Warehouse Management Systems (WMS) have now been in the market for almost 50 years, but for a variety reasons, interest remains very high.

Those include new needs for efulfillment functionality, growing adoption of materials handling automation, aging legacy systems at many companies and more.

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When a company begins to interact with WMS vendors, fairly early in the conversation someone is likely to ask a pretty basic question: what’s it going to cost?

And the answer is: it depends (should be no surprise there).

That said, below we offer some guidance on how WMS costs are structured.

Wide Range of Options and Costs

As with most markets, there is a wide range of capabilities and price points. Points to consider:

• The market is loosely organized around Tier 1, 2 and 3 WMS vendors, with Tier 1 being at the highest price point – but keep in mind that these vendors are well-established and offer the most comprehensive functionality, advanced capabilities, and a broader suite of solutions.

•  Don’t just consider the short-term – think about matching current requirements, but more importantly your future requirements. You might only need the services of a Tier 2 vendor today, but will you require Tier 1 capabilities in the future? It may be a better investment decision to act now rather than having to go through another overhaul later, as cost may be higher, implementations will take more time and training could cause delays.

•  Average costs for a new solution can range anywhere from $100,000 for a Tier 3 WMS to over $1 million - though most Tier 1 WMS vendor deployments come in below that million-dollar level.

Basic WMS Cost Categories

It is useful to think of costs in terms of on-time/upfront costs and recurring costs. But the model for those cost categories has been dramatically changed by the emergence of WMS delivered in the Cloud, with the software and other cost elements moving from a fixed to a recurring cost and creating a shift in how some deployment costs are incurred.

Cloud Changes the WMS Cost Dynamics

The rapid growth of Cloud delivery generally - and specifically for WMS - has changed the cost dynamics.

With Cloud WMS deployments, the pricing model generally changes for the WMS software from an upfront charge for the software user license to a monthly or quarterly subscription fee to use the software over time.

While traditional software license models are still available from some WMS vendors, the overwhelming trend is for Cloud delivery and subscription-based pricing, so that will be the focus on that here.

In the Cloud model, upfront costs primarily consist of:

• WMS implementation (requirements definition, system configuration, system and user acceptance testing, integration to existing corporate and/or material handling systems, go-live support, etc.)

• Training

Note that with a Cloud deployment, there are no upfront costs for the WMS software, or for setting-up a technical environment to run the WMS (no in-house computer hardware, databases, app servers, etc. required.)

With a Cloud deployment, recurring costs primarily include:

• WMS subscription fees, generally payable on a monthly or quarterly basis. Typically this is charged on a “named user basis,” though some vendors will quote based on “concurrent users," meaning the maximum users on the system at any point in time.

• Web hosting fees: Includes setting-up a Cloud environment, provisioning required hardware and software, on-going system maintenance and system tuning, and other needed support; most companies opt for both a production and test environment, which will cost a little more versus a single instance.

(See More Below)

Some WMS vendors combine the WMS subscription fee and other fees into a single monthly cost. But importantly, the web hosting fee will be significantly or completely offset by the near elimination of internal WMS IT support costs.

In a traditional license model, the upfront license fee also comes with an annual maintenance fee - equal to 22-24% of the software license costs. Some WMS vendors continue to charge an annual maintenance fee even for Cloud deployments, but many do not.

Prospective WMS users should also factor-in potential upgrades over a certain period, say five years, which for some vendors can run in the hundreds of thousands of dollars.

With some WMS vendors, software maintenance and support are included in the web hosting fee. The hosting fee might also includes free upgrades, which significantly reduces the TCO (Total Cost of Ownership) for companies implementing WMS.

There are a few other WMS cost considerations that should be considered:

Other upfront costs can include various types of hardware, including wireless RF terminals, Voice terminals, and barcode label printers. Sometimes a company already has some existing hardware that can be re-purposed with the new WMS, but not always.

If new hardware is required, it can often be sourced from the WMS vendors. But as these are largely commodity devices, a smart strategy can be to source this hardware separately, with the advice and recommendations from the WMS vendor.

Some WMS software vendors can leverage inexpensive ruggedized smart phones for wireless data terminals, and offer native Voice capabilities without the need for dedicated (and often expensive) Voice terminals.

Finally, even with leading WMS solutions, companies must often license supporting software separately, such as parcel shipping management, barcode label design and print management, reporting tools and more.

Other vendors include some or even all of these as part of their core WMS capabilities. Companies evaluating cost of warehouse management systems across vendors should clarify the potential add-on costs in detail. For example, a WMS vendor without its own label printing tools is unlikely to bring that topic to the table on their own, so make sure you know what questions to ask.

This two part series on WMS costs will conclude next week.

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