The ERP Value Menu: Three User Licenses for $1?

Some of the best things in life are free (love, health, happiness, Gmail, thousands of apps on the Apple iTunes store, etc.). Many other things in life cost only $1 (or less) - just look at the value menu at pretty much any fast food restaurant. Now, it seems the concept of a “Value Menu” has hit the ERP market, as one software vendor is offering its ERP software at a price of just $1 for three user licenses (you can read the article here). My first reaction upon reading the article was, “Wow, that’s really cheap.” Then, as I started thinking about it, I asked myself, “Well, if something that usually sells for thousands of dollars is now just $1, what’s wrong with it? What else can I buy with that same $1?”

To help me with my “Items that Cost $1 Comparison,” I went to the dollar store to do a little investigating into the things that cost $1 and, more importantly, the things that are really worth $1. Here’s a list of some of the things I found that cost one dollar:

1. A travel size pack of tissues
2. Miscellaneous children’s plastic toys (probably all infested with lead paint)
3. 4 month old Christmas cards
4. A box of markers
5. A box of chocolates (expired as of February 1, 2010)

After my visit to the store, I determined that there was one common thread between each of the items I found – not one of them was worth even a single dollar, and I would never bother wasting my money purchasing any of the items. Trying to think about a small business owner’s perspective, I asked myself, “Would the owner of a company really feel comfortable buying an ERP system that costs the same as a travel size pack of tissues, or a box of markers, or expired chocolates?”

As with any purchase, individuals (and businesses) have an opportunity to weigh both the short-term and long-term costs of the things they buy. Going back to the fast food value menu, for just $1, you can buy chicken nuggets, a cheeseburger, two baked apple pies, or French fries. In the near short-term, you know this is a great option for a meal. It’s cheap, will taste reasonably good (if not amazing) going down, will leave your hunger satisfied, and will be easy on your wallet. But before you make your purchase, you also know that if you choose to eat off such a menu, in a matter of hours, you are going to return to your computer at work and feel like you’re going to need to take a mid-day nap. You also know that, perhaps, some of the items available on the value menu aren’t the healthiest of meal options and could lead to more serious, long-term health problems later in life (anybody ever see the movie Super Size Me?).

The same general logic can be applied to purchasing an ERP software solution. Again, think about the small business owner’s perspective. “What are the short-term costs? What are the long-term costs? What am I really getting for $1? Does $1 software meet all (or at least the majority) of my business’s software requirements? What happens when my small business grows? Does the $1 solution feature functionality that will accommodate my business’s growth, or am I going to have to buy additional modules, features, functions, bolt-ons, etc. later on? Could my annual maintenance fees increase over the next five years?”

The reality of the situation is that, the last I checked, there aren’t a whole lot of ERP companies classified as charitable organizations. Businesses need to turn a profit to stay in business. Now, can an ERP company realistically realize a profit on software licenses by selling those licenses at a rate of 3 for $1? Highly doubtful, unless of course the software is really worth $1, in which case no business should buy it in the first place! The more likely situation is that the ERP company is willing to take a short-term financial loss for software licenses in order to execute a more long-term revenue strategy in the future. For the small business, these future, unexpected, hidden costs are simply bad for business.