Total Cost of Ownership: Custom Software vs ERP Replacement vs Off-the-Shelf

If you are evaluating whether to build custom software, replace your ERP, or buy an off-the-shelf add-on, you have probably already noticed something: every vendor presents their costs in a different time frame. One quotes a monthly subscription. Another quotes a one-off project fee. A third quotes an annual licence. None of them make it easy to compare apples with apples.

This guide fixes that. We have broken down the real 5-year total cost of ownership (TCO) for every credible approach available to a UK manufacturer today. We have included every cost we know about: upfront, recurring, hidden, and opportunity. And we have been transparent about where our own approach (Sysgraft) falls in the comparison.

You can use this as a framework to calculate your own numbers. The ranges are based on real projects, real vendor quotes, and honest conversations with UK manufacturers over the past two years.

Why 3–5 Year Cost Is What Matters

A common mistake we see is procurement teams comparing capital expenditure (CapEx) only. The ERP quote is £350,000. The custom build is £60,000. The ISV add-on is £25,000. Decision made, right?

Not quite. The ISV add-on carries £30,000 per year in licensing. The custom build has a £3,000 monthly subscription for hosting and maintenance. The ERP replacement requires £80,000 in data migration and £30,000 in retraining that nobody included in the initial quote.

Over three years, those numbers converge. Over five years, the ordering can flip entirely. You need to compare total cost of ownership, not initial project cost. This means including:

• One-off implementation costs (discovery, build, migration, training)
• Recurring costs (licensing, subscription, hosting, support)
• Internal costs (staff time for implementation, ongoing administration)
• Hidden costs (disruption, productivity loss, opportunity cost of delayed features)
• Exit costs (data extraction, contract termination, transition)

The sections below lay out all five approaches with their full cost components. Each is expressed as a range because every manufacturer is different — scope, complexity, user count, and integration requirements all affect the final number.

The Five Approaches, Broken Down

1. Custom Interface Layer (Sysgraft)

A custom interface layer sits on top of your existing ERP and connects via its REST API. Your backend stays untouched. The interface is rebuilt in modern React/Next.js with a bespoke UX designed for your specific workflows. No data migration. No ERP replacement.

Cost components:

• Discovery sprint: £3,000–£5,000 (one-off, 3–5 days on-site)
• Build: £20,000–£80,000 (fixed-price, one-off)
• Monthly subscription: £1,500–£4,000 (hosting, maintenance, security, feature evolution)
• 3-year total: £50,000–£180,000
• 5-year total: £85,000–£280,000

The build cost depends on scope: a staff operations dashboard (4–6 weeks) sits at the lower end; a full platform with staff portal, customer self-service portal, and management dashboard (10–12 weeks) sits at the higher end. Subscription scales with complexity and user count.

What is included in the subscription: UK-hosted infrastructure (Azure UK South or AWS London), automated deployments, 24/7 monitoring, security patching, ongoing BC API compatibility updates, and feature evolution (minor enhancements as your needs change).

2. ISV Add-On (Independent Software Vendor)

An ISV add-on extends your existing ERP with pre-built functionality. Examples include Simova for Business Central, FLS VISUAL for manufacturing, or task-specific modules for document management, reporting, or compliance.

Cost components:

• Implementation: £10,000–£30,000 (one-off, includes configuration and setup)
• Annual licensing: £15,000–£50,000 per year (per-user or per-tenant)
• 3-year total: £55,000–£180,000
• 5-year total: £85,000–£280,000

ISV add-ons can be deceptive because the upfront cost looks low. Over 3–5 years, recurring licensing dominates the total. Many ISVs also charge for upgrades and additional modules separately.

3. Power Apps (Microsoft Power Platform)

Building custom interfaces using Microsoft Power Apps, usually connected to your ERP via Power Automate and Dataverse (formerly Common Data Service). A popular option for organisations already invested in the Microsoft ecosystem.

