How much does management software cost? The items to consider

In short: there is no single price for management software. The cost depends on four factors: how many users will use it, which processes it has to cover, how much data needs migrating and how much it needs to be integrated with other systems. To compare two offers you need to look at the total cost over several years, not just the licence or the first year's subscription.

It is the first question almost every company asks us, and rightly so. The problem is that two quotes for “management software” can differ widely while, on paper, describing the same thing. In this article we look at the items that make up the price, how to read them and which questions to ask before signing.

The items that make up the cost of management software

A management software or ERP project almost always breaks down into the same items. What changes is the weight of each one and the way they are presented.

1. Licences or subscription

This is the most visible part. It may be a one-off licence purchase (with an annual maintenance fee) or a recurring subscription, typical of the cloud. The price usually rises with the number of users and the modules activated: accounting, sales, purchasing, warehouse, production, job costing, HR.

With an open source ERP such as iDempiere there are no user licence fees: the cost shifts to implementation, customisation and support services.

2. Analysis and set-up

This covers process analysis, system configuration, master tables, documents, approval workflows and testing. It is the item that, more than any other, determines the success of the project: management software configured properly from the outset costs less in the years that follow.

3. Data migration

Customer, supplier and item master data, balances, bills of materials, open documents, history. The more scattered or inconsistent the starting data, the longer it takes to clean and import it. It is worth deciding early on how much history really needs to be carried over into the new system.

4. Customisations and integrations

Specific reports, printouts, particular calculation rules, links to e-commerce, production machinery, banking systems, electronic invoicing or other software already in use. These are often the least predictable item, which is why they need to be described precisely in the quote.

5. Training

How many hours, for which roles, in person or remotely. A system that people do not know how to use creates duplicate work and parallel Excel spreadsheets – exactly what you wanted to get rid of.

6. Support and ongoing development

Support fees, response times, regulatory updates (for example tax-related), new versions, and a help desk for users where needed. This is a cost paid every year and must be included in the comparison.

7. Infrastructure

Servers, backup, security and connectivity if the software is installed on your premises; or the cost of the cloud service. We cover this in our article on choosing between cloud, on-premise and a hybrid model.

Why two quotes cannot be compared at a glance

An offer with low licence costs may involve many days of consultancy; one with a higher subscription may include support and updates. Some offers exclude data migration or treat it as “time and materials”. To compare them, you need to put them on the same basis:

• the same number of users and the same modules;
• the same reference period, for example five years;
• all items, including support, updates and infrastructure;
• what is included and what is excluded, stated explicitly.

The total cost over five years

The most honest way to evaluate management software is to estimate the total cost of ownership: how much you spend from go-live to year five. A simple table is enough: one row for each of the items above and one column for each year. The first year weighs more because of set-up and migration; from the second year onwards it is mainly subscriptions, support and enhancements.

Alongside the costs, set out the expected savings: less manual data entry, fewer errors, more accurate inventory, faster accounting closes, data available when you need it. They are not always easy to quantify, but they are the real reason for the investment.

How to reduce the cost without reducing the result

• Start with the priority processes and add modules later: a good ERP grows step by step.
• Choose management software already designed for your sector, so there is less to customise.
• Clean the data before migration, not during it.
• Appoint an internal project lead who knows the processes and has time for the project.
• Avoid replicating in the new system habits that arose only to work around the limits of the old one.

Questions to ask before signing

• Is the price per named user or per concurrent user?
• How many set-up days are planned, and what happens if they are not enough?
• Is data migration included? Which data and how much history?
• Are regulatory updates included in the subscription?
• Who owns the data, and in what format can I get it back if I change supplier?
• Who answers when I have a problem, and how quickly?

How we work at Labinf Sistemi

Before quoting, we analyse processes and priorities, and we clearly separate licences or subscriptions, set-up services and support. We offer different solutions depending on the company: LIGEST for SMEs, the open source ERP iDempiere, and vertical management software such as Plasti-Gest for rubber and plastics or Opera ERP for theatres and foundations. You will find more quick answers in our FAQs.

If you would like an estimate for your company, write to us or call us: we start from how you work today and what you want to achieve.