Yes, ERP costs go beyond the initial purchase. But you already knew that.
Investing in an ERP system is a big decision for any manufacturing company. The right system can improve efficiency, streamline operations, and provide valuable insights. But how much does it really cost? Many businesses focus only on the upfront price, but the reality is that ERP expenses extend far beyond the initial purchase.
This is where Total Cost of Ownership (TCO) comes in. TCO looks at all costs associated with an ERP system over its entire lifecycle, including implementation, customization, maintenance, and upgrades. Understanding TCO helps manufacturers make informed financial decisions and avoid unexpected costs down the road.
Breaking Down the Total Cost of Ownership for ERP
To truly understand ERP system cost, let’s break down the key components of software TCO.
1. Upfront Costs: The Initial Investment
The first cost most businesses see is the price tag on the ERP system itself. This includes:
- Software licensing fees (for on-premise solutions) or subscription costs (for cloud-based ERP)
- Hardware and infrastructure investments if hosting on-premise
- Implementation and setup fees, including installation, data migration, and configuration
- Customization costs, if modifications are needed to fit specific business needs
While these are the most obvious costs, they are only a fraction of the total cost of ownership software requires.
2. Implementation and Training Costs
Implementing an ERP system is a major project that requires time and expertise. Many companies underestimate the cost of getting the system up and running. These costs can include:
- Consulting fees for implementation specialists
- Project management expenses to coordinate the deployment
- Employee training costs, as staff need time to learn the new system
- Temporary productivity loss, as teams adjust to new workflows
Skipping proper training can lead to inefficiencies and errors, making it a critical investment in the overall TCO.
3. Ongoing ERP Maintenance Costs
Once the ERP system is in place, it requires continuous maintenance to function properly. This includes:
- Software updates and patches to fix bugs and security risks
- Technical support and troubleshooting, often through a paid service contract
- Cloud hosting fees, if using a SaaS ERP model
- System monitoring and optimization to keep the ERP running smoothly
For Infor SyteLine total cost of ownership, businesses should factor in Infor CloudSuite Industrial’s ongoing maintenance requirements, whether hosted on-premise or in the cloud.
4. Customization and Integration Expenses
Many ERP systems need additional modifications to fully integrate with a company’s existing workflows. Over time, as business needs change, additional customizations may be required, leading to extra costs.
- API and third-party integrations for CRM, MES, or finance software
- Custom dashboards and reporting tools tailored to specific manufacturing needs
- Additional user licenses, as companies scale operations
While some ERP solutions include built-in integrations, others require custom development, which can increase costs significantly.
5. Future Upgrades and Scalability Costs
Technology is constantly evolving, and ERP systems need to keep up. Businesses must plan for future upgrades, which may include:
- Major software version updates that require new training and system modifications
- Additional features or modules, such as advanced analytics or AI-powered forecasting
- Hardware upgrades, if the system is hosted on-premise and requires better infrastructure
- User expansion costs, as more employees need access to the system
Cloud-based ERP solutions like Infor SyteLine offer more scalability and flexibility, but businesses must still account for annual costs associated with expanding their system.
How to Lower ERP Total Cost of Ownership
Understanding TCO is only half the battle. Manufacturers also need strategies to manage costs effectively. Here are a few ways to control ERP expenses:
1. Choose the Right Deployment Model
Businesses can choose between on-premise ERP and cloud-based ERP. While on-premise ERP requires larger upfront investments in hardware and IT staff, cloud ERP spreads costs over time through subscription fees.
Infor SyteLine total cost of ownership can vary depending on whether the business opts for Infor CloudSuite Industrial or an on-premise deployment.
2. Invest in Proper Training
Many companies try to cut costs by reducing training, but this often leads to user errors, inefficiencies, and lower ROI. A well-trained team helps maximize system capabilities, reducing costly mistakes and downtime.
Read also: How to Calculate ROI on ERP
3. Standardize Instead of Over-Customizing
Customizing an ERP system is often necessary, but excessive modifications can drive up costs and make future upgrades more complex. Choosing an ERP solution that fits your industry needs from the start reduces the need for heavy customizations.
4. Plan for Growth and Future Costs
Before selecting an ERP system, manufacturers should forecast future needs. Choosing a scalable ERP solution prevents unexpected upgrade costs as the business expands.
5. Work with an Experienced ERP Partner
ERP implementation and maintenance require expert guidance. Working with a trusted ERP consulting firm helps businesses identify common ERP risks, avoid costly mistakes, streamline deployment, and maximize system value.
Final Thoughts: Making Smart ERP Investment Decisions
ERP is a long-term investment, and understanding total cost of ownership software is key to making an informed decision. While upfront costs are important, businesses must consider ongoing ERP maintenance costs, customization expenses, and future upgrades when evaluating an ERP solution.
For manufacturers considering Infor SyteLine, total cost of ownership should include cloud vs. on-premise considerations, user scalability, and integration needs.
Looking for expert guidance on ERP system cost and long-term value? Godlan has over 40 years of experience helping manufacturers implement, manage, and optimize ERP systems. Contact us today to schedule a consultation and get a real-world view of ERP TCO for your business.
