There’s no doubt that ready-made ERPs are great for running and managing a business. However, the high cost often makes them unaffordable for many companies, especially small businesses and startups.
But custom ERP (Enterprise Resource Planning) systems help businesses cut IT costs by bringing all processes under one platform, removing the need for multiple expensive software tools. In this article, I’ll explain what a custom ERP is, compare it with ready-made ERP solutions, and highlight which option could be the best fit for your business.
What is it?
It is a system built specially for your business needs. Unlike ready-made software that you buy from the store, custom ERP is made to fit exactly how your business works. It connects all parts of your business-like sales, inventory, accounting and customer service in one place.
Cost Comparison: Custom vs Ready-Made ERP
- Upfront Costs: Custom ERP requires higher initial investment, typically ranging from ₹8,00,000 to ₹40,00,000 for small businesses, while larger companies may spend multiple crores. Ready-made ERP systems start at ₹1,000 to ₹1,00,000 initially.
- Long-term Savings: However, custom ERP becomes cheaper over time. Ready-made systems have ongoing licensing fees, user fees, and upgrade costs that add up quickly. Custom ERP eliminates these recurring expenses.
- Return on Investment: Studies show that 62% of companies report cost reduction after implementing ERP systems. The average ROI for ERP projects are 52%, meaning for every rupee invested, businesses earn back ₹1.52. Custom ERP typically pays for itself within 2-3 years through cost savings and efficiency gains.
How Custom ERP Reduces IT Costs
Eliminates Multiple Software Licenses
Most businesses use many different software programs for different tasks. This means paying for multiple licenses every year. A custom ERP combines all these functions into one system, so you only pay for one solution instead of many.
For example, instead of paying separately for accounting software, inventory management, CRM and project management tools, you get everything in one custom ERP system.
Reduces Maintenance Costs
Ready-made software often needs expensive maintenance contracts that cost 22-25% of the purchase price every year. Custom ERP typically has maintenance costs of only 15-20% of the initial development cost. This means lower yearly expenses after the system is built.
Saves Money on Third-Party Add-ons
Off-the-shelf ERP systems often need expensive add-ons or plugins to work properly with your business. These extra tools can increase your total costs by up to 40%. Custom ERP is built with all the features you need so no extra purchases are required.
Eliminates Integration Costs
When you use multiple software systems, connecting them together is expensive and complicated. Custom ERP is designed as one complete system, so there are no integration costs. All your data flows smoothly between different departments without expensive connectors.
These Are Specific Areas Where Custom ERP Cuts Costs
- Inventory Management: Custom ERP provides real-time inventory tracking across all locations. This reduces overstocking and stockouts, saving money on storage costs and lost sales. Companies report inventory cost savings of up to 30% with proper ERP implementation.
- Staff Productivity: By automating repetitive tasks and eliminating manual data entry, custom ERP allows employees to focus on more valuable work. Studies show productivity improvements of 15% for businesses using custom software solutions.
- Error Reduction: Manual processes lead to costly mistakes in orders, billing, and inventory. Custom ERP automates these processes, reducing errors and the costs of fixing them. This includes fewer returned products, billing corrections, and customer complaints.
- Compliance and Reporting: Custom ERP can automate compliance requirements and generate reports automatically. This saves money on legal fees, penalties, and staff time spent on manual reporting.
Disadvantages of Not Having Custom ERP
- Data Silos: When departments use different software systems, information gets trapped in separate places. This leads to poor decision-making and misses opportunities. Studies show companies lose an average of ₹2,00,000 for every month they delay ERP implementation.
- Manual Workarounds: Without integrated systems, employees spend time moving data between different programs. This wastes money on labor costs and increases the chance of errors.
- Scalability Issues: As your business grows, buying more licenses for multiple software systems becomes very expensive. Custom ERP scales with your business without additional licensing fees.
Total Cost of Ownership
The total cost of ownership for ERP systems is approximately ₹10,00,000 to ₹15,00,000 per user over several years. However, custom ERP often has lower total costs because it eliminates ongoing licensing fees and reduces the need for multiple systems.
For mid-size companies, ERP systems typically cost 3-5% of annual revenue, while large companies spend 2-3% of annual revenue on ERP. Custom solutions often fall within this range while providing better value through eliminated licensing costs.
Develop Your Powerful Custom ERP Website or Application From Makes360
Makes360 is a leading ERP development agency specializing in custom ERP development services tailored for businesses of every size: large, medium, and small. With a proven track record of delivering over 100 successful implementations across industries such as construction, manufacturing, education, and real estate, we help companies streamline operations, boost efficiency, and accelerate growth.
