ERP system far outweigh the initial ERP software development cost. When used correctly, modern ERP systems give you a competitive edge with a higher level of operational intelligence that allows you to be more agile and deliver more quality customer experiences.

Therefore, if you plan to invest in ERP systems, Appinventiv is a leading enterprise software development company where the experts can guide you through the entire process and help increase your operational efficiency. Our services include

Therefore, Consult our industry experts to get started now. 

THE AUTHOR
Saurabh Singh
CEO & Director
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