Cost components:

• Development: £10,000–£40,000 (one-off, internal or partner-built)
• Power Platform licensing: £5,000–£30,000 per year (per-user Power Apps and Power Automate licences)
• Dataverse storage: additional costs above 10 GB base storage (~£25/GB/month)
• Premium connector costs: additional per-API-call charges for ERP connectors
• 3-year total: £25,000–£130,000
• 5-year total: £35,000–£200,000

Power Apps works well for simple internal tools for small teams, but costs scale significantly with user count. A customer-facing portal or high-volume transactional interface often pushes you into the top-end licensing tier, and performance limitations may require re-architecting midway through.

4. Full ERP Replacement

Replacing your current ERP with a new platform. This could mean moving from Business Central to SAP Business One, from Sage 200 to Microsoft Dynamics 365 F&O, or from a legacy on-premise system to a modern cloud ERP.

Cost components:

• Project implementation: £300,000–£400,000 (one-off, includes consulting, configuration, and customisation)
• New ERP licensing: £20,000–£60,000 per year
• Data migration: £30,000–£80,000 (one-off, includes extraction, transformation, validation)
• Retraining: £10,000–£30,000 (one-off, staff training and change management)
• Business disruption: £50,000–£150,000 (estimated productivity loss during 9–18 month rollout)
• 3-year total: £390,000–£700,000+
• 5-year total: £430,000–£820,000+

These figures are consistent with published industry benchmarks. Panorama Consulting reports average ERP implementation costs of $5–$10 million for large enterprises; for mid-market UK manufacturers (50–250 employees), the more typical range is £300,000–£400,000. Gartner notes that more than 55% of ERP replacement projects fail to meet their objectives, which adds further cost risk.

5. Do Nothing

Continuing with your current systems and processes without investment. This is the option most businesses default to, and the one with the most hidden cost.

Cost components:

• Ongoing productivity loss: £40,000–£150,000 per year (estimated)
• Spreadsheet error cost: £5,000–£20,000 per year (rework, mis-shipments, pricing errors)
• Low staff productivity: 1–3 hours per person per week navigating poor interfaces
• Customer churn due to poor service: hard to quantify but real
• 3-year total: £120,000–£450,000
• 5-year total: £200,000–£750,000

We have written separately about the hidden cost of spreadsheet workarounds in manufacturing. The short version: a manufacturer with 60 staff, each spending 90 minutes per week on Excel workarounds, loses approximately £85,000 per year in productive salary cost alone. That is before counting errors, rework, and slow decision-making.

Five-Year Cost Comparison

The table below shows the realistic cost range for each approach at Year 1, Year 3, and Year 5. All figures include upfront and recurring costs as detailed above.

What this table tells you: Over three years, a custom interface layer and an ISV add-on are in the same cost bracket (£50k–£180k). Power Apps can be cheaper for small teams but scales unpredictably. Full ERP replacement is in a completely different league. And doing nothing is not free — it carries a heavy hidden cost that grows every year.

Hidden Costs of Each Approach

Every approach has costs that are easy to overlook during procurement. Here is what we have seen catch manufacturers off guard.

Custom Interface Layer

• Ongoing maintenance (included in our subscription, but not always elsewhere): If you build in-house or with a different agency, budget 15–20% of build cost per year for maintenance, security patches, and API compatibility updates.
• ERP API changes: When your ERP vendor updates their API (version bumps, deprecated endpoints), the interface layer needs updating. Any reputable provider covers this in their subscription, but confirm before signing.
• Feature evolution: Your needs will change. Budget for feature additions at roughly 10–20% of build cost per year if not included in a subscription.
• Hosting: £200–£800 per month for production-grade UK-cloud hosting with proper security and monitoring.

