If you’ve ever shopped for ERP software, you’ve probably been hit with a dizzying mix of pricing terms: perpetual licenses, subscription fees, named users, concurrent users, SaaS, on-premises, tiered modules…
It’s enough to make anyone’s head spin.
But here’s the thing: how you pay for your ERP can impact your total cost, flexibility, and even your ability to scale—sometimes more than the software itself.
After 18+ years in ERP implementation, I’ve seen companies save tens of thousands—even hundreds of thousands—simply by understanding their licensing options before signing. So, let’s cut through the jargon and break down what each model really means—and who it’s best for.
1. Perpetual Licensing (The “Buy It Forever” Model)
How it works: You pay a large onetime fee to own the software license indefinitely. You also typically pay an annual maintenance fee (15–22% of the license cost) for updates, bug fixes, and support.
Who it’s for: Companies that prefer long term ownership, have stable IT infrastructure, and plan to use the system for 7+ years. Common in on-premises ERP deployments (like older SAP, Oracle, or Microsoft Dynamics AX).
The catch:
- High upfront cost (can be $100K+ for midsized businesses)
- You’re responsible for hosting, backups, and upgrades
- Customizations may break during version upgrades
- Harder to scale quickly if your business grows
Best if: You have an inhouse IT team, predictable growth, and want full control over your environment.
2. Subscription Licensing (The “Rent It Monthly” Model)
How it works: You pay a recurring fee—usually monthly or annually—per user or per module. The software is often cloud hosted, and updates are included.
This is the dominant model today, used by vendors like NetSuite, Acumatica, and modern Microsoft Dynamics 365.
Who it’s for: Most midmarket businesses—especially those that value predictable cash flow, faster deployment, and minimal IT overhead.
The catch:
- You never “own” the software—stop paying, and access stops
- Longterm costs can exceed perpetual if you use it for 8+ years
- Some vendors charge extra for storage, integrations, or advanced features
Best if: You want lower upfront costs, automatic updates, and the flexibility to scale users up or down.
3. User-Based Pricing: Named vs. Concurrent
This is where things get tricky—because not all “per user” pricing is the same.
Named User Licensing
You pay for each individual who accesses the system—even if they only log in once a month.
Example: 50 employees = 50 licenses.
Pros: Clear, predictable billing.
Cons: Expensive for companies with many occasional users (e.g., shop floor staff, warehouse pickers).
Concurrent User Licensing
You pay for the maximum number of users logged in at the same time.
Example: 100 employees, but only 20 use the system simultaneously = 20 licenses.
Pros: Huge savings for shift based or task-based teams.
Cons: Requires careful planning; if too many log in at once, others get locked out.
Watch out: Some vendors quietly switched from concurrent to named user models in recent years—dramatically increasing costs for existing customers. Always read the fine print.
4. Open-Source ERP: “Free” Software, Hidden Effort
Yes, there are ERP systems you can download and use without paying a license fee—like Odoo Community, ERPNext, or Apache OFBiz. They’re opensource, meaning the code is publicly available and modifiable.
But “free” is misleading.
You still pay for:
- Server infrastructure (cloud or on-premises)
- Implementation & customization (often 3–5x what a comparable commercial system would cost, due to scarce expertise)
- Ongoing maintenance (backups, security patches, version upgrades)
- Support (unless you hire a third-party consultant or join a paid support plan)
- Integration (connecting to payment gateways, ecommerce, or legacy tools often requires custom coding)
Who it’s for: Tech savvy teams with inhouse developers, very tight budgets, or highly unique workflows that no commercial ERP supports.
The reality:
Many companies start with opensource to “save money,” only to realize they’ve traded licensing fees for massive internal labor costs and project delays. Without a vendor backing the product, you’re on your own when things break.
Best if: You have strong internal IT, a developer on staff, and the appetite to manage a DIY project long term.
Avoid if: You need reliable support, fast go live, or compliance ready features (like audit trails or financial controls).
The Hidden Power of Open-Source Partners
It’s worth noting you don’t have to go it alone with opensource ERP—and you probably shouldn’t.
Across the globe, a growing ecosystem of specialized firms offers professional services around opensource platforms. These aren’t just freelancers; many are established consultancies with dedicated teams who live and breathe these systems daily.
