Pricing Fears in ERP

In educating growing businesses, I find most people moving off of QuickBooks experience significant sticker shock when they consider their next ERP system.  There are two levels of shock, the extreme price difference between QuickBooks and a “real” ERP system, and then the shock of implementation on onboarding that system.  The first part, well, you just have to get over, and I’ll explain why.  The second shock we can help you with.

3 Tiers of Products

First off, in the accounting world, there are three tiers of products.  Tier 1 is where QuickBooks sits, along with obsolete platforms like PeachTree or Microsoft Accounting.  These are your entry-level accounting systems.  You can pick up a single-user license of QuickBooks for about $300, although QuickBooks is pushing their online version for $30/month (again for a single user).  The downside to Tier 1 software is that it’s not GAAP-compliant (learn more about GAAP), which means it doesn’t muster controls to keep your books safe from fraud.  QuickBooks has often been compared to a shoebox for receipts.  You can change the values of entries willy-nilly, which is pretty awesome because non-accountants make a lot of mistakes.  But this is incredibly dangerous as a business owner.  If you are doing your own books, QuickBooks is great.  As soon as you’ve passed your bookkeeping to another person, it’s time for a Tier 2 system.

Tier 2 systems include things like Dynamics GP, Acumatica, Business Central*, Navision, Intacct, Sage, NetSuite, and Epicor.  Chances are you’ve never heard of most of these.  And even as I push Acumatica I have to say all of them are good, mainly because they all serve thousands of customers.  Each has a sales pitch as to why they’re better than another, but ultimately they all perform similarly.  (My favorite of these is Acumatica, but even so, I run businesses on Acumatica, BC, and Dynamics CRM).  But here’s the first sticker shock:  A 12-user system runs about $50,000.  Yep.  I said it.  That’s like $4,000 per user compared to $300 per user for QuickBooks.  Ouch.  And $100,000+ for a system is very common.  It’s hard to price these systems because the modules needed to run your business vary so widely.  So think of these numbers as a scale for comparison, not a quote on what your system should cost.

Tier 3 systems include Oracle, JD Edwards, and Lawson.  These systems run organizations like Boeing or Amazon.  Think gazillions of dollars for these systems.

Sticker Shock

One of the ways to reduce the sticker shock of a Tier 2 system is by purchasing it in a SaaS (Software as a Service) model, also known as a subscription model.  In this model, rather than forking over $50,000 in one shot, you might pay $1500/month for the life of the software.  Still more than a Tier 1 system, but it moves the Capital Expense (and lack of cash flow most growing businesses experience) to an Operating Expense.  I think of the investment into a Tier 2 ERP system as hiring a new person with a full-time salary.  Ultimately, that’s the value of a Tier 2 ERP system anyway.

The second sticker shock is the implementation or onboarding process. In general, it takes about 1x to 1.5x the cost of the system to implement it.  Bought a $50,000 system?  Plan on spending up to an additional $75,000 to get it running in your company.  Why?  Because consulting is expensive, these products are complex (no matter what anyone tells you) and believe me, you do NOT want to self-implement (unless you really like a disaster and want to pay twice).  If you’ve never replaced the engine in a car, I recommend you hire someone skilled at it.  It’s expensive, but if you want your car to drive, well worth the money.  Remember, a Tier 2 system is like hiring a new employee – you want to train them well to work in your company to provide value.

One Monthly Price

What we’ve done at Rockton Connect is we’ve given the onboarding cost the SaaS treatment.  We just treat the onboarding like a huge, multi-year project.  So instead of a $75,000 implementation, you might (and I stress might, as these are ballpark figures) pay $2,000/month for all the services you need.  This makes the project more palatable and achievable.

With us, you also pay one monthly price that includes onboarding, service hours and unlimited support. Just because it is stressful moving to an ERP doesn’t mean the pricing has to be.

I’ll dive into more details on this complex topic in future blogs, but this is a good place to start your mental shift when considering a Tier 2 system.

Before jumping in, Rockton Connect is here to help understand your business strategy and cloud strategy. Working with growing businesses for more than 20 years has taught us a thing or two about what companies want from an ERP solution. We are helping businesses thrive by connecting people, processes, and priorities.

Next Steps:

By: Rockton Connect, www.rocktonconnect.com, Colorado and North Dakota based Acumatica Partner.

*Not its real name, but the name used in practice. Microsoft has confused the marketplace with an array of offerings under the Dynamics 365 brand; it takes a PhD to understand all the flavors.  Business Central is “Dynamics 365” but Dynamics 365 actually has several Tier 2 systems, including the former Axapta, Navision, Solomon, and Great Plains products.  Do not be surprised if you, your reseller, or anyone at Microsoft is confused, as we all are.

 

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