ERPs are the backbone of businesses today. Systems integrate the whole process-this is from supply chains to finance and HR. Now, before an organization undertakes development work, a pertinent question to be considered is: What is the ERP software development cost?
Here is a brief outline to give an overview before details follow:
| Cost Component | Estimated Range (USD) |
|---|---|
| Requirements & Planning | $5,000 – $25,000 |
| UI/UX Design | $4,000 – $15,000 |
| Core Development | $20,000 – $100,000+ |
| Integration (APIs, legacy) | $10,000 – $50,000 |
| Testing & QA | $5,000 – $20,000 |
| Deployment & Training | $3,000 – $10,000 |
| Ongoing Maintenance | $1,000 – $10,000/month |
What Influencing Factors Affect ERP Software Development Cost?
The cost of developing ERP software can widely vary, depending on several key factors:
Scope and Complexity
The more modules are required for the ERP system (for instance, finance, HR, supply chain, and CRM), the more development hours will be required. A small business can work with just a few core modules, whereas a multinational will need high-end customization. Topping that, the level of user access, data processing load, and the reporting requirements will also increase complexity.
Customization vs Off-the-Shelf
An ERP solution completely custom-built for your business flows would be very costly. Off-the-shelf solutions are cheaper initially but more rigid and could get costly in future customizations. Moreover, hybrid cases where the off-the-shelf software gets customizations incrementally also exist.
Location of the Development Team
Calling a team of developers from North America or Western Europe might be a little costly compared to working with developers in Eastern Europe, South Asia, or Latin America. In fact, outsourcing or working with a combined team can cut many dollars without compromising on quality. The proliferation of collaboration tools and cloud services undoubtedly renders working with international teams a practical consideration.
Agile Development
Operate in sprints where a backlog is well refined. Agile provides the possibility of early problem identification, avoids rework, and keeps the project in line with the business requirements. It builds transparency, continuous feedback, and team collaboration.
Offshore or Hybrid Development Team
Hybrid teams (local product managers + offshore developers) purportedly can give more control and save money. Many companies have succeeded with offshore partners who provide technical expertise almost at half the cost of local counterparts.
Modular Architecture
Your ERP system should be built in a modular fashion so as to allow modules to be added or upgraded independent of the core system. This way you do not have to go all the way to rebuilding your entire setup when your business grows. Modules could be switched on according to business priorities.
Average Cost by Business Size
| Business Size | Modules Needed | Typical Cost Range (USD) |
| Small Business | Finance, HR, Inventory | $25,000 – $50,000 |
| Mid-size Enterprise | Finance, HR, CRM, SCM, Reporting | $50,000 – $150,000 |
| Large Enterprise | Full Suite + Custom Integrations | $150,000 – $500,000+ |
Hidden Costs to Watch For
Beyond obvious development costs, here are other expenses to watch out for:
Change Management: There’s training of staff, updates to SOPs, and management of adoption—all consuming time and money. The implementation might be delayed and costlier due to resistance from the change.
Data Migration: Data migration from legacy systems is usually more complicated than it was initially thought to be. A poor plan might even result in loss or corruption of data.
Licensing Fees: If there is usage of some third-party tools or platforms, licenses can be costly. Some APIs or databases might ask for renewal every year.
Downtime Risk: Happening in the middle of switching systems could affect operations temporarily if not handled well. Though such risks can be reduced with backups and phased rollouts.
User Training: Effective onboarding is necessary to fully utilize the system. Options for user training may include e-learning, documentation, or in-person sessions.
Vendor Lock-In: Too much reliance on proprietary technologies might cause switching costs to rise in the future.
Maintenance and Support
ERP systems are never set and forget. What you will always need assistance for is:
- Bug fixes
- Updating systems
- Enhancing features
- Security patching
- Updates in compliance
- Performance monitoring
Maintenance would consume about 15-20% of your initial development cost every year. Technology solutions with proper documentation and community support can, therefore, minimize vendor-specific expertise dependency.
Tips to Reduce the Development Expenses in ERP Systems
- Utilize code components which can be shared between different modules.
- Use automation tools like Selenium and JUnit for testing purposes.
- The code quality should be maintained through continuous reviews of the codebase.
- End-users must provide feedback from the initial stages of development work.
- During the initial stages of development maintain a straightforward approach to avoid excessive complexity.
- The main goal should be to enhance the user experience which will lead to lower post-launch support demands.
- Select infrastructure that can grow with your needs from the beginning of your project.
An example shows how a company saved money on ERP implementation
A retail company of medium size required inventory management and finance along with HR functionality. The company selected Odoo as their open-source base while creating a hybrid team with in-house project managers and offshore developers before running the system on AWS. The business spent roughly $65,000 for their initial development work and needed less than $2,000 per month for maintenance. Through a phased approach for feature introduction and staff training, the company achieved better inventory precision in a six-month period without causing major operational disruptions.
Future-Proofing Your ERP Investment
The investments made in your ERP system should focus on securing financial benefits over the extended duration of its lifecycle.
- Design your system to expand easily.
- Docker containerization will simplify the process of deployment.
- API-first design enables easy integration of upcoming services.
- Regular security and performance audits should be planned on a set basis.
Your ERP system needs to adapt as your company changes. Every 2-3 years you should allocate funds for updates to maintain your competitive position.
Conclusion on ERP Software Development Cost
Developing ERP software will always have a longer lifespan than other software projects and should be viewed as a long-term investment. While the overall ERP software development cost can be quite high, a properly designed ERP will ultimately save you more money in the long run through visibility, improved accuracy, efficiency, decision making etc. ERP development is not purely a technical project – but a transformation and change management vehicle. Regardless of the size of the organization, ERP can be simple, effective and innovators approach to employing a strategic way to engineering scalable, sustainable and economical solutions, while ensuring you still have some money left over.
There are many ways to maximize your ERP investment ROI such as clear implementation roadmap, capable development team and leadership commitment to user adoption.
FAQ
Typically, buying software will be cheaper upfront, but building can provide long-term flexibility and potentially cost savings if built and managed well.
Most custom ERP systems can expect to have built anywhere between 3-12 months for development time. Very complex ERP systems can take over a year due to testing done throughout the build process and system training sessions for users.
Of course, phased or modular approach is often the best option for many stakeholders. A phased approach will help with cash management responsibilities and mitigate risks associated with organizational change management.
Odoo, ERPNext, Dolibarr, and Metasfresh are examples of open-source ERP platforms. These platforms provide both community (open-source) and paid versions of the software that include support.
Industries such as manufacturing, retail, healthcare, logistics, construction, and education tend to provide their organizations with a good return on investment (ROI) with ERP Software solutions. Non-governmental organizations (NGO) and government agencies can also provide increased transparency and visibility to their operations thanks to the guidance of ERP software.