TCO Worked Examples and Selection Checklists
ERP cost examples for a distributor and a services firm: 3-year sums
Two illustrative three-year ERP cost comparisons: a multi-state distributor with e-way bills, and a 40-person services firm choosing between USD and rupee plans.
A distributor and a services firm need very different things from business software, and their costs behave differently. For a multi-state distributor, the cost drivers are the number of GSTINs, warehouses, invoice and e-way bill volumes and sales-team users. For a services firm, they are the number of people logging time, project billing and, often, whether the software is priced in US dollars. The two illustrative examples below show how to work out a three-year cost for each; all prices are examples, not quotes.
Both apply the method in the 3–5-year ERP TCO guide.
Example 1: a distributor in three states
The business (illustrative)
- FMCG and household goods distributor with GST registrations in three states and two warehouses.
- AATO about ₹40 crore: e-invoicing mandatory with the 30-day limit; around 4,000 B2B invoices and 2,500 e-way bills a month.
- 25 people need the system: accounts 5, warehouse 6, sales and van sales 12, owners 2.
- Needs: batch and expiry, schemes and discounts, credit limits by customer, route-wise collections, stock transfers between GSTINs with e-way bills.
Option A: cloud accounting and inventory suite
| Item (illustrative) | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Plan for 3 organisations (one per GSTIN) and 15 users | ₹3,60,000 | ₹3,78,000 | ₹3,96,900 |
| E-invoice overage above the included quota | ₹12,000 | ₹12,600 | ₹13,230 |
| Sales-team mobile app add-on | ₹60,000 | ₹63,000 | ₹66,150 |
| Implementation and training | ₹1,50,000 | – | – |
| Year total | ₹5,82,000 | ₹4,53,600 | ₹4,76,280 |
Three-year cost = ₹15,11,880 (recurring lines rise 5% a year).
Limitations to price in: the 10 sales and warehouse staff without logins would need to work through others; schemes and credit control may need workarounds; consolidated reporting across three organisations may be manual.
Option B: small-business cloud ERP
| Item (illustrative) | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| 25 users × ₹24,000, multi-GSTIN and connector included | ₹6,00,000 | ₹6,30,000 | ₹6,61,500 |
| Implementation, migration, schemes setup, training | ₹5,50,000 | – | – |
| Year total | ₹11,50,000 | ₹6,30,000 | ₹6,61,500 |
Three-year cost = ₹24,41,500.
Reading the result
Option B costs ₹9,29,620 more over three years. It is worth it only if it saves more than about ₹3.1 lakh a year. Typical sources of saving for a distributor are fewer expired-stock write-offs (batch and expiry control), faster collections (credit limits and route-wise outstanding), and less manual consolidation. Estimate each with your own data and test the result in the ERP payback calculator.
Example 2: a 40-person services firm
The business (illustrative)
- An engineering consultancy with 40 consultants who log time against projects, one GSTIN.
- AATO about ₹7 crore: above ₹5 crore, so B2B invoices need IRNs; below ₹10 crore, so the 30-day limit does not apply for now.
- Needs: timesheets, project budgets, milestone and time-and-materials billing, expense claims, accounts and GST.
- Choice: a global project-and-finance SaaS billed in US dollars from abroad, or a comparable plan billed in rupees by an Indian partner.
Assumptions (illustrative)
- USD plan: $35 per user per month, price fixed for three years; exchange rates ₹86, ₹88 and ₹90 in years 1–3; 2% bank or card forex charges.
- Rupee plan: ₹2,800 per user per month, 6% uplift a year.
- Both need similar implementation, so it is left out of the comparison.
The sums
| Year 1 | Year 2 | Year 3 | Total | |
|---|---|---|---|---|
| USD plan: 40 × 12 × $35 = $16,800 a year, converted | ₹14,44,800 | ₹14,78,400 | ₹15,12,000 | ₹44,35,200 |
| Forex charges at 2% | ₹28,896 | ₹29,568 | ₹30,240 | ₹88,704 |
| USD plan total | ₹45,23,904 | |||
| Rupee plan: 40 × 12 × ₹2,800 = ₹13,44,000, +6% a year | ₹13,44,000 | ₹14,24,640 | ₹15,10,118 | ₹42,78,758 |
On these illustrative assumptions the rupee plan is about ₹2,45,000 cheaper over three years, even with a higher uplift, mainly because of the exchange-rate drift and forex charges. If the rupee had stayed at ₹86, the USD plan would have cost ₹43,34,400 + 2% = ₹44,21,088 including charges, and the gap would shrink to about ₹1,42,000.
GST and TDS differences
- USD plan billed from abroad: the firm pays 18% IGST under reverse charge in cash through GSTR-3B and claims it back as input tax credit. Year 1: ₹14,44,800 × 18% = ₹2,60,064 paid and reclaimed. The 57th GST Council meeting recommended e-invoicing for imports of services by taxpayers with AATO of ₹5 crore and above; it had not been notified as of late October 2026, so check CBIC before configuring it.
- Rupee plan from an Indian partner: the partner charges 18% GST on the invoice, claimable as input tax credit.
- TDS: payments to the Indian partner and to the foreign vendor may both raise TDS questions under section 393 of the Income-tax Act, 2025. See GST, TDS and depreciation on ERP software.
Lessons from both examples
- Count every person who needs to touch the system, not just heavy users.
- For multi-state businesses, check charges per GSTIN or organisation and how consolidated reports work.
- For USD plans, test the total at two or three exchange rates and add forex charges.
- Compare uplifts and currency risk together: a lower uplift in a foreign currency can still cost more.
- Put the extra cost of the better system against measurable savings.
For a manufacturer's view, see the small manufacturer example; for normalising quotes, see comparing ERP quotes.
FAQ
Is a separate organisation per GSTIN normal?
Some accounting suites treat each GSTIN as a separate organisation; many ERPs handle several GSTINs within one company. The structure affects both price and reporting, so ask early.
Can I hedge the USD price?
Some vendors offer rupee billing through an Indian entity or partner, which removes currency risk. Formal hedging is rarely worth it for a subscription of this size.
Do services firms need e-way bills?
Not for services, but they may need them when moving equipment or goods, for example to a project site.
Sources
- CBIC GST — import of services and reverse charge
- E-way bill portal — e-way bills for stock transfers
- GST e-invoice portal (NIC IRP) — e-invoice thresholds and advisories
- Reserve Bank of India — reference exchange rates
- Income Tax Department — TDS on payments to residents and non-residents
