Choosing an ERP system isn’t just about the purchase price. The real question is:
“What will this cost me over the next 5 to 10 years?”
That’s where Total Cost of Ownership (TCO) comes in—a full-picture view of the short- and long-term costs tied to your ERP investment. Here’s what you need to look at when evaluating TCO, especially if you’re in the building materials supply space.
- License or Subscription Fees
Whether it’s a one-time license (on-premise) or a monthly/annual SaaS subscription, these are the most visible costs. But they’re just the starting point.
- Implementation & Configuration
ERP implementation can be complex, especially if you’re integrating pricing rules, dispatch workflows, or inventory processes. This includes:
Data migration
Custom workflows
Integration with existing tools (CRM, POS, fleet management)
External consultants (if needed)
- Training & Change Management
Don’t underestimate the cost (or time) needed to train your staff—from warehouse managers to sales reps. The more intuitive the system, the lower this cost—but it still needs to be factored in.
- Customization Costs
Most ERP systems will require some customization to match your specific processes, especially in building materials where orders often involve variable units (e.g., pallets, bundles, linear feet).
- Hardware & Infrastructure (for On-Premise)
If you’re going on-premise, you’ll need to factor in:
Servers
Backup systems
IT infrastructure upgrades
Physical security and maintenance
- Support & Maintenance
Ongoing support—either from your vendor or an internal IT team—is an ongoing cost. Ask what’s included in your service level agreement (SLA), and whether critical support is extra.
- System Upgrades
Will you get free updates (as in SaaS models), or will upgrades require a separate project and budget? Keeping software current is essential for security, compliance, and feature enhancements.
- Downtime Risk
What is the cost to your business if the ERP system is unavailable—due to updates, errors, or outages? For distributors, even a few hours of downtime during peak ordering can be costly.
- Scalability Costs
As your business grows (more SKUs, branches, or users), your ERP must scale with you. Some systems charge per user, per module, or per GB of storage—so be clear on how costs grow with usage.
- Opportunity Costs
A cheaper system that doesn’t support your long-term goals (like eCommerce, multi-location inventory, or real-time reporting) could cost you growth, agility, and customer satisfaction down the line.
✅ Bottom Line:
Evaluating TCO is more than just comparing price tags—it’s about forecasting the true investment in making your ERP work for your business over time. Get this step right, and you’ll not only stay on budget—you’ll future-proof your operations.
