The Hidden Cost of “Cheap” Planning Suites
From time to time, Lokad is passed over in favor of a more “mainstream” planning suite because we are perceived as too expensive. The subscription line on our proposal is compared to a discounted license line on someone else’s, and we are declared the premium option.
Yet, when I look at the actual economics of those projects over five to ten years, the conclusion is consistently the opposite. Approached from the perspective of total cost of ownership, the economics usually invert: the supposedly cheaper alternatives turn out to be deceptively expensive, while the Lokad model ends up on the low-cost side of the equation.
This is not a matter of opinion or branding. It is the predictable consequence of how different models allocate costs across software, services, labor, IT, and risk.
The price tag is not the bill
Enterprise software has had decades to teach us the same lesson: the price printed on the license quote is only a small portion of the bill that will be paid over the life of the system.
ERP and planning TCO guides all say the same thing. The meaningful number is the total cost of ownership: not only subscriptions or licenses, but also implementation services, integration, customization, training, infrastructure, internal staff and the productivity you lose while your organization is busy feeding the system instead of serving customers.
Real-world data is not flattering. Various recent surveys indicate that a large majority of ERP-style projects exceed their budgets; one recent meta-analysis puts the proportion of implementations over budget at around two thirds, and notes that more than half fail to meet their original objectives.
In plain language: the “cheap” system is often just the one where the costs have been moved off the visible line item and into future projects, internal teams, and a long tail of services that never appeared in the RFP.
When Lokad is judged expensive, it is almost always because we are being compared on the visible price and not on the actual bill.
The true cost driver: people making decisions
In supply chain, software is not the main cost driver. People are.
Modern supply chains involve armies of planners, analysts, forecasters, S&OP coordinators and their managers. Their salaries, fully loaded with overhead, run into millions per year for any sizable company. A planning suite may help them type a bit faster or reconcile a few more spreadsheets, but it rarely changes the core fact that thousands of daily decisions are still entered manually.
Most enterprise planning tools are designed to support this manual decision-making. They provide screens, workflows and dashboards; they assist the planner in making a decision, they do not remove the need for the decision to be made by a human in the first place. The orders, transfers, production launches or price changes are still clicked through by someone in front of a screen.
Lokad was built with a different premise: robotize the decisions themselves.
Our probabilistic models and optimization pipelines produce fully-formed, executable decisions: order quantities per SKU and location, replenishment wave compositions, allocation and assortment decisions, even pricing moves. Humans still exist in the loop, but increasingly in a supervisory and investigative role, not as human macros whose job is to click “approve” thousands of times per week.
Economically, this distinction is enormous. A system that merely assists planners keeps the labor line largely intact. A system that takes over the bulk of the routine decisions turns planners into investors: they spend their time improving the robot, not competing with it minute by minute.
Any TCO comparison that ignores this labor dimension is structurally biased. It is equivalent to comparing two factories only on the cost of the machinery, ignoring the number of people required to operate it.
The CAPEX illusion of the “big license”
Another recurring illusion is the idea that a large upfront license and a long implementation project are some kind of capital investment that can be amortized peacefully over a decade.
From an accounting perspective, it is possible to capitalize a software project and call it an asset. From an economic perspective, this is mostly fiction. Technology cycles in analytics, optimization and AI are measured in a handful of years. Business models in retail, manufacturing and logistics keep evolving. Customizations made today turn into technical debt tomorrow.
TCO discussions in the ERP world routinely stress that you must look at the full lifecycle: not just acquisition and implementation, but also upgrades, re-implementations, parallel systems created to compensate for limitations, and the inevitable clean-up projects a few years down the road. There is no residual value. You cannot resell your heavily customized planning license once it is obsolete.
The large CAPEX project gives the comforting illusion of “owning” something substantial, but the economics are close to leasing a very complex machine that becomes obsolete faster than you finish paying for it.
Lokad deliberately avoids this posture. Our model is entirely OPEX. Our commitment is to remain continuously relevant, not to sell you a one-off project that you can capitalize and then forget. Financially, we prefer to be a modest, recurring expense tied to ongoing performance, rather than a big capital adventure that looks cheap once amortized on a spreadsheet and very expensive in reality.
The silent ecosystem around the license
The enterprise planning license rarely comes alone. It lands surrounded by an ecosystem: integrators, consultants, trainers, hosting providers, middleware specialists and sometimes a separate analytics vendor to make sense of the data that the planning tool cannot handle gracefully.
Independent analyses of ERP and APS projects regularly highlight that services multiply the nominal software cost by two to three times over the life of the system. Implementation, customization, data migration, training and ongoing support often exceed the license line items by a wide margin.
Those services are frequently delivered by “preferred partners” who enjoy premium rates and, in some ecosystems, share their revenue with the vendor. This is not a conspiracy; it is simply how that business model works. But for the client, it means that every deviation from the standard template, every integration nuance, every new country roll-out tends to appear as a billable project.
At Lokad, we intentionally internalize this work. The people who would be sold to you as external consultants in another model are our supply chain scientists. They design, implement and continuously refine your optimization pipelines as part of the Lokad service. Their effort is reflected in our subscription, not in an endless sequence of statements of work.
This is why we appear more expensive when you only compare software line items. We are already including many of the costs that other vendors quietly move into the “services” category.
Organizational overhead: when planning hijacks the company
Another cost category that is almost never included in TCO spreadsheets is organizational overhead, especially around Sales and Operations Planning.
By design, S&OP is a cross-functional management process. It aligns sales, marketing, operations and finance around a unified plan and is typically run on a monthly cadence with participation from multiple departments and senior leadership.
This alignment can be valuable. It is also extremely expensive in terms of management attention.
