How to optimize ERP implementation cost

ERP implementation cost  plays a crucial role in the ERP application, an essential tool to manage and integrate all aspects of business operations in today's rapidly developing era. Providing a unified platform for rationalizing processes from Accounting & Finance to HR Contract, Manufacturing, Inventory, comprehensive ERP solutions drive high efficiency, improve data accuracy, and support making smart decisions. 

However, the success of ERP implementation starts with an accurate required investment assessment, including both initial costs and long-term costs for customization, training, maintenance, and upgrades.

Types of ERP implementation cost

The costs of implementing ERP for businesses are not the same. It is influenced by numerous factors, including the scale of the business, industry, number of users, level of customization required, and whether the deployment is on-premise or cloud-based. Understanding these costs beforehand is important for businesses to budget, analyze return on investment (ROI analysis), and ensure that the project aligns with their financial capabilities and strategic goals. Below is the main costs list:

Software licensing fee

• Perpetual license: This one-time purchase allows the buyer to use the software indefinitely. Although the initial cost is higher, it provides long-term usage without the need for regular payments. Nevertheless, it typically lacks updates or support, which could result in additional expenses.
• Subscription model: In contrast to perpetual licenses, the subscription model includes regular payments (monthly or annually). This model often includes updates, regular support, and sometimes even storage services, making it an attractive choice for businesses looking for lower upfront costs and continuous improvement.

Consulting and project management

The collaboration between consulting experts and project managers can significantly impact the success of ERP implementation. Consulting experts bring specialized knowledge in planning, software configuration consulting, project execution, and management, helping to avoid common pitfalls and ensure the project stays on track.

Although using professional consulting services may increase project costs, it often leads to more efficient implementation results and can provide significant long-term value by avoiding costly mistakes.

Customization and integration costs

The success of implementing ERP depends heavily on the end users' ability to use the system effectively. Training costs should take into account creating and providing comprehensive training programs to ensure employees are proficient in using the new system.

In addition, continuous support costs are very important to address any issues after deployment, provide updated information, and ongoing support to ensure smooth operation.

Training and support costs

The success of implementing ERP depends heavily on the end users' ability to use the system effectively. Training costs should take into account creating and providing comprehensive training programs to ensure employees are proficient in using the new system.

In addition, continuous support costs are very important to address any issues after deployment, provide updated information, and ongoing support to ensure smooth operation.

>>>>> See more: ERP implementation process : Experience and essential factors

Infrastructure and operating costs

• On-premise deployment: Choosing an on-premise ERP solution requires businesses to invest in the necessary hardware and infrastructure to support the system. This includes servers, data storage, and network connectivity, which can significantly increase the initial investment.
• Cloud-based deployment: Cloud-based ERP systems often reduce or eliminate the need for on-premise hardware expansion, resulting in lower infrastructure costs. However, they are associated with ongoing subscription fees and reliance on reliable Internet connection, factors that businesses need to consider when planning long-term financial strategies.

Comparison of ERP implementation cost

Understanding the costs associated with implementing ERP is crucial for businesses when deciding between different ERP providers. This section provides a comparative analysis focusing on three popular ERP solutions: Viindoo, Odoo, and SAP. Each type offers unique benefits and cost structures to cater to different business needs and scales.

Viindoo

• Introduction to Viindoo: Viindoo is known for its flexible and customizable ERP solutions designed to serve small and medium-sized enterprises (SMEs). Viindoo's all-in-one approach allows businesses to only pay for the number of users, making it a super cost-effective choice.
• Cost structure of Viindoo ERP implementation: The cost of implementing Viindoo typically includes software licenses, which can be in the form of subscription or perpetual, depending on the preference of the business. Focused on small and medium-sized enterprises, Viindoo's pricing model is designed to be affordable, with costs varying based on the number of users and the level of customization required. Training and support are often provided as part of the implementation consulting package, with additional costs for customizations or extended integrations. In most ERP implementations, Viindoo has three types of costs as follows:

• • Price of Viindoo's ERP Consulting & Implementation service: 540.000.000 VND

• • Customize price (if specific businesses need to customize): 1.450.000 VND/man_day

Oracle

• Overview of Oracle Solution: Oracle ERP is a suite of integrated business applications developed and marketed by Oracle Corporation. 
• Typical cost of Oracle ERP implementation: Oracle solutions typically come with a high initial cost of ownership, including licensing fees, implementation services, hardware, and ongoing maintenance.
• • The upfront investment required for Oracle ERP implementation can be significant, particularly for small to medium-sized enterprises (SMEs) or organizations with budget constraints.
  • In addition to the initial costs, organizations must also account for long-term expenses associated with maintenance, support, upgrades, and additional modules or features.
  • The annual subscription for user tend to be on the higher side compared to  competitors.
  • • Financial Reporting plan: $175/month. 
    • Advanced Financial Controls: $80 user/month
    • Advance Access Controls package: $150 user/month.

