Best Ways to Pay for ERP

Here is How Other Comparies Are Doing It

By Kevin Stewart
Updated: September 02, 2011

When considering how to pay for an ERP system, there are several possible options. The option you choose will depend on the following factors:

• Is the software considered a capital expense or an operating expense?
• Is the software intended for long-term or short-term use?
• Will the system be deployed on premise or as a service?

Based on your consideration of these factors, you can choose the most advantageous payment option for your organization.

Perpetual Software Licensing

If you are able to make your purchase as a capital expense, a software license is the most common option. Usually the license will be perpetual, which means that after you pay a one-time license fee, you will have the right to use the software indefinitely. There are usually restrictions in perpetual licenses. For example, your use of the software can be limited to a particular number of named users or servers.

Another common restriction is the requirement of purchased maintenance. Along with a perpetual license, you would have to agree to purchase maintenance for a fee. Purchasing the maintenance would also give you access to updates and improvements in the software.

Term Software Licensing

In some cases you may need to purchase software for a limited time. If you plan on expanding in the future or have limited resources to commit to software purchases, a term license may be appropriate. A term license will give you access to the software only for a period of time. After expiration of the license term, the software would have limited operation or be blocked altogether.

Subscription Pricing

For situations where software purchases need to be classified as operating expenses, a subscription makes more sense. You can book your software subscription costs as an operating expense even in cases where you run the software on your own hardware.

To take full advantage of software subscription pricing, consider software as a service (SaaS) or hosted software subscriptions. In the case of SaaS or hosted solutions, the entire expense of the ERP system can be considered an operating expense.

Keep in mind that how you deploy ERP in your business and how you pay for it are separate considerations. One decision should not necessarily drive the other. Instead, look for the best fit in terms of features and benefits first. Then consider the payment method that meets your financial requirements. Knowing the options available should help you negotiate a plan that is best suited to your needs.
 

Featured Research
  • How to Buy an ERP Solution

    Congratulations on making the decision to beginning the process to research and ultimately purchase an ERP solution for your business. Studies have shown that through accurate information about daily operations, companies can make decisions that reduce operational costs by as much as 23% AND administrative costs by 22%. more

  • The Future of ERP

    Today's business decisions are data-driven and the difference between success and failure can be boiled down to utilizing the correct data. Now more than ever, companies have access to not only robust data but consumable data as well, through Enterprise Resource Planning (ERP) software. more

  • Top ERP Trends of 2017

    No matter the size, success or industry in which you do business, data is vital. Because of this, data-driven technologies such as Enterprise Resource Planning (ERP) systems are becoming more important for the streamlining of quantitative data and gaining/analyzing key insights. Even better, as of 2017, ERP tools aren’t only for enterprise companies in the manufacturing and distribution sectors—they’re for everyone. But that’s not the only keynote change that’s taken place this year … Download our latest guide to see what else is happening with ERP! more

  • Making a Business Case for ERP

    Are you in the market for an ERP solution but hesitant to purchase due to the potential financial risks associated with implementing such a tool? While costs may seem prohibitive, and make it difficult to get stakeholders on board, an ERP system can add SIGNIFICANT value to your organization, regardless of what industry you are in. more

  • CIO eGuide

    Data is becoming increasingly important in business. As a result, more and more organizations are becoming attractive targets for hackers. Data breaches caused by stolen credentials are on the rise. You need smarter tools to protect your organization against the monetary and reputational damage caused by a data breach. This guide will explain how Okta Adaptive Multifactor Authentication (MFA) provides the security that IT needs, while also providing the simplicity end users want. more