ERP software is licensed for use, whether as an on-premises deployment or a hosted one. But with modern SaaS offerings, those licences come in the form of subscriptions. With a licence or subscription, you have the right to use the ERP in line with specified terms and conditions. These tell you what can be used, when, and by whom.
In this article, we take a close look at pricing models for these different licensing and subscription models.
What’s the difference between a ‘perpetual’ and a ‘term’ ERP licence?
Subscriptions are emerging as the most popular standard for ERP software. But ERP licences are still relevant for anyone who is not running a SaaS product. So let’s take a look at the two most common types of ERP licences.
When you have this type of licence, you pay once and get permanent use of the application. At least, that’s how it used to be – today, you might be granted the right to use the system as long as you continue paying maintenance to the ERP vendor. Always examine the fine print carefully when you enter a licence agreement.
ERP systems may maintain ongoing support but, the older it gets, the less likely it is that the vendor is continuing to innovate with it. In a nutshell, you won’t get any new features once your on-premise system is no longer the latest one. Over time, many business functions may no longer be sufficiently supported, while you continue paying the same amount as you did when the new features were rolling out regularly.
It may be more cost-effective to use a third-party to keep up with maintenance. A genuine perpetual licence allows for this, but those that tie you to the vendor do not. Bear in mind that, though vendors often promise they will never stop supporting a product, there have been ERP vendors declaring ‘end-of-life’ dates, after which they will no longer provide support or updates.
If you are on a perpetual licence that ties you to the vendor, and they have announced the end of life, it’s time to start rethinking things.
Perpetual licences used to be the norm, but they are being replaced. Term licences are valid for a specified time period, after which you must renew your licence or cease using the ERP solution.
There might be a built-in ‘kill switch’ to disable your ERP system when you reach the end of the term. However, this is not always the case, especially in older ERP software. If you choose not to renew, you must discontinue use or you might be paid a visit by the software auditors.
Neither perpetual nor terms licences include long-term support and maintenance as part of the deal. Chances are, you will have to pay for a separate maintenance agreement, at a recurring cost, to provide access to certain updates and upgrades as well as technical support.
Some of the upgrades will be granted as part of the maintenance fee. These might include:
- Bug fixes.
- New releases.
But there may be extensions and new modules that are only offered at an additional cost. At its bare minimum, a maintenance agreement is an insurance policy, but it can be more than that if your solution vendor continues to actively develop new functionality and features.
Subscription-based ERP Systems
Subscription pricing is very similar to a licence. As long as you are paying your subscription, you get to continue using the system as agreed. This is the basic model for cloud ERP.
Migration to the cloud is happening at pace throughout different industries. There are different deployment options, and one key advantage of subscriptions versus old-fashioned licences is that the maintenance aspect is included. People frequently equate subscriptions to SaaS, but this is not always accurate.
SaaS and Cloud ERP Subscriptions
With a Software as a Service (SaaS) subscription, you get all the support and maintenance in the package. Furthermore, the provider takes responsibility for maintaining the system, monitoring performance and uptime via their hosting solution. This means you will never have to apply:
- Bug fixes.
- New releases.
It also means your solution remains the most current and up-to-date available. Your software will not age and cause compatibility problems for you, and ongoing expenses will be kept to a minimum.
These cloud ERP solutions are making the software accessible to smaller businesses as well as large companies. The latest software includes tools for virtually anything a business could needs, including CRM, financial management, supply chain management, business intelligence and more. They are even designed to be very mobile-friendly to adapt to the needs of the modern workforce.
Pricing in SaaS ERP can take various forms, typically based on the users within your organisation:
- User-based: This is where the cost of your subscription is based on the number of users you require.
- Concurrent ERP Users: This relates to the number of users that you will need to be simultaneously logged into the system.
- Named Users: Here, you buy a certain quantity of named users, each of whom will receive their own login credentials.
Thus, in your subscription, you will pay for the modules you use plus a fee based on the users, perhaps in one of the above formats.
Non-SaaS ERP Subscriptions
The availability of subscriptions for on-premises software is also on the rise in the subscription economy. With a subscription-based licence, you may have fewer up-front costs and you may get support and maintenance as part of the deal.
But if you are running an on-premise solution or hosting it with a third-party, the responsibility for applying updates and upgrades will be down to you. Fail; to keep up with this and you could still run the risk of becoming obsolete.
ERP Licensing Summary
ERP is an investment for your business. Whether you licence or subscribe, it is important to fully understand the terms and conditions of your agreement. Hopefully, this article has given you a better understanding of the pricing models for licence and subscription ERP models. If you need help with anything, we are available to offer expert guidance so that you can proceed from an informed position.
Why Choose Eventura as your ERP Implementation Partner?
Eventura has been providing robust business solutions to countless organisations for over two decades. We are ERP experts and can identify all of your business needs and deliver a comprehensive ERP solution that works for you.
As Sage 200 Partners and NetSuite Solution Providers, we can help you identify which solution will fit your business needs the best. Our expert team of business analysts, developers, consultants, technicians and support staff can guide you through your entire project, from initial scoping through to implementation and on-going support.
We’re also managed IT service providers meaning we can help you identify your entire IT infrastructure requirements from day one. If you would like to speak to one of our ERP experts to discuss your options or request a free demo, you can request a free call back here.