Surely you already have thought through all the ways to optimize your business. ERP software can be one method to solve your problems. This is a complex solution for businesses and enterprises that can automate workflows.
Enterprise resource planning software continues to hold a leading position when it comes to improving the enterprise. Applications' systems that work synchronously to better the result of your business according to its individual needs - isn't it exactly what you were looking for?
This article will help you understand what ERP software is, how it works and why it's crucial for your business.
What is an ERP software?
You can tell by the name of Enterprise Resource Planning (ERP) what this software is responsible for. These are software systems responsible for planning and managing processes and resources in enterprises of various sizes. Among these processes are:
- supply chain;
- client-management and services;
- financial operations;
- procurement and production processes.
ERP software is also widely used to improve and automate customer relations management, project and risks management. Vast functionality and capabilities make this type of software indispensable when working with large amounts of data.
Software products for business automation, such as ERP systems, significantly speed up the work of production, which is useful for businesses of any size. This IT solution can be either a standalone application or as a set of applications, each focused on a specific process. Several ERP applications running together make up more efficient ERP system corresponding enterprises needs. This IT-solution turns the enterprise into one organism, which function more harmoniously than ever.
Brief history of an ERP software
It is impossible to understand a product on definition alone. Each technical solution has its own history of evolution, and for ERP software it began in 1990. That year Gardner Group used the term enterprise resource planning for the first time, though by that time ERP systems have been improving workflows on enterprises and factories for over a century.
Technologies are evolving every year, and the functionality of ERP software continues to grow along with the needs of the market.
And this chronology is an excellent example of it.
Modern business has the opportunity to choose both a comprehensive system and a SaaS solutions for automating a single process. Now that ERP software has evolved to the present-day forms of business process management that are familiar to us, it is divided into many types. Let's look at them a little bit closer.
Types of an ERP software
ERP software as an IT solution has impressive variability. A huge number of different modules and individual features can be implemented in single ERP system. In addition, the ERP systems also differ among themselves depending on the necessary functions or the size of the enterprise they are integrated in. This variability helps customize software for the needs of any business. However, before choosing, you need to know what are the options.
Types of ERP systems:
1. Generalist ERP
This is an ERP system that adapts to business processes in any industry. Thanks to the system's adaptability, it can easily comply with an enterprise's business needs. After integrating the system into the workflow it is easily noticeable that these systems are more compatible with any enterprise than others. These solutions are one of the most popular on the market, so their suppliers are the largest of the existing companies. Individual customization of generalist ERP solutions allows them to be convenient for both small and large businesses.
An example: NetSuite ERP
Solutions like these are convenient for companies that have in-house development team. Due to the open-source nature, this ERP software can be optimized and refined in accordance with the changing business or market needs. In these systems a new application can be integrated and its unique functions can be customized, when most of other ERP systems are not as flexible. It makes them seem like the best option for optimizing the changing workflow on the enterprise.
An example: Odoo ERP
ERP systems like these usually work only for one specific industry. Most often, these IT solutions are created by startups or small IT companies that understand their niche best. Thus, despite the lack of wide opportunities for customization, these software products will function well in their industry. Since its suppliers understand the field like the back of their hand, such solutions do not need to be changed or adapted at first. But there is one catch - they soon become outdated.
An example: platform Microsoft Dynamics AX
4. Lightweight ERP
These are off-the-shelf IT solutions, cloud or on-premises, with a modular structure and stripped down functionality. These ERP systems differ from complex solutions - most often they focus on automating only 1-2 processes. Therefore, those who work with lightweight ERP solutions will have to sacrifice the productivity of their enterprise’s workflow. Such ERP software is usually preferred by small companies, which is why it is also called "small businesses systems".
An example: PeopleSoft
In addition, ERP software is also divided into 3 types according to the type of data storage: cloud-based, on-premise and hybrid. The cloud-based solution works completely in a virtual environment, which simplifies its use and updating. On-premise ERP software is managed through an offline space that can only be updated through changes in the code from the development company. Hybrid functions partially offline, partially through the cloud, which gives the user more flexibility in every-day use and customization.
