The factors to consider when hiring an ERP for a business

In a first evaluation, if we limit ourselves to examining the list of functionalities indicated by the ERP system manufacturer, we realize that the different management programs available on the market have very similar functionalities, which makes it difficult for us to understand the differences between one software and another. The names of the functionalities do not help to define what an ERP system does.

We have modules like accounting, customer management, manufacturing, inventory, production, and so on. These are very generic titles that say everything and nothing, which could generate a lot of expectations in those who are considering hiring ERP software.

Contracting an ERP or a management software?

Not everything marketed under the name ERP can be considered as such. Let's look at different categories of management software to be clear about the differences:

Specific software for some business operations. Take, for example, programs for issuing invoices, or for simplified accounting management, programs for acquiring customer orders, etc. Obviously we are not dealing with an ERP.

Software packaged with different modules. Sales module, purchasing module, invoicing, etc. In general, licenses are paid per module and per user. It is close to the ERP concept, but to be an ERP it must cover all areas of the company.

Structured management software. Highly parametric and flexible system designed to manage all business operations and capable of ensuring total control of the flow of information throughout the organization. It responds to what we mean by ERP.

Does the right choice of ERP depend on the size of the company?

Not at all. Unfortunately things get complicated because the equation "small business = simple needs" is NOT correct. On the contrary, the dynamism of small companies and the limited availability of resources force them to work with very flexible tools and low implementation costs.

What are the costs for an SME to contract an ERP?

When we talk about the costs of an ERP management software, it is necessary to define:

User licenses (required in the case of proprietary software).

Costs of the basic hardware and software infrastructure where to install the ERP system in the case of opting for a local version: servers, operating system, backup device, etc.

Initial system implementation services and possible customization developments (system installation, program configuration, user training, analysis and development of customized procedures).

Annual maintenance and customer support contract (in addition to the contract, the costs of the server + operating system + database maintenance contract should be foreseen).

The cost of the license

As for the cost of the license to simplify, it is necessary to differentiate between programs hosted in the cloud and those hosted on the company's server. In general, among the different types of ERP, online ERP's are cheaper and we can find solutions that start at 50 euros per month per user. If we opt for an on-premise tool, there is a great disparity of rates that are set according to the size of the business and the complexity of the implementation process.

The cost of on-premise implementation

In this case it is necessary to define the business processes to be managed with the ERP system and then design a system implementation compatible with the needs defined for each business process.

Just because of the specificity of each company, it is not easy to define an average cost for software implementation services. International vendors claim that the cost of implementation accounts for approximately 50-60% of the total ERP contract.

For example, if we have 10 users and we contract a commercial ERP with a license cost of 500 euros per user, we have an amount of 5,000 euros, the cost of implementation services could reach about 2,500 euros. To these amounts we have to add the maintenance contract, normally 15-18% of the value of the licenses, and the cost of the server infrastructure that will host the ERP software.

We are out of budget. Can't we hire an ERP for less money?

To drastically reduce ERP project costs and still have a flexible management system, it is advisable to move towards modern solutions: ERP in the cloud. This eliminates some major hardware infrastructure management and maintenance costs (everything is managed by the service provider) and implementation times are much faster.

Hiring an ERP in the cloud

Let's start by stating what you can save by hiring a Cloud ERP. First of all, no internal hardware infrastructure is required, with a simple Internet connection and with any PC with a browser you can access the ERP system running on the Cloud platform.

No corporate server to manage?

Exactly. Everything is managed by the service provider who is responsible for keeping the software updated, checking the operation of the systems, performing maintenance operations and backing up the data.

How much does all this cost?

The great advantage of the Cloud lies in its flexibility, you can start with a few users, basic fees and then add additional users and functions over time. All this extremely quickly and without major contractual constraints.

What is included in the fee?
  • Access to the system from any PC via Internet connection.
  • Version upgrades.
  • Daily technical support and data backup.
With Cloud ERP, the costs of the service are known in advance. Initial configuration and training are up to the user. There will only be additional costs in the case of needing customizations.