ISV Add-On

• Upgrade dependency: Many ISV add-ons lag behind ERP version releases. You may find yourself unable to upgrade your ERP until the ISV vendor releases a compatible version. This can delay critical security patches by months.
• Feature limitations: Off-the-shelf add-ons cannot be customised beyond their configuration options. If your business process does not match the add-on’s assumptions, you either change your process or accept a suboptimal fit.
• Vendor pricing changes: ISV licensing costs can increase significantly at renewal. A £15,000 annual fee can become £25,000 with limited notice. You are locked in because the add-on is tightly integrated into your ERP.
• Vendor viability: ISVs can be acquired, go out of business, or discontinue products. If that happens, you lose both the functionality and the integration path.

Power Apps

• Licensing complexity: Microsoft’s Power Apps licensing is notoriously complex. Per-user, per-app, per-tenant, with different tiers (Premium, Standard, pay-as-you-go). Most organisations underestimate their licensing costs by 30–50%.
• Performance at scale: Power Apps struggles with complex data operations, large datasets (20,000+ records), and real-time updates. Many projects hit performance walls and require costly re-architecture.
• Vendor lock-in: Power Apps apps cannot be easily migrated off the platform. You are committing to the Microsoft Power Platform long-term.
• Limited customisation: The component library and design constraints of Power Apps mean you cannot achieve the same UX polish as a custom frontend. For internal tools this may be acceptable; for customer-facing portals it is a real limitation.

Full ERP Replacement

• Business disruption: 9–18 months of reduced operational efficiency during rollout. Staff are learning new systems while trying to keep the business running. This is the largest hidden cost and the one most often underestimated.
• Data migration errors: Every ERP migration introduces data quality issues. Historical data, legacy codes, and edge cases get lost or corrupted. You will spend months reconciling post-migration.
• Retraining gap: The budgeted £10,000–£30,000 for training assumes classroom sessions. The real cost includes reduced productivity for 3–6 months while staff reach proficiency.
• Process change: A new ERP means new processes. Your team’s hard-won efficiency with the old system is lost. It takes 6–12 months to rebuild.
• Integration rebuild: Every integration with third-party systems (e-commerce, warehouse management, shipping, finance) must be rebuilt or reconfigured for the new ERP. Budget £10,000–£50,000 per integration.

Do Nothing

• Compounding productivity loss: As your business grows, the gap between what your ERP can do and what your team needs widens. Manual workarounds multiply. The cost accelerates.
• Spreadsheet errors: A single spreadsheet formula error can cost £10,000+ in mis-shipments, incorrect pricing, or compliance failures. These are frequent and underreported.
• Staff frustration and retention: Talented team members will not tolerate poor tools forever. The cost of replacing a single experienced staff member is 1–2x their annual salary.
• Customer churn: Slow quote turnaround, inaccurate order status, late deliveries due to manual processes — these drive customers to competitors who can serve them faster.

How to Calculate Your Specific Payback Period

Every manufacturer is different. Use the following methodology to calculate your own payback period instead of relying on industry averages.

Step 1: Quantify your current productivity loss

Survey your team (anonymously) on how many hours per week they spend on workarounds: manual data re-entry, exporting to Excel, navigating slow screens, waiting for reports. Multiply by blended salary cost (including employer NI and pension). Most manufacturers find this number is between £40,000 and £150,000 per year.

Step 2: Estimate the direct savings from each approach

For each option (custom interface, ISV add-on, Power Apps, full ERP replacement, do nothing), estimate:

• What percentage of the productivity loss it would eliminate
• What new capabilities it would unlock (customer self-service, real-time dashboards, automated reporting)
• What operational risks it would reduce (data errors, compliance failures, staff turnover)

Step 3: Calculate the net present value (NPV) over 5 years

Subtract the total cost (upfront + recurring) from the total savings (direct + indirect) for each year. Discount future cash flows at your cost of capital (typically 8–12% for SME manufacturing). Sum the discounted cash flows. The option with the highest positive NPV is the best economic choice.

Step 4: Factor in non-financial benefits

Some benefits are hard to quantify but matter: improved staff morale, faster decision-making, better customer experience, strategic agility. These should influence your decision even if they do not appear in the NPV calculation.

Step 5: Run a sensitivity analysis

What happens if your productivity loss estimate is 30% higher than expected? What if the ERP replacement takes 18 months instead of 12? What if subscription costs increase? Test your assumptions with a simple spreadsheet model. If a full ERP replacement still comes out ahead only if everything goes perfectly, that is a red flag.

When Each Approach Is the Cheapest Option (Honest Assessment)

No single approach is cheapest for every manufacturer. Here is our honest assessment of when each option makes financial sense.

A note on the “do nothing” option: it is never the cheapest in the long term. The only question is whether you recognise the cost. If your team is productive, your customers are happy, and your processes run smoothly without workarounds, you may not need to invest. But if you are reading this article, that is unlikely to be your situation.

Frequently Asked Questions

What exactly is included in the £1,500–£4,000 monthly subscription for a custom interface layer?

For our Sysgraft subscription, it includes: UK-hosted cloud infrastructure (Azure UK South or AWS London), automated CI/CD deployments, 24/7 infrastructure monitoring, security patching and vulnerability scanning, BC API compatibility updates, minor feature enhancements, and ongoing support. It does not include major new feature development (scoped separately) or third-party integration costs. Twelve-month minimum term, then 30 days’ notice to cancel.

Does the custom build price include everything, or are there extras?

Our build price is fixed-price against the scope agreed during the discovery sprint. The sprint produces a detailed specification, wireframes, and a fixed-price proposal. If you change scope during the build, that is a change request with an agreed cost. We are transparent about what is in scope and what is not. Typical extras that fall outside the initial scope include: integrations with third-party systems not covered in discovery, custom mobile apps (iOS/Android), and advanced analytics or BI dashboards beyond standard reporting.

What happens if we want to cancel the subscription?

After the 12-month minimum term, you can cancel with 30 days’ notice. On cancellation, you retain full ownership of all source code, IP, and any data held in the interface layer. You can self-host, move to another provider, or stop using it. There are no exit fees. We will provide a full data export in a standard format (JSON, CSV) and a handover document describing the architecture.

How do Power Apps licensing costs actually work for a customer portal?

This is the most common surprise we hear about. A customer-facing portal in Power Apps requires each external user to have a Power Apps “per-app” plan (approximately £3.80/user/month at the time of writing) or a “per-user” plan with premium connectors (approximately £32/user/month). For 100 external customers accessing a portal, that is £4,500–£38,000 per year just in licensing, before any development or Dataverse storage costs. If your customer base is large, a custom frontend with standard cloud hosting is almost always cheaper.

Can we do the custom interface layer in-house instead of hiring Sysgraft?

Yes. If you have a capable in-house team with experience in React, Next.js, TypeScript, and REST API integration, you can build an interface layer yourself. The discovery sprint approach still applies: invest 1–2 weeks in understanding your pain points and auditing your API before writing code. Your cost will be internal team salary (typically £50,000–£80,000 for a senior developer over 8–12 weeks) plus hosting and ongoing maintenance. The trade-off is that your team is diverted from core product or operational work. Many manufacturers find it more cost-effective to partner with a specialist for the initial build and take the code in-house for ongoing maintenance.

What supplier costings does an ERP replacement actually cover?

An ERP replacement project typically includes: software licences (per-user or per-tenant), implementation consulting (process mapping, configuration, customisation), data migration services (extraction, transformation, loading), training (train-the-trainer or end-user sessions), project management, and go-live support. What it often excludes: business process re-engineering (you need to figure this out yourself), third-party integration costs, hardware or cloud infrastructure, extended post-go-live support (beyond 30–90 days), custom reporting and dashboards, and the cost of your internal team’s time during the project. Always ask for a full scope of inclusions and exclusions before comparing prices.

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