In fact, some of the most reliable midmarket ERP solutions today start with an opensource foundation—but are enhanced, hardened, and productized into full-fledged commercial offerings. They add polished interfaces, prebuilt industry templates, certified integrations, and real support—while keeping the flexibility of open code.
If you go this route, your Total Cost of Ownership (TCO) can be significantly lower than with traditional licensed ERPs. Why? Because there’s no peruser license fee or annual maintenance surcharge. You only pay for what you consume: implementation, customization, and support—often at predictable monthly rates.
And crucially—support is available when you need it, not locked behind premium tiers or outsourced overseas. Many of these firms build their reputation on client success, not software royalties.
Just be sure to choose a partner with deep community involvement, proven industry experience, and transparent pricing. Because when done right, this model gives you the best of both worlds: cost efficiency with professional accountability.
5. Tiered or Module Based Licensing
Many ERPs—especially cloud platforms—offer à la carte pricing:
- Core Financials
- Inventory & Warehousing
- Manufacturing (MRP, Shop Floor)
- CRM
- HR & Payroll
- Advanced Analytics
This sounds great—until you hit the fine print. Beware:
Hidden dependencies: You might need “Core Financials” to unlock “Inventory.”
Upsell pressure: Base modules are priced low; industry features cost extra.
Integration gaps: Added modules may not share data seamlessly.
Tip: Map your must have modules upfront. Ask: “What’s included in the base package? What triggers an extra cost?”
6. SaaS vs. Hosted On-premises: Don’t Be Fooled
Don’t confuse licensing with deployment.
True SaaS: Vendor owns everything—software, infrastructure, updates. One version for all.
Hosted On-premises: You (or a partner) install licensed software on AWS/Azure. You control upgrades—but also bear maintenance costs.
Some vendors market “cloud ERP” but actually offer hosted on-premises—which may still require perpetual licenses.
Ask: “Is this true multitenant SaaS, or just our software installed on your server?”
7. The Hidden Costs Nobody Talks About
Licensing is just the tip of the iceberg. Watch for:
- Implementation (often 1–2x software cost)
- User overages
- Data storage fees
- Integration costs
- Major upgrade expenses
- For opensource: internal dev time and lost productivity
Always ask for a 5-year TCO estimate—not just Year 1.
Why Even “World Class” ERP Projects Fail—A Story from Dubai
I’ll never forget a conversation in Dubai with an old colleague over late night coffee. His company had just abandoned a “worldclass” ERP implementation after 16 months of delays, change requests, and mounting costs.
The upfront license fees had drained their budget. But worse—the system delivered nothing usable for over a year. Leadership lost interest. Teams reverted to spreadsheets.
That night, he said something that stuck with me: “We kept waiting for the light at the end of the tunnel. But all we saw was more tunnel.”
After 22 years in this field, I’ve learned: ERP isn’t like selling a machine. The value takes 12–24 months to appear. If you don’t deliver small wins along the way—things people can use today—interest fades. And even the best software fails.
Final Thought: Read the Contract—Especially Appendix B
Before you sign:
- Get pricing in writing—by user, by module, by year
- Clarify what happens if you scale
- Understand your exit rights (can you export data?)
Because ERP isn’t just software. It’s a long-term operational commitment. And how you pay for it should empower your growth—not limit it.
A Smarter, Modern ERP Option
At BRS Infotek, we work with two practical ERP platforms designed for real business outcomes—not enterprise bloat.
Cyprus ERP, built in-house by BRS Infotek on proven Adempiere foundations, delivers strong functionality, flexible deployment, and lower total cost of ownership for mid-sized businesses.
Onfinity ERP, where BRS Infotek is a legal and implementation partner, extends the same execution-focused approach for organizations that need greater scalability and structure.
Both ERPs are well suited for manufacturing, distribution, construction, and healthcare organizations seeking faster ROI without endless delays.
👉 Explore how Cyprus ERP or Onfinity ERP fits your business.
Request a personalized demo with BRS Infotek at http://www.cypruserp.com or at Onfinity ERP.
About the Author
Surya Sagar
Founder & ERP Solution Architect – BRS Infotek
With 18+ years of hands-on ERP experience, he has guided businesses across industries and geographies through successful digital transformation.
He co-designed Cyprus ERP and leads Onfinity ERP implementations as BRS Infotek’s legal partner, focused on solving real-world operational challenges.
