ERP Software Price is Nearly Always Negotiable and Each Company Buying a Given ERP System is Likely to Pay a Slightly Different Actual Price Compared to any Other Company

Final pricing is a factor of company size and strategic importance to the supplier (maybe the vendor desperately wants a reference account in a particular industry); size of the order (number of seats or applications); bundle of services and other extras included in the order; state of the market at that particular time (is the supplier ahead of or behind expectations year-to-date); competitive pressure (is the vendor trying to match or beat a competitor’s bid); negotiating skills of both parties, and other factors.

ERP Software Price is Nearly Always Negotiable and Each Company Buying a Given ERP System is Likely to Pay a Slightly Different Actual Price Compared to any Other Company

ERP software price is nearly always negotiable and each company buying a given ERP system is likely to pay a slightly different actual price compared to any other company. The same is true for a CRM software price or an accounting software price.

Final pricing is a factor of company size and strategic importance to the supplier (maybe the vendor desperately wants a reference account in a particular industry); size of the order (number of seats or applications); bundle of services and other extras included in the order; state of the market at that particular time (is the supplier ahead of or behind expectations year-to-date); competitive pressure (is the vendor trying to match or beat a competitor’s bid); negotiating skills of both parties, and other factors. These factors apply whether the negotiation is for a full suite ERP solution or for a more limited application like a CRM price or Warehouse Management System (WMS) price .

Perhaps the most powerful influence on final price is the competitive situation. Initial bid or “list” price for ERP software solutions are surprisingly similar, even when comparing so-called Tier 1 to Tier 2 solution providers.

Buyers should understand that any ERP cost comparison should also include consideration for the rest of the implementation costs that will be incurred. Software license fees are only a part of the total cost to implement and ERP software solution, in fact, not even the majority of the costs. An old rule of thumb states that the software makes up only about one-third of the total cost to implement ERP, with hardware / technology and conversion and consulting and user training making up the other two thirds. Exact percentages vary, of course, with some more complex solutions requiring more consultation and assistance. With a Software-as-a-Service (SaaS) deployment, up-front cost for software and hardware is virtually eliminated but conversion, implementation and training costs will still apply.

SaaS is a licensing and deployment option that swaps up-front capital investment for monthly fees. Total cost of ownership over a reasonable life cycle period (7 to 10 years) will be similar, with SaaS total cost likely to be somewhat higher over the long term.

Open source software is not the same as SaaS licensing. Open source ERP software is available from a modest number of sources and consists of software available without the traditional license fee. The software is community supported, meaning that the users contribute fixes and enhancements, rather than a developer with tight licensing control. Some open source software is available with paid support. Other open source ERP solutions like Compiere ERP, offer a cross between open source ERP and traditionally licensed ERP. Compiere ERP has open source roots and architecture, but offers a very low cost commercial version that is fully supported.

Any open source ERP comparison in conjunction with traditional paid software should recognize that the user company takes on a significantly more active involvement in support and maintenance of the software, compared to a traditional licensing agreement. Buyers should factor in those additional support costs in their total cost of ownership assessment.