Replace or Do Nothing? Determining the costs of replacing your ERP system

Replace or Do Nothing? Determining the costs of replacing your ERP system

How much does an ERP system cost?

You may currently have a legacy ERP system, such as Sage, Microsoft Dynamics, Infor, JD Edwards, Made2Manage, or one of the many others. It may not be serving you well today. You always have the opportunity to make a choice:

  1. Maintain the current system and postpone getting the benefit of a modern system
  2. Make the decision to move to a modern system

Of course, when purchasing a new ERP system, one of the first questions everyone asks is: How much will it cost? Many factors are involved, from purchasing and installing equipment to configuring the software to ongoing maintenance.

True Cost = ROI - TCO

Most pricing models just calculate the initial hardware infrastructure, software licensing expenses, and implementation costs, but do not consider the impact of ongoing operating expenses.

Your ERP price may vary depending on your scope of implementation, number of employees, customizations, and deployment method (on-premise or in the cloud). Let’s take a closer look at the factors that can affect ERP pricing—and the unique pricing model that can dramatically reduce your costs. ERP price structures explained.

ERP pricing has changed forever, thanks to the cloud. Cloud ERP can certainly save you money, but read your vendor’s pricing policies carefully. For maximum savings, choose a vendor that charges by resource consumption, not per user. Can the Cloud Improve Your ERP Pricing?

Return on Investment (ROI)

In our pricing model, we first look at the potential cost savings or Return on investment (ROI) the system will offer you. Some results can be hard to measure, such as improvements in employee satisfaction and teamwork. As part of our due diligence our local partners can help you determine your possible ROI.

Total Cost of Ownership (TCO)

The software license fee is not the cost of the software. The total cost of owning and maintaining the system over the 7 to 10 years expected life includes a great deal of "hidden" on-going people costs,  plus your annual maintenance fee. That fee  is typically about 18% of the current list price of the software every year. This means you are repurchasing your system every 5.5 years. 

This annual maintenance fee gives you the unique opportunity every year to:

  • Maintain your current legacy ERP system and receive no additional business benefits. We call this “The Cost of Doing Nothing”.
  • Replace your current system with a modern ERP system and start realizing the additional benefits of increased ROI.

Calculate the Total Cost of Doing Nothing versus Investing in a Modern System

Acumatica has developed a simple tool to help in developing the cost of both decisions. We start by asking you 5 simple questions.

  1. What core applications are you planning to implement? (We expect there will be several add-on applications specific to your business, but here we are interested in the base applications)

    Select at least 1 option
  2. Complexity of the implementation project will determine the amount of effort. What is the probable complexity of this project?

    Select only 1 option
  3. What level of implementation, training and on-going support do you expect to need from your implementation partner? (Remember, there are many technical and non-technical tasks that are required to be performed. Either your partner will need to be assigned these tasks or you must assign them to current or additional staff.)

    Select only 1 option
  4. Consultant's hourly fee

    Consultant's hourly fee must be a minimum of $100 per hour
  5. Full burden hourly rate of IT staff or contractors (includes wages, benefits, taxes, tools, and space) where average is $60 and minimum is $30 per hour

    Minimum is $30 per hour

I am considering keeping
my legacy ERP system

What are my ongoing costs?