SMB Manufacturers Guide for Budgeting an ERP Project

What makes an ERP different from the other software offerings? Of course, its user-friendliness and the capability of managing the most critical business elements of the organization. 

Talking about small and mid-sized manufacturing, here the business owners are self-reliant and have a versatile spirit. Wearing multiple hats, they are often the custodians who focus on enhanced productivity and better employee efficiency.  

It is said that a larger business comes with great complexity and challenges. However, small business, if don’t follow a proper channel, may be more intricate and difficult to manage.  

Well, the benefits of deploying ERP remains the same for large and small organizations. New licensing cost and delivery models are more affordable and feasible.  

Fortunately, global ERP Software Market is expected to garner a revenue of approximately $56.8 billion by 2025, growing at a CAGR of 6.9% from 2016 to 2025.  

Moreover, picking the right partner and planning the budget for ERP is quite an overwhelming task. In this blog, we’ve mentioned a few points, which you should consider before creating a budget for an ERP solution –  

1.   Define the need for the software so that every user should have a clear picture of it. 

2.   Articulate and endorse the vision by spending time and communicating about the challenges your company faces. 

3.   Understanding the established work culture is a must. After the implementation, many elements may change and thus, employees should accept it whole-heartedly.  

4.   Decide the ERP features you need before discussing it with the ERP vendor.  

5.   Give a thought to what you expect from an ERP software for business. 

You should be thoughtful about the SMB ERP budgeting and the critical elements directly related with the cost and budgeting of ERP software are – the number of software users, ERP licensing, industry type, customizations required to fit the company’s needs, maintenance costs, deployment options and more.  

#Justifying the cost is crucial; it helps you choose the right ERP 

The components that affect the ERP cost planning include –  

1.   Software licensing fees  

2.   Customization required 

3.   Additional servers and hardware  

4.   Training and testing  

5.   Number of users and type of industry 

Keep reading this blog to learn more about how these points affect the cost of ERP implementation and how you can keep your budget on track by planning for your ERP, diligently. 

How to decide the ballpark ERP implementation budget?  

Deployment of ERP is quite a dicey game. You have so many reasons to think, so many factors to consider and so many options to choose.  

And of course, all these parameters decide the ballpark amount of the overall ERP budget. Let us discuss this in detail.  

•   How can ERP licensing fees affect your budget? 

Some companies may require ten licenses and others may require 100. ERP project cost obviously depend on the number of licenses you ask for. Moreover, ERP license can be temporary or perpetual, named or concurrent. 

As a business owner, you need to decide the suitable license number and select the ERP with the license policy compatible for your business. Generally, smaller companies need fewer licenses compared to the bigger organizations, and this is why the overall ERP cost is less for smaller companies.  

Business owners should understand that they don’t need to purchase a license for every possible ERP user. This requires an understanding about concurrent ERP user licensing policy. 

•   How will customizations and add-ons affect the SMB ERP cost?  

If you need to have a dynamic system with out-of-the-box add-ons and custom-made modules, then a greater level of customization may also be required. And more customization means more cost.  

Small and mid-sized businesses may require less number of licenses but their necessities and the customization requirements may differ. The functionality which is best suitable for organization A may not fit well for organization B.  

Therefore, the vendors ensure that the selected ERP fits every criterion on your checklist by making changes and customizing it.  

•   How will additional servers and hardware cost affect the budget? 

Server/ hardware cost is one of the reasons why manufacturers are choosing cloud deployment option instead of on-premise.  

With on-premise ERP, your company may need to purchase new physical server, some workstations, database server licenses, upgraded software and spend a fortune on IT personnel. On the other hand, cloud ERP saves you from such expenses as the ERP servers and databases are managed by the cloud service providers in state-of-the-art remote data centers. This type of ERP deployment has a subscription-based model and almost eliminates the overhead IT expenses.  

•   How can training add to the ERP implementation cost?  

If your company is not using an ERP system, you need to consider adding one soon. SMB ERP has become a prerequisite for modern businesses. Well, we cannot be thankful enough to the proficient software trainers who methodically train the ERP users about the solution functionality and teach them to use the ERP solution efficiently in completing their daily tasks. 

Detailed solution training for the ERP users is a must for successful ERP implementation. Learning the tools and business processes is extremely important to ensure that every employee makes proper use of his/her skill in the organization after the ERP implementation.  

It is you, who, as a business owner should identify the super users (those with extensive technical knowledge and a sound understanding of your business processes) to train them exclusively, about the ERP solution.  

Training cost depends on a variety of factors – the complexity of business, learning aptitude of the personnel (users in different departments may have diverse skillset), multiple locations etc.  

•   Number of users and type of industry can also affect the cost 

The more users you have, the more expensive implementation process becomes. The mindset and tasks of every user are different. Thus, customization may vary from one user to other. More the customization, more expensive is the ERP implementation.  

It is true that every industry is unique and so are its nature and requirements. So, depending on the industry, the number of users need to be calculated. More users are equal to more ERP cost.   

Conclusion – 

ERP cost and its budget are subjective. The amount for an ERP implementation for small and mid-sized businesses, may vary from a few thousands to many millions.  

Depending on multiple factors, you need to calculate and negotiate the right price and reach a conclusion for implementing the right ERP in your organization. To know more about ERP cost and its budget calculation, feel free to contact us here.