Many “mainstream” planning programs turn S&OP into a structurally heavy ritual. Entire teams spend days preparing slides and numbers; senior sales and marketing people are routinely taken out of the field for long meetings about forecasts and constraints; finance spends time reconciling plans and assumptions.
This is rarely counted in TCO, yet it is a real cost. Every hour spent feeding the planning process is an hour not spent serving customers, improving products or negotiating better contracts.
Lokad’s ambition is not to abolish cross-functional dialogue, but to make it lighter. If the default plan produced by the system is robust and economically sound, the S&OP conversation can focus on genuine exceptions and strategic choices, not on fixing the daily work of the machine. In effect, we try to give back time to your organization.
Architecture matters more than most people think
Another reason Lokad is misjudged as expensive is that we insist on a multi-tenant SaaS architecture and refuse bespoke deployments.
In a multi-tenant model, all clients share the same codebase and infrastructure, with strict isolation at the data level. This architecture is widely recognized as more cost-efficient to operate: infrastructure, monitoring, security and upgrades are amortized across all customers, and everyone receives improvements at the same time.
Single-tenant or heavily customized deployments feel reassuring because they appear to offer more control. They also behave, from a cost perspective, like individual software projects that have to be upgraded, patched and migrated one by one. Each upgrade becomes a mini-implementation. Each customization increases the cost of change.
When you choose a “cheap” planning license that results in a dedicated or heavily modified instance, you are implicitly signing up for a stream of future upgrade and maintenance projects. They rarely carry the same drama as the original implementation, but over a decade they add up.
Lokad’s multi-tenant stance removes an entire class of future costs. Upgrades are continuous and our responsibility. You do not get a private fork of Lokad; you get the same continuously evolving platform as everyone else, at a fraction of the cost it would take to operate such a system alone.
The commercial model: features versus outcomes
Traditional enterprise software is sold as a bundle of features, with a contractual scope defined as precisely as possible. Anything outside this scope becomes a change request.
In practice, this creates a predictable pattern: the initial proposal is kept narrow to appear competitive; real-world complexity inevitably exposes gaps; each gap triggers a negotiation and additional services. Industry commentators routinely warn buyers that change orders in ERP and APS projects are both common and expensive.
At Lokad, we try very hard to operate differently.
When we take on a client, our internal motto is: we do whatever it takes to make it work, within the non-revised contractual agreement. We price accordingly, and we assume that the path from raw data to robust decisions will not be straight. When we hit bumps in the road – messy data, edge cases, unexpected constraints – we consider this our problem to solve, not an opportunity to send a new quote.
This is uncomfortable for us at times, but it is healthier for the client. Your downside is largely capped: if the journey is more complicated than anticipated, the financial pain is mostly on our side, not yours.
Again, this makes Lokad appear more expensive on day one. We have already priced in the effort that others prefer to leave undefined and bill later.
IT and the invisible plumbing
There is another group whose time tends to disappear from TCO models: IT.
Planning tools do not connect themselves. Someone has to design, implement and maintain the data flows, schedule and monitor jobs, manage environments, ensure security, handle incidents and participate in upgrades. Analyses of ERP and planning TCO regularly point out that the internal IT effort – as well as the productivity lost during migrations and outages – is one of the most underestimated cost drivers.
In many classic projects, IT ends up responsible for complex ETL chains, integration middleware and a patchwork of point-to-point connections whose purpose is slowly forgotten as teams change. Integrators build them, then move on; IT inherits the responsibility.
Lokad takes a different stance. We usually ask for raw extracts from relevant tables or files. From that point on, all the transformations, aggregations, probabilistic modeling and optimization logic are implemented and operated inside Lokad by our own teams. Your IT organization still has a role, but it is much smaller and more clearly bounded.
Over time, this translates into fewer internal tools to maintain, fewer brittle interfaces to nurse and more time for your IT people to focus on things that are strategic for your business rather than tuning planning feeds.
Risk is also a cost
Finally, there is a cost that almost never appears in vendor comparisons: the risk that the project will disappoint.
The public track record of ERP-type initiatives is not encouraging. Various studies and analyst firms report that a majority of such projects fail to meet their original objectives, and that a significant proportion overrun both time and budget. The consequence is not just financial; it includes years of organizational fatigue, delayed benefits and often the quiet abandonment of parts of the planned scope.
Risk has an expected cost. A tool that is cheaper on paper but much more likely to stall, overrun or end in partial failure is not actually cheaper.
Lokad’s delivery model reduces this risk by design. We do not attempt to re-platform your entire enterprise. We start with well-defined flows where we can prove value quickly. We move incrementally, expanding coverage as evidence accumulates. We reuse a platform and methodology hardened across multiple industries, rather than inventing bespoke solutions each time.
No project is risk-free, but our economics depend on getting to production quickly and staying there. A stalled project is bad news for you and bad news for us. That alignment matters for TCO, even if it rarely appears in procurement spreadsheets.
What “expensive” really means
When someone tells me that Lokad is more expensive than another planning solution, what I usually hear is that they have compared two line items and ignored everything else.
They have ignored the planners and analysts whose work will remain manual. They have ignored the S&OP cycles that will expand to compensate for a weak default plan. They have ignored the consultants, integrators and trainers whose invoices will follow the license. They have ignored the IT teams who will own the integration spider-web. They have ignored the future upgrade projects. They have ignored the risk that the whole endeavor will fall short of its promises.
If you add all of this back into the equation, the picture changes. The supposedly cheap system becomes a long-term obligation to sustain an expensive ecosystem. Lokad, by contrast, becomes what it was designed to be: an industrial-scale automation engine for supply chain decisions, delivered as multi-tenant SaaS, operated by people whose incentives are aligned with yours.
From that perspective, the question is no longer “Why is Lokad more expensive?” but rather “Why do the others look so cheap?”. The answer is simple: you are not looking at the whole bill.
