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Can one ask that question? Yes, one can, but the answer is somewhat divided and, according to the classic consultant cliché, "It depends." Based on experience and insight from over 500 procurements and implementations of ERP systems over 25 years, it can quickly be concluded that an ERP system can unfortunately cost as much as possible.
As an advisor, one is often both surprised and frightened by the cost that many of the implementation projects result in. And even more surprising is that customers accept these costs. At the same time, it is difficult to equate a high investment and high operating costs with an expensive system. The expectation is, of course, that a new ERP system will contribute to increased business value for the organisation, where the potential benefit should be related to the cost of implementing the system and its ongoing operational costs. And one can similarly turn the question around to "what does it mean if we DO NOT switch to a new ERP system?" Delaying a necessary investment also has a price, and in a time where digitalisation is moving at record speed, this price can become very high.
When analysing the cost of an ERP system, one must first clarify which cost components should be included in the valuation. Even though the license prices between two systems can appear relatively similar, the other costs such as implementation, operation, support, upgrades and not least the customer's internal costs for ongoing maintenance can differ significantly. It is also for this reason that there are many arguments both for and against cloud-based ERP systems being more expensive compared to locally installed ERP systems. Calculations can thus be based on completely different grounds and arrive at completely different conclusions.
So how much does an ERP system cost? The very short answer is 7,037 SEK per employee per year. However, this should not be confused with "per user" but literally "per employee." The substantially longer answer that requires both base data and explanations is that we have made a synthesis from over 200 procurements and implementations carried out in Sweden, Denmark and Norway in recent years. With a mix of both cloud-based ERP systems and locally installed (so-called On-premise). Our data is based on facts where we have developed key figures concerning both the customer's turnover and the number of employees.
The ERP systems which, according to the key figures, currently show the highest cost regarding total operating costs over 5 years (in relation to the customer's total turnover) are SAP S/4HANA, Microsoft Dynamics F&O and Microsoft Dynamics BC. And the ERP systems that show the lowest cost with the same key figures are Xledger, Sage X3, Pyramid and Jeeves. If we instead use the key figure total cost in relation to the number of employees, SAP Business One and Sage X3 are the highest with Unit4 and Xledger as the lowest. The conclusion is that it is important to understand the basis and key figures before comparing ERP systems to avoid drawing incorrect conclusions.
It is also important to distinguish between the cost of implementation and the cost of operation including both subscription licences, operation, support and maintenance which can yield different results when comparing ERP systems from different vendors.
More facts about the cost of ERP systems are available in our recently published analysis "The Cost of a new ERP system." Download your copy of the free report below.
