Have you ever signed an ERP contract thinking you locked in a great deal, only to see your costs spike unexpectedly a year later?
After guiding dozens of companies through this process, we’ve seen firsthand what causes ERP costs to skyrocket.
This article will reveal the steps you can take to protect your business from hidden fees, surprise renewals, and rising costs.
How to avoid choosing the wrong ERP pricing tier (and getting stuck with higher costs later)
Before you sign on the dotted line for any ERP system, consider your ideal ERP solution. ERP pricing is usually guided on some level by how many users you have and how much you use the system. Where the system is hosted can also play a factor—whether on-prem or in the cloud.
If it feels like an ERP provider is shoehorning you into a pricing tier that you’ll soon outgrow, ask yourself why. All ERP resellers want to earn your business, including us. But doing so with a lower price that leaves no wiggle room can be a disadvantage for you when its time to renew.
Solution: Make sure your initial ERP product meets your needs beyond today. Buying an ERP software tier that is too tightly tailored for your current business operations will likely mean that any business growth will move you to a higher tier with more cost.
If you’re a seasonal business, ask about the ERP provider’s ability to adapt costs. Some offer pricing flexibility for high-demand and off-season usage.
ERP software capabilities carry a price tag; know what you do and don’t need
Improvise, adapt, and overcome isn’t just a great slogan for the US Marines. Businesses implementing an ERP can also use this thinking.
Custom development, third-party add-ons, and tailored integrations mean a higher ERP price tag. There is a strong argument for changing your business processes and how your team works. In most cases, it’s actually less expensive to adapt your business to your ERP than vice versa. This can be a harsh reality for companies that have created a system over time, but moving to a new ERP is a prime time to do it.
Solution: You can protect your ERP budget by homing in on the essentials you need from an ERP solution. Map your current processes to out-of-the-box features of the software under consideration.
Then, change as many of your processes as possible to align with the software. The system’s core features use accepted standards. Home-grown or "unique to you" methods mean custom development and maintenance costs.
How to know if you’re paying for things you don’t use or need things you don’t have
Business growth or shifting strategies can change your ERP needs over time. Like a gym subscription on autopay, it’s possible that your ERP billing includes things you no longer use.
Or maybe your ERP is underperforming compared to your needs. Both can have an impact on your current costs and future budget needs.
Solution: Assess your ERP use and needs regularly. Some providers do this as part of their partnership with you; others might not offer to review your system unless you ask. It’s a good way to ensure that things you don’t need (and their price tag) aren’t hiding in your system. If you discover you need to upgrade, this gives you time to research options, make a plan, and adequately budget so you can avoid surprises.
Renewal ERP prices might not look anything like your initial cost
ERP solutions have a reputation for confusing, convoluted pricing. In some cases, that reputation is well deserved. Different licensing structures, what’s included, and discount and renewal processes make it the Wild West for ERP customers.
Some ERP providers cap future increases to help customers understand their future pricing. Others use an individual pricing approach with each customer, negotiating contract terms with each business.
Solution: Ask your prospective ERP partner or provider about licensing renewal costs. Does your pricing include a discount? If so, does it move forward with your continued commitment, or is it a limited-time offer? Providers with a traditional selling process may be reluctant to have this conversation. But remember that your strongest negotiating position is before you sign.
Hidden ERP costs that could blow your budget (and how to spot them early)
Once your business has implemented an ERP system, you will have ongoing costs related to use and management. Implementation can be a significant, upfront number but costs for support and training can also impact your future budget.
Solution: Identify all costs your company will encounter in the coming years for your ERP system. This number, known as total cost of ownership (TCO), can guide your ERP budgeting and help set the right expectations with your leadership. Recurring costs include support, software updates, employee onboarding and training, and upgrading capabilities.
ERP knowledge is power
Now that you know more about ERP pricing and cost increases, you are better positioned to compare ERP solutions, improve contract negotiations, and prevent ERP sticker shock.
If price certainty is essential to your business, Stellar One offers transparent, upfront pricing that includes the essentials of a successful ERP experience, including a 5-Year Price Lock.