ERP Software Development Cost: What Businesses Should Expect

Enterprise Resource Planning (ERP) software has become a crucial part of the infrastructure of today’s business world. Right from managing finances and human resource management to inventory management, sales, and supply chain management, ERP software integrates multiple business functions into one system. However, among the most common and most critical questions that business owners ask is, 'What is the cost of ERP software development?'

The answer to this question is not simple. The cost of ERP software development can vary greatly depending on the size of the business, functionality, customisation requirements, technology used, and deployment type. This article will give you a complete understanding of the cost of ERP software development.

Understanding ERP Software Development

ERP software is intended to optimise business operations by automating business processes, providing better visibility into business data, and allowing for real-time business decision-making. Custom ERP software differs from other software in that it is developed to specifically align with a company’s business processes and objectives.

Modules that are usually included in an ERP system are:

Finance & Accounting
Human Resource Management (HRM)
Inventory & Warehouse Management
Sales & CRM
Supply Chain & Procurement
Manufacturing & Production
Reporting & Analytics

The greater the number of modules and functionalities that have to be developed, the steeper the cost of development will be.

Key Factors Affecting ERP Development Cost

1. Business Size and Requirements

The size of your business is an important determinant of the cost of the ERP system.

Small businesses require simple modules and less customisation.
Workflow automation, reporting, and integration are essential for medium-sized enterprises.
Big companies require great security, scalability, and complicated modules.

The complexity and cost of development increase with the number of users, departments, and processes.

2. Customization Level

Customisation is one of the largest cost factors in ERP implementation.

Less customization: Standard workflows (less costly)
Moderate customization: Modification of business logic and dashboards
High customization: Entirely different workflows, reports, and automation

Highly customised ERP solutions can be 30-50% more expensive than standard ones.

3. Deployment Model

ERP implementation type is a major factor that influences the cost.

On-Premise ERP

Higher initial infrastructure investment
Needs internal IT staff
More control and security

Cloud-Based ERP

* Lower initial investment
* Pay-as-you-use or subscription model
* Scalability is easy

Hybrid ERP

* Combination of on-premise and cloud
* Middle ground in terms of cost and flexibility

Cloud-based ERP is generally 20-30% less expensive in terms of initial investment compared to on-premises.

4. Technology Stack

Technology choice affects development time, performance, and maintenance costs.

Backend: Java, Python, Node.js, and .NET
Frontend: React, Angular, and Vue
Database: MySQL, PostgreSQL, and MongoDB
Cloud: AWS, Azure, and Google Cloud

Technologies such as blockchain, artificial intelligence, and machine learning have long-term benefits despite being more expensive to develop.

5. Integration with Third-Party Systems

ERP software may have to interface with:

Payment gateways
CRM software
E-commerce solutions
Accounting software
IoT devices

Each interface may incur a cost of ₹1-5 lakhs
.
6. UI/UX Design Complexity

A good UI enhances usability and productivity.
Basic UI: Lower cost
Custom dashboards & role-based UI: Higher cost
Mobile-friendly ERP: Additional cost

Spending on UX design will help cut training costs and resistance to change.

7. Data Migration

Migrating data from legacy systems is a time-consuming and risky activity.

Data cleaning and validation
Mapping old data to new ERP
Testing and verification

Data migration can add 10-15% of the total cost of the ERP.

8. Security and Compliance

ERP systems deal with sensitive business data.

Security features include:

Role-based security
Data encryption
Audit trails
Compliance with GDPR, ISO, or industry standards

High-level security features increase the development cost but are required for long-term sustainability.

ERP Development Cost Breakdown by Phase
1. Requirement Analysis & Planning (10–15%)

Business process analysis
System architecture planning
Documentation

2. UI/UX Design (10-15%)

Wireframes
Prototypes
User flow design

3. Development & Customization (40-50%)

Module development
Feature implementation
Integration

4. Testing & Quality Assurance (15-20%)

Functional testing
Performance testing
Security testing

5. Deployment & Training (5-10%)

System deployment
User training
Documentation

Ongoing ERP Maintenance Cost

ERP development is not completed with the deployment of the system.

The annual maintenance cost is estimated to be between 15% and 25% of the development cost, which includes:

Bug fixes
Updates & upgrades
Server costs
Technical support
Feature enhancements

Hidden Costs Businesses Should Consider

Hidden costs of ERP implementation are often ignored by many businesses. These include:

User training
Change management
Optimization
Future integration
Licence upgrades
Downtime during migration

The costs can be avoided by planning ahead.

How to Reduce ERP Development Costs

MVP – Build core modules first

Cloud deployment
Open-source frameworks
Modular development
Experienced ERP developers

Strategic planning can help lower ERP costs by 20-40%.

Is ERP Software Worth the Investment?

However, despite the large setup costs, ERP systems offer great value for money in the following ways:

Increased productivity
Reduced operational costs
In-depth analysis of real-time data
Enhanced compliance and reporting
Enhanced customer experience

Most organisations can easily recover their costs on an ERP system within 2-4 years through increased productivity.

FInal Thought

ERP software development is a large investment, but it is also a great growth catalyst. The cost of developing an ERP system depends on the size of the business, functionality, complexity, and technology used. Understanding these factors can help organisations plan their budgets accordingly and avoid unexpected expenses.

For organisations that want to grow their business, become more efficient, and make data-driven decisions, the cost of a well-designed ERP system is not just an investment; it is also a great decision.