NetSuite: Total Cost of Ownership

The NetSuite Cost of Ownership

Cloud-based Enterprise Resource Planning (ERP) software, which covers beyond finance and accounting, is at the forefront of the ERP technology evolution. Cloud-based ERP systems like NetSuite has leaped over in terms of popularity and functionality compared to an on-premise system because of their cost-effectiveness for small and medium-sized business enterprises. Hardware needed to run an on-premise system is one of the key contributors to the cost reduction since these are no longer a requirement for Software as a Service (SaaS) Applications.

Conventional on-premise ERP systems were the norm for large businesses, but the high cost of acquisition of the ERP system software, associated hardware, and vital support staff made it inaccessible to most small and medium-sized business. Cloud-based Software as a Service (SaaS) like NetSuite allows small and medium-sized Businesses to leverage innovating cloud computing technology cost-effectively. NetSuite costs significantly lower than on-premise ERP systems.

The Cost Elements of Adopting NetSuite and the NetSuite Total Cost of Ownership

Implementing an on-premise ERP system or a Cloud-based system is a big step for Small and Medium-sized businesses because of the cost and commitment involved in the development, implementation, and support of the system. The time and manpower required for the deployment of the system is also a major decision factor for small and medium businesses with limited budgets and smaller dedicated IT, staff. These businesses often turn to NetSuite Solutions Provider Partners like Excelym for Cloud-based NetSuite Implementations. 

Businesses often ask the question, What is the NetSuite Cost? In making an informed decision, businesses have to consider the Total Cost of Ownership of the chosen Enterprise Resource Planning (ERP)  Software. These include Advisory/ Consultation Costs, Software (SaaS) recurring costs, Professional Services costs for Implementation and any needed Customization and Integration work, Professional Services costs for ongoing support coverage post-Go-Live, and internal costs associated with staff involved in the project.

1. Advisory/ Consultation Cost (Optional)

If you have the need (or want) to evaluate in detail your ERP SaaS options before committing to NetSuite or another option, and explicitly ensure tight alignment to your business needs and drivers, then factor in professional services costs for a week or two in the  Evaluation of business requirements and specifications to functionalities of the ERP SaaS options available.

2. NetSuite Software (SaaS) Recurring Cost

NetSuite cost for license are quoted as monthly charges per module (eg. Purchasing, Collections, Sales, etc.) and per number of users, but pre-paid annually. You can prepay for more than a year to obtain discounts. Future versions/ releases are at no extra costs, and upgrades happen seamlessly in the background.

IT infrastructure costs / Hardware costs: these mainly apply to on-premise ERP systems/ applications where you have to purchase and operate your own physical servers and networks to run the ERP system and hire staff to operate and maintain such hardware. Since NetSuite is SaaS/ cloud-based, your annual license payments actually cover both software and hardware.

3. Professional Services costs for Implementation

For smaller organizations with less complex needs, a “QuickStart” implementation package maybe what is optimal. A fixed engagement for 3 months with a fixed 160 hours of guidance/ consultation from a NetSuite Solution Provider/ NetSuite Partner like Excelym. This is a   self-implementation, with heavy guidance from the Partner/ Professional Services firm, but with the bulk of the implementation and data migration performed by the client.

For larger organizations with more complex needs, a traditional implementation engagement is necessary. This typically runs four and a half months with the NetSuite Partner leading and coordinating all the needed tasks from systems configuration, user training and testing, to historical data migration.

For a traditional implementation engagement, one must also factor in Consultant travel costs. Depending on customer preference this maybe once or up to 3 times during the four and a half month project duration. We certainly recommend and require that we be onsite for project kickoff and requirements gathering and business process mapping. From past experience, the mid-point UAT/ User Acceptance Testing and pre-Go Live testing (the other 2 opportunities for onsite client visits), can be just as effectively managed remotely.

4. Professional Services cost for Customization

After NetSuite is implemented, some organizations have requirements that NetSuite does not provide out of the box. Depending on the scope of such, one must factor in the cost to perform these needed and nice-to-have customization requirements.

5. Professional Services cost for Integration

After NetSuite is implemented, some organizations have requirements that require NetSuite to integrate/ digitally interact with other systems operated by its customers and vendors. For example, it may have the need to electronically interface with its 3PL/ Third Party Logistics partner for the fulfillment and of its various sales orders. Or, it may need to integrate with its top volume customers for the receipt of their purchase orders on a daily basis or real-time. Depending on the scope and complexity of such, one must factor in the cost to perform these needed and nice-to-have integration requirements.

Internal Cost associated with Staff Involved

No NetSuite  implementation effort would be effective and successful without the active and engaged participation of key stakeholders, mostly from the accounting and finance team. As such, one must factor in the cost of the time involvement of these resources throughout the different phases of the implementation project, from requirements gathering and validation, through testing, and actual historical data migration in preparation for go-live

Professional Services cost for NetSuite Support post Go-Live

Once live with NetSuite, organizations will need support as they adapt to and get used to their new system for finance, accounting, and other operational activities. Through time, the level of support needed drops. As such, one must factor in the costs of support, but with a heavier allocation for the first 6 to 12 months post go live, versus thereafter.

A Sample NetSuite TCO

The table below is NOT definitive NetSuite Cost but we wanted to give you a good basis, a good foundational knowledge from which you can evolve on your own to come up with something close to what your exact scenario looks like.

These sample costs are historical averages from projects we’ve done in the past 5 years, mid-sized companies in the USA, mostly manufacturing or software/ service companies with annual revenues of at least $12 million and employee headcount of 50 and upwards.