SAP

• Introduction to SAP: SAP is a global leading company in ERP software, providing comprehensive solutions to support large enterprises and complex business processes. Known for its strength and scalability, SAP serves various industries and is a popular choice for multinational corporations.
• The cost of deploying the SAP ERP system: Implementing SAP is often seen as a major investment, including software licenses, maintenance fees, and expenses related to customization and integration with existing systems. The total cost of implementing SAP ERP can be very high, especially for large enterprises with complex needs. SAP provides both on-premise and cloud-based solutions, each with pricing models and associated costs. Below are the costs for the lowest version B1 of SAP:

The choice between Viindoo, Odoo, and SAP should be based on a thorough understanding of the cost structure of each platform related to the specific needs, scale, and budget of the business. While Viindoo and Odoo offer more flexibility and are often preferred by small and medium-sized enterprises for cost-effectiveness and scalability, SAP remains the top solution for larger enterprises willing to invest in a powerful and comprehensive ERP system.

Factors to consider when choosing an ERP system

Choosing a suitable ERP system involves more than just comparing initial costs. Businesses must consider several important factors to ensure that the chosen solution meets their needs and supports long-term growth.

• Adjusting business requirements with ERP capabilities: It is essential to thoroughly understand your business processes and requirements and how well they align with the capabilities of the ERP system. Misalignment can lead to costly customization or even system replacement.
• Consider long-term and short-term costs: While initial costs are important, businesses also need to consider long-term costs, including maintenance, support, and potential upgrades. A cheaper initial option may end up being more expensive in the long run due to these factors.
• Scalability, flexibility, and future growth: An ERP system should not only meet current business needs but also be able to accommodate future development. Scalability and flexibility are crucial as they determine how well the system can adapt to new processes, additional users, and evolving business contexts.

>>>>> See more: Criteria for ERP Selection: Choosing Suitable ERP for Businesses

Optimizing the strategy of ERP implementation cost

Implementing an ERP system is a significant investment for any organization. However, with strategic planning and wise decision-making, businesses can optimize these costs while maintaining the quality and effectiveness of the ERP solution. Here are some strategies to consider:

Tips for negotiating software licenses

• Research and preparation: Before negotiating, thoroughly research your ERP needs and how different pricing models from various providers align with those needs.
• Quantity discount: Utilize your user base scale to negotiate quantity discounts.
• Additional services: Price requirements for additional services include support, training, and maintenance.

>>>> See more: Viindoo SaaS subscription  optimize your software implementation budget

Minimize customization and utilize available features.

• Business process evaluation can be operated differently: Before choosing customization, evaluate whether modifying the current business process to fit the available features of the ERP system is feasible.
• Only essential customization: Only customize essential features, do not customize non-operational features, bring significant value or competitive advantage.
• Using integrated configuration tools: Many ERP systems include tools that allow you to configure the system according to your needs without the need for deep customization.

>>>> See more: Leverage Standard Features: Save your implementation budget

The best methods for effective project management to reduce unnecessary costs

• Project Scope: Define the project scope clearly and concisely to avoid scope creep and related costs.
• Project manager: Appoint an experienced project manager to oversee the implementation and keep the project on track.
• Review and adjust regularly: Conduct project evaluations regularly and make adjustments as needed to avoid delays or costly rework. Ensure the project stays on schedule and within budget.

>>>> See more: Why businesses need ROI analysis before Digital Transformation?

​FAQs​

Conclusion

Understanding the various costs associated with implementing an ERP system is crucial for making strategic, informed decisions about which system best fits your organization's needs. By carefully considering direct costs such as software licenses and customization, as well as indirect costs like training and support, businesses can choose an ERP solution that provides the best balance of cost, functionality, and alignment with business goals.