Each ERP system has its own modules, each optimizing a particular business area/process. Among the modules are: CRM, financial management, supply chain management, reporting, inventory, sales and marketing management, etc. If you do not know yet what modules exactly you need in your ERP-software - find a technical partner with an IT consulting service. This will help you plan the project correctly and understand your business needs.
How an ERP software works
We already talked about what ERP systems there are, and what modules they include. You already know what ERP is and how this software product has evolved in 100 years. But to understand whether your business needs it, you'll have to understand how ERP software works.
The main goal of ERP software is to increase the efficiency of the enterprise through the management and automation of business processes. In addition, ERP software also works to reduce costs and resources, without losing the quality of the final product. Thus, what the ERP system will do for your enterprise is optimizing its work through automation of data management, the supply chain and other elements.
For this, system is using
- shared database for all enterprise processes;
- real time operation to optimize the timing of work cycle;
- all system components support;
- on-premises / cloud hosting or SaaS deployment
- maintaining performance reports and customers' reviews;
- improved work with collected data
and other useful features.
ERP software is a reliable business assistant that, thanks to data synchronization and reporting analysis of work processes, manages cost reduction, increases profit and efficiency.
What industries use ERP software?
The work of ERP software is truly impressive. Most often, all its advantages are recognized by manufacturing companies and factories, and the list may include the following areas:
- industrial equipment manufacturing
- building industry
- production of household goods
- electronics and technology
- car manufacturing
- defense systems
- healthcare and pharmaceuticals
- food production
- clothing and fabrics manufacture
- wholesale and retail
- hotel business
However, the list of industries does not end there, and literally every enterprise can one day notice its need for an ERP software.
How to know if your business needs ERP software
If you are one of those who postponed the development and integration of ERP software in your own enterprise, the following markers should become your red flags.
You need ERP software now if:
1. The systems and departments of your business are not synchronized
Your expectations don't match what you are currently producing; the supply chain is slower than expected; expenses do not justify costs - all this is a sign that your company no longer run like clockwork. The fact that you don't have time to track all the processes, and they work separately from each other is slowing down your business growth. And if this is your case - consider this the first hint of your business needs for an ERP system development.
2. Faults in the financial department
This most likely happens because your employees don't have access to all financial transactions of the enterprise. When data is transmitted manually, it is easy to miss something or fail to meet the deadline when it comes to submitting relevant information. ERP software can't make these mistakes.
Thanks to the automation of financial turnover at the enterprise, your employees will receive relevant information and the necessary technical assistance to improve their work with finances.
3. Deterioration in customer service
If you won't be fast enough taking into account all customer ratings, send all emails and modify the product offer according to market changes, you lose profit. You lose your competitive advantage, you won't be the first and best in line for clients' preferences.
ERP systems automate these processes, freeing up your time for more important tasks in the whole work process.
4. Your business has expanded and you don't have time for everything
Perhaps you think that with the business expansion it is reasonable to simply hire more employees. But if your company continues to rely on outdated IT solutions or work without technologies at all, it will not cope with the amount of information in the workflow. The feeling you had when your business became larger and more successful will turn against you.
Success must not only be won, but also maintained. And ERP systems can help you with this, accelerating the work of the enterprise and automating complex data processing.
5. Supporting the existing IT products has become costly
According to what was said earlier, it is clear that in today's realities business cannot scale without technology. But what if you have software products that are too expensive? Their maintenance and updating requires a lot of expenses but will not make any profit in the long run.
There is only one answer: combine them. Combine existing software products, strengthen them with new ones and you will get your own custom ERP system.
If something from the list matches your business problems, do not hesitate - your business needs ERP software. But among the whole variety of off-the-shelf ERP systems and the ability to create a custom solution, how to choose what suits your company best? Stand by and we’ll tell you right now.
Off-the-shelf ERP software VS custom ERP software
When choosing ERP software, you will certainly face the need to choose between a custom and an off-the-shelf solution.
Each of these options has its advantages and disadvantages, so we advise you to choose according to your individual businesses needs. To make a right choice, check on the difference between choosing off-the-shelf and custom ERP software.
Off-the-shelf ERP software
Custom ERP software
Software supplier: the creator of the ready-made software gives you a product that is maintained by several companies and teams, so if the developer’s business burns out, you can still use their software. However, there will be no guarantee for this IT-solution. And the supplier is unlikely to help you decide on the modules if you are not sure what you need yet.
Software development company: buying a custom solution you’re, in fact, buying a technical partnership. Many companies offer services for maintaining ERP software after it's delivered to the customer. Some provide IT consulting services, which helps customers decide on modules in ERP systems. Some even provide a lifetime software warranty. And this is good, as it will take off your responsibility for the IT-product. And even if it burns out, you can still work with the existing software, but you'll have to find another support team for the IT solution maintenance.
Development time: off-the-shelf ERP software solutions are ready to be integrated into your enterprise workflow. However, this software lacks the ability of adapting to the individual needs of your business.
Development time: custom ERP software solutions take longer to develop and it's only natural. They are adapted to your business ideas and needs in order to later work exclusively for your goals and your result. This determines the custom systems’ effectiveness, and makes it more promising than off-the-shelf solutions.
Costs: buying a turnkey solution is much cheaper. But consider this as a deposit: you will pay client fees, pay extra for additional functions and it won't cost you cheaply after some time. Everything is ambiguous here - off-the-shelf ERP software is cheaper than custom only in the short run.
Cost: at the development stage, a custom solution is much more expensive. But the situation changes later. Buying custom software, you get an IT-solution that includes high-quality customer service, software integration into the enterprise, warranty and support. You do not have to worry that something is not working as it should. If you need to fix software or make it more relevant to the current needs of your business, you'll have this opportunity.
Architecture: since off-the-shelf solutions must be optimized for different enterprises, they try to take into account all the nuances. Hence, there is a risk of overly complex architecture. This can make the system integration into the workflow unnecessarily complicated. In addition, these solutions are not flexible. Off-the-shelf ERP software is not suitable for you if you expect changes in your workflow.
Architecture: a custom solution is developed to suit exclusively your business. The high-quality architecture of these solutions simplifies the integration of ERP software in the enterprise. In addition, it makes further changes or new modules integration in the software solution fast and easy. Therefore, custom software is suitable for your business if your workflow varies depending on the market and production situation.
Flexibility: ERP software off-the-shelf suits you if your business has few specific requirements. Otherwise, you should know that off-the-shelf software solutions will not be able to accurately adapt to your requirements.
Flexibility: custom ERP software takes into account all the unique needs of your business. Off-the-shelf solution will not be able to take them into account and work with them. But a custom solution will strengthen your differences and provide a competitive advantage against others. Custom ERP system can turn simple functions into unique features.
Business needs: todays' off-the-shelf solutions can partially or temporarily solve the problems of your business. It’s easy to start working with them, quickly integrating them into the enterprise. However, they will not meet your specific business goals, therefore, they will not always work for the desired result.
Business needs: this is the main advantage of custom ERP software, in which it has no equal. It is created by taking into account your business goals. Therefore, each module will be configured to work on optimizing your company's operations. Working on your business ideas, ERP software will help your business achieve maximum results.
How to evaluate the ERP software effectiveness for your company
If you decided to buy off-the-shelf ERP software, you will have to rely only on yourself and your analysis of software products. If your choice is custom ERP software - contact the developer. Find a company that provides IT consulting services. This service will help you correctly plan and evaluate the project, and choose the type of ERP system, as well as the functions and modules your business needs.
However, whatever you decide, you will go through the process of choosing and evaluating by yourself. So that’s why we created a checklist to help you.
Ask your chosen development company or software provider these simple questions to evaluate what ERP your business actually needs.
- Will this system make my employees work more productive?
- Will ERP software help me achieve are my productivity goals?
- How will this system contribute to achieve greater customer satisfaction?
- Can I evaluate the improvements system