TCO Worked Examples and Selection Checklists
How to compare ERP quotes: an RFP and normalisation method for MSMEs
Write a short ERP request for proposal, normalise vendor quotes to the same users, modules and years, and score price against fit. Illustrative example.
ERP quotes are rarely comparable as they arrive: one is per user per month, another per year with a platform fee, a third bundles implementation, and each counts users and modules differently. To compare them, send every vendor the same short request for proposal (RFP) with your numbers and requirements, then normalise the replies into one table: same users, same modules, same period, all before GST, with one-time and recurring costs separated and gaps priced in. Only then score price against fit. This guide shows how, with an illustrative example.
It belongs to the 3–5-year ERP TCO guide section.
What to put in a short RFP
An MSME does not need a 50-page tender. Four to six pages usually work:
- About the business: what you make or sell, locations, GSTINs, turnover band, number of employees.
- Volumes and users: the numbers sheet from the ERP requirements checklist.
- Requirements: must-haves and nice-to-haves by process, plus the Indian compliance list.
- Integrations: banks, payment gateway, marketplaces, devices.
- Commercial format: ask for prices in a fixed template (below), before GST, in rupees; if quoted in another currency, state the currency and billing entity.
- Contract questions: uplift cap, minimum users, exit and data export, SLA.
- Timeline and references: proposed plan and two customer references of similar size.
The price template to ask for
| Line | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Notes |
|---|---|---|---|---|---|---|
| Subscription or AMC by module and user type | User counts by year | |||||
| Platform or base fee | ||||||
| Per-company / per-GSTIN charges | ||||||
| Transaction charges (IRN, e-way bill, documents) | Included quota | |||||
| Hosting (if separate) | ||||||
| Partner support plan | ||||||
| Implementation (fixed or days × rate) | Scope reference | |||||
| Data migration | Data sets included | |||||
| Training | Sessions and users | |||||
| Integrations | Each listed | |||||
| Customisations | Each listed | |||||
| Renewal uplift cap | % per renewal |
Ask vendors to mark any requirement not covered and the price to cover it.
Normalising the replies
- Convert to the same period and units: per user per year, for each year.
- Align users: apply your user counts by year to each vendor's price per user type.
- Apply the uplift: use the contract cap; if there is none, apply a cautious assumption to all vendors equally.
- Price the gaps: for each must-have a vendor does not meet, add the cost of an add-on, customisation or workaround.
- Separate one-time and recurring: so you can see cash flow as well as totals.
- Convert currencies at a cautious rate and add forex charges.
- Keep GST out if you can claim credit.
Illustrative normalised comparison (five years, 20 users)
| Vendor A | Vendor B | Vendor C | |
|---|---|---|---|
| Quoted as | ₹2,400 per user per month | ₹26,000 per user per year + ₹60,000 platform fee | $28 per user per month, billed from abroad |
| Year-1 recurring, normalised | 20 × ₹2,400 × 12 = ₹5,76,000 | 20 × ₹26,000 + ₹60,000 = ₹5,80,000 | 20 × $28 × 12 × ₹88 = ₹5,91,360 |
| Uplift cap | 5% | None stated (assume 8%) | 3% in USD |
| Five-year recurring (with uplift) | ₹31,82,764 | ₹34,02,629 | ₹31,39,611 + 2% forex ≈ ₹32,02,403 |
| Implementation | ₹8,00,000 | ₹6,50,000 | ₹9,50,000 |
| Gap pricing | E-way bill add-on ₹25,000 a year = ₹1,25,000 | None | Job-work customisation ₹1,50,000 |
| Five-year normalised total | ₹41,07,764 | ₹40,52,629 | ₹43,02,403 |
Year-1 recurring costs are within about ₹15,000 of each other, yet the order changes over five years: Vendor C, billed in dollars, is the most expensive once implementation and the gap are added, and Vendor B ends cheapest despite the steepest assumed uplift, because of its lower implementation fee. Small changes, such as Vendor B agreeing to a 5% cap, would widen its lead. You can check each total roughly in the ERP TCO estimator.
Scoring price against fit
Price is one part of the decision. A simple weighted score keeps the discussion honest:
| Criterion | Weight | Vendor A | Vendor B | Vendor C |
|---|---|---|---|---|
| Fit to must-haves (demo scores) | 35% | 8 | 7 | 9 |
| Five-year cost (lowest = 10) | 25% | 9 | 10 | 8 |
| Partner capability and references | 20% | 7 | 6 | 8 |
| Contract terms (uplift, exit, SLA) | 10% | 8 | 5 | 7 |
| Ease of use in trials | 10% | 8 | 7 | 7 |
| Weighted score | 8.05 | 7.35 | 8.15 |
Scores are illustrative. Agree weights before you see prices, so the decision does not get reverse-engineered. Then negotiate with the top two: the contract items in the SaaS contract guide are often easier to win than a lower list price.
Mistakes to avoid
- Accepting "price on request" lines for modules you will need in year 2.
- Comparing a vendor's standard edition with another's premium.
- Ignoring the partner's support plan because it is a separate quote.
- Letting the vendor define the demo script instead of using your scenarios.
- Taking reference calls only with customers the vendor chose, without asking about problems.
See also hidden ERP costs.
FAQ
How many vendors should I invite?
Three to five is usually enough for an MSME. More than that makes careful demos impractical.
Should I reveal my budget?
A range can help vendors propose the right scope, but it can also anchor prices upwards. Many buyers share a range only after the first proposals.
Is a public tender process needed?
Not for private businesses. Government bodies and public sector undertakings follow their own procurement rules, such as procurement through GeM where applicable.
Sources
- Government e-Marketplace (GeM) — public procurement route for government buyers
- CBIC GST — GST on imported services
- Reserve Bank of India — reference exchange rates
- Ministry of MSME — MSME support and classification
