Open Source ERP: How to calculate the Total Cost of Ownership (TCO) really

The decision for a new Enterprise Resource Planning System (ERP) is one of the most strategic investments a company can make.

In recent years, Open Source ERP has become an more often popular alternative to proprietary solutions. The main reason for this is obvious: no royalties apply.

But the true price of an ERP system often hides behind the purchase price.

Here the Total Cost of Ownership (TCO) comes into play – a complete review of all costs incurred over the entire life cycle of a software.

What is the Total Cost of Ownership (TCO)?

The Total Cost of Ownership is an review method that takes into account not only the initial purchase costs of an investment.

However, all costs incurred over their entire duration of use.

In the context of ERP systems, this means that, in addition to the purchase price, costs for rollout, adaptation, maintenance, training and support are also included in the calculation.

A careful TCO review is essential to realistically assess the long-term economic viability of an ERP solution and to avoid bad surprises.

The cost factors for open source ERP systems

The decision for a new Enterprise Resource Planning System (ERP) is one of the most strategic investments a company can make.

When planning Open Source ERP: How to calculate the Total Cost of Ownership (TCO)… from idea to delivery, API & Integration Projects, Cost Calculator: API Development, Solution: Integration Chaos sowie RPA vs. API Integration offer practical next steps on our site.

Although Open Source ERP systems usually do not pay royalties, they are not free of charge. The following factors must be taken into account in a TCO assessment:

Implementation costs

The rollout of an ERP system is a complex process that goes far beyond the pure software installation.

These include the review of business processes, the configuration of the system, the development of interfaces to other applications and the execution of tests.

These tasks require expert know-how that must be either in-house built or purchased by external service providers.

Adaptation and individualization

Short: Rarely, a standard software fits perfectly with the custom needs of a company.

Rarely, a standard software fits perfectly with the custom needs of a company. Open Source ERP systems offer the advantage that the source code is freely accessible and thus theoretically there are unlimited options for adaptation.

This room to adapt, however, has its price: each individualization requires development expenditure which causes costs. The more the system is adapted to its own processes, the higher these are.

Data migration

Short: The acquisition of data from old systems is a critical and often underestimated cost factor.

The acquisition of data from old systems is a critical and often underestimated cost factor. Data must be cleaned, transformed and imported into the new system.

Depending on the extent and complexity of the data, this process can be very time-consuming and cost-intensive.

Employee training

Short: The best software is useless if employees do not know how to use it.

The best software is useless if employees do not know how to use it. A complete training of users is so essential for success

References and further reading

The following separate references complement the topics in this article:

• Bitkom – German digital industry association.
• German Federal Office for Information Security (BSI).
• European Commission – Digital strategy.
• MDN Web Docs (Mozilla)
• W3C – World Wide Web Consortium.

"AI in mid-sized companies works when processes are measurable and data is trustworthy—a pilot without a success metric is theatre."

— Björn Groenewold, Managing Director, Groenewold IT Solutions

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The decision for a new Enterprise Resource Planning System (ERP) is one of the most strategic investments a company can make. In recent years Open ...

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