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ERP Total Cost of Ownership: What to Include

How to calculate ERP total cost of ownership over five years: licences, hosting, implementation, data migration, training, support, upgrades and internal time.

By ERP Builders Team1 min read

Licence price is the number on the vendor's website, and it is often the smallest part of what an ERP costs. Total cost of ownership (TCO) gives the real picture.

The cost categories

One-off costs

  • Implementation: design, configuration, project management
  • Customisation and integrations
  • Data migration
  • Training
  • Hardware, such as scanners and printers

Recurring costs

  • Licences or subscriptions per user
  • Hosting and infrastructure
  • Support and maintenance
  • Upgrades
  • Third-party apps and connectors
  • Add-on services, such as OCR or bank sync

Internal costs

  • Staff time on the project
  • Temporary productivity dip after go-live
  • An internal system owner

Five-year view

Put each category in a table by year. Year one carries implementation. Years two to five carry subscriptions, support and at least one upgrade. Add expected user growth.

Licence models compared

ModelExampleCost pattern
Open sourceOdoo Community, ERPNextNo licence, pay for services
Per-user subscriptionOdoo Enterprise, cloud ERPsGrows with users
Perpetual licenceSome on-premise ERPsLarge upfront, annual maintenance

See Odoo pricing explained and is ERPNext free?.

Hidden costs

  • Customisations that make every upgrade expensive
  • Integrations nobody owns
  • Connectors priced per order
  • Price increases at renewal

Read free ERP hidden costs for more.

Reduce TCO

  • Stay close to standard features
  • Phase the rollout
  • Train internal super-users
  • Choose integrations you can maintain

Compare against benefits

TCO is half the picture. Set it against expected savings and growth. See how to calculate ERP ROI or try our ERP pricing calculator and ROI calculator.

Frequently asked questions

What is ERP total cost of ownership?

The full cost of owning an ERP over a period, usually five years, including licences, hosting, implementation, support, upgrades and internal staff time.

Is open-source ERP cheaper over five years?

Often, because there are no licence fees, but implementation, hosting and support still cost money. Compare full five-year costs.

Written by

ERP Builders Team · ERP consultants and engineers

Articles written and reviewed by the ERP Builders delivery team — functional consultants, solution architects and developers who implement, integrate and support ERP systems.

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Next step

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