ERP costs: perpetual licence vs annual subscription — which is better?

Choosing to buy an ERP system is an important investment for a business, because it affects work efficiency and the long-term growth of the business. The decision to buy a perpetual licence or an annual subscription is therefore something to consider carefully, so that it suits the business’s budget and needs.

The writer will provide a comparison of the advantages and disadvantages of both cost models as options to inform the decision. The details are as follows.

ERP price: perpetual purchase

Advantages

• The long-term cost is many times more economical than the subscription model, because it is a one-time payment; after that there is a service-contract fee, whose price depends on each provider.
• High security because it uses an internal system, such as your own server.

Disadvantages

• High initial cost — you must invest in a large amount of hardware, software, and system installation.
• Maintenance fees — you must have an IT team continuously looking after the system.
• Updates — you must invest in software updates periodically.

Annual subscription (Subscription)

Advantages

• Low initial cost — no need to invest in a large amount of hardware and software.
• Updates — you always receive updates with new features.
• Flexibility — you can adjust the number of users as needed.

Disadvantages

• Long-term cost may be higher than the perpetual model if you use the system for a long time.
• Dependence on the provider — you must rely on the provider to maintain the system.
• Risk — if the provider stops offering the service, it may affect your use of the system.

Which one should you choose?

Which option you choose depends on many factors, such as:

• The size of the business: large businesses may suit a perpetual purchase, to control the system fully, while small businesses may suit an annual subscription, to reduce the initial cost.
• Budget: consider the budget you have and the costs you expect to incur in the long run.
• Customisation needs: if you want to customise the system to fit the business’s needs as much as possible, a perpetual purchase may be the better option.
• The importance of data: if data is highly important, a perpetual purchase helps you control data security better.
• IT resources: if you have an IT team capable of maintaining the system, a perpetual purchase is also an attractive option.

Conclusion

Both the perpetual purchase and the annual subscription have different advantages and disadvantages. Which one you choose depends on what suits each business. Comparing the advantages and disadvantages, and considering the various factors mentioned above, will help you decide on buying an ERP system appropriately.