The Cost Illusion In ERP: Why Companies Overspend

A recent article in Forbes argues that companies are overspending on enterprise resource planning (ERP) systems for a surprisingly simple reason: they’re focused on software pricing instead of long-term value. In this article, author Manish Goyal (Co-Founder of Dynamics Square) explains that ERP overspending rarely comes from the license itself. The bigger issue is how organizations buy, customize, and manage ERP systems over time. Many businesses still estimate for peak usage, over-purchase licenses, and lock into rigid contracts — only to discover later that large portions of the system go underused. The article notes that cloud ERP hasn’t eliminated waste; it has simply changed how waste appears. Instead of large upfront costs, companies now face recurring subscription expenses that can quietly grow year after year without active oversight. Another major cost driver is over-customization. While tailored workflows may seem beneficial initially, heavy customization often increases maintenance complexity, upgrade difficulty, and long-term ownership costs. Rather than focusing solely on negotiating discounts, the article recommends a more value-based approach to ERP. That includes tying licensing to actual business outcomes, adopting modules gradually, reviewing system usage regularly, and building flexibility into contracts. Goyal’s core takeaway is that ERP cost problems are usually caused by misaligned decisions, not expensive software. Organizations that continuously optimize usage and align ERP investments with business goals are far more likely to control costs and improve ROI.

 

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