How come I can use full ERP software for just $49 per month? Will I be charged additionally for support and implementation of the ERP/MRP software?
ERP cost stats
The first thing that comes to mind when potential users see our price is that development is done as “outsourcing”. The company has an idea or an existing solution that needs to be scaled to a new platform and engages a third-party company that will do the “coding”. Developer prices vary from region to region, but it’s not a price that is in focus, but quality. Engaging “nearshore” / “offshore” requires additional specialists (QA, Scrum master, etc.) as well as the biggest problem – “communication”. This is good for ad-hoc solutions, but when inquiring “core” processes, there is a big risk.
With the advent of services such as Freelancer, Elance, Upwork, it has led to the equalization of developer engagement prices. So, whether a developer is from the USA, the EU or India has no particular impact, the only thing that has any influence is developer quality.
ERPAG is a 100% in-house solution.
Also, the cost of development in the price of software decreases during the year. One reason is that the other costs are increasing, the other is that with the emergence of modern programming languages, “coding” productivity is increased, the third and most importantly, the knowledge and experience are available a couple of “clicks away” (portals such as https://stackoverflow.com).
In Software development, there is no space for saving. And every attempt to save has returned to us like a boomerang.
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5. Support
All software companies are saving here. Anything that does not refer to getting new customers is considered to be an unnecessary cost. Most companies are focused on getting new users, and not so much on keeping the existing ones, they are guided by the idea of ”investing better in marketing and getting 100 new users because the existing ones are a closed chapter”. Most bonuses are calculated and paid for commercial, very rarely for loyalty.
Such practice leads to loyalty and goes below 33% (users who have used the application for more than 3 years), and this is the value that flows over to the final price. Which means that the price of the software must be 50% higher than when the loyalty is 66%.
According to our statistics, ERPAG currently has a loyalty of a bit over 60%. (With the classic desktop version loyalty was even over 75%). We still have users who have gone through all three generations of our applications (MS-DOS, MS Windows, Cloud).
Like most companies that began in the 1990s, we were a two-man-band. Since it was time before mobile phones, fieldwork was part of everyday life, when a problem arose – existing users simply could not contact us. One of them said, “… then find somebody to answer my call me at least, if I have to I will pay double, just to have someone who will listen to me.”
There are “old school” and “new school” users, someone prefers to communicate by email, someone is sticking with a phone call. That’s why we have enabled our users to choose, if they want phone support, then they will have to subscribe to our “premium” service. With today’s prices, it is hard to expect that for $49 someone will answer the phone, for that service, it should be added to the price.
There must be a support for this type of application. And more importantly, it has to be effective. The more efficient the support is, the cost of support is lower. Everyone is trying to outsource support. Such support is cheaper but less efficient. For years we have been trying to transfer support to our partners, but in the end, not only did we not save any money, but we were at a loss. We spent more time on training third parties, so the cost was higher than when we worked with in-house support, and again the problems came to us.
ERPAG has 100% in-house support. With us, support and software development are the two sides of the same story, one complement each other.
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6. Implementation & customization
These two inputs are interconnected so we will treat them as one topic.
Here lays the answer to the question of this blog. Implementation is the most expensive part of the MRP / ERP system. And this is the most critical point of application of the information system.
For SMBs, it can cost from $1,500 to $4,000 per operator, or from $75,000 to $750,000 per company. (source: https://www.workwisellc.com/erp-software/erp-software-cost)
Over 60% of implementation is unsuccessful.
In July 2018, the German trade chain “Lidl” gave up, after investing $550M and seven years of implementation. (source: https://www.br.de/nachrichten/lidl-setzt-500-millionen-euro-mit-software-von-sap-in-den-sand-100.html)
At these prices, the question arises as to whether it is profitable for small businesses?
According to our analysis, as many as 80% of all activities related to implementation are made by the company itself. When we implemented the same thing, for as much as half the time, we listened to the mutual dispute among employees, anyone who was asked any question, thought that his demands were a priority. Requests for customization, training, documentation have spread through the organization like a virus. It was guided by the idea of ”now we are introducing a new system; now is the moment to fulfill all our desires and needs”, if a clear limit is not set, the price can go to the stratosphere.
Without strong and authoritative management, it is impossible to successfully implement (and economize) the system.
ERPAG is facing SMBs and entrepreneurs, where the hierarchy is clear, the owner is the only decision maker (he is asked for everything), sharing tasks and controlling the implementation process.
In the price of ERPAG, there is no implementation, implementation is up to every company, every company is doing it independently. If you need help, you can always contact support.
Each company knows its processes, there is no need for consultants to record processes. If ERPAG covers more than 70% of the process we can expect that the independent implementation will be successful. The greater the coverage of the process, this price increases exponentially (80% of the price coverage will be 10 times more expensive).
In SMBs it often happens that recording some business processes are more expensive than themselves. For example, in one implementation, it was required to upgrade the HR module to the application that will record the number of employees shoe size. The reason was the following – when ordering protective shoes to have a “one click” report. It would make sense for the company that has 1,000 employees, but they had 10 and ordered the shoes every second year. The cost of finishing and implementation was higher than the value of the shoes mentioned.
At the price of ERPAG, there is no customization, because it is none.
Like a wardrobe – if you are buying ready-made sizes (size XL, L, M, S), the price is one, but if you want your suit to be custom-made, the price is not just doubled but it’s 10 times higher. There is no question here why there is a higher price, while with the information systems the demand goes by the principle “it’s a small implementation, what’s the problem?”.
We periodically improve our system according to the meaningful requirements from our users, all in order to become the best cloud-based application. Requests are collected through the customer service, analyzed, and if we think that some are interesting and helpful to other users, they go into production.
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7. Maintenance
How to save on maintenance? The answer has three letters – “WEB”.
Cloud-Based Applications require incomparably fewer maintenance resources. With this, the lower end price of the application is achieved.
Even a large IBM company confirms fewer maintenance costs for Cloud-Based Applications (source: https://www.ibm.com/cloud/learn/benefits-of-cloud-computing).
Another advantage of ERPAG is that only one version of the application is active. All ERPAG users use the same version so that only that one is maintained. In systems where there are multiple active versions, the cost of maintaining each version must be embedded in the cost of the application itself.
As always, saving on one side creates a new cost on the other. In the Cloud-based application, there is a new cost called “cloud-based infrastructure”, simply save 10% of the cost of the application, but we will have a new cost of 5%.
ERPAG is designed in the following way – the more users company has, the cost per user is lower. We achieved this by introducing a “server-side” cache. For example: “product and service list” will be required by almost all users (data of the company), and we will insert data into the cache, and deliver it to everyone. The good side of this algorithm is that the memory is quite cheap, the bad side is when the company has a large number of users, then the memory limit can be broken. ERPAG is designed for SMBs and 5 users are averages per company, so the memory limit is not compromised.
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8. Marketing
When we say “marketing” we actually mean “Google”.
Previously, the software advertised through fairs (eg CeBit), lobbyists, consultants, professional magazines, electronic and other media. “Today everything is pay-per-click (PPC)”.
Cloud-based software companies (or, as someone prefers the term, SaaS Companies) spend between 10% and 120% of their annual sales revenue on marketing. (source: https://www.xandermarketing.com/what-should-your-saas-marketing-budget-be)
The reaction of someone who is not from SaaS business is “120% on marketing, you must be joking?”.
Most cloud-based services are start-ups. The goal of a start-up company is just growth (especially recurring revenue), so it can only be interesting for investors. They are willing to pay for a “click” as much as they need, just to keep growth up to the acquisition, i.e. before the users drop off. If they invest a bit in marketing they will not have expected growth, but if they invest too much, they will burn.
90% start-ups fail.
This risk is transferred to the price of the software. And we can say that it affects how much implementation costs.
ERPAG is not a startup. We exist since 1996, we have no investors (for the time being) and we are financed exclusively from our own profits.
Of course, we wouldn’t be here without marketing.
PPC is difficult to control, from 0.5% to 1% of “clicks” will become users. With an average price tag of $20 (USA market) for significant keywords, from $300/mo to $500/mo would be the minimum cost of marketing per user. How is it worth paying us $49/mo?
Fortunately for us, there are business-to-business services and listings.
One of them is Capterra (https://www.capterra.com/p/142477/ERPAG), where in our case, 20% to 30% of “clicks” turn into users.
In addition to PPC and business listing, there are still many effective methods, but the most effective method is the recommendation of a satisfied user.
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9. Conclusion
The primary parameter that makes a price of $49/mo is:
The principle is the same as with the Swedish furniture manufacturer, Ikea, these are furniture models, fit your needs to them, take them over by yourself, transport them by yourself and assemble them by yourself. If you do not want to do it, you will have to pay someone to do it for you.
Off-topic:
“Ikea” is also called the “The divorce maker”, the ones which assemblied the furniture with their wives, knows exactly why the meaning behind this name. If you have a spouse in your company, be armed with patience during the implementation.
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2019. ERPAG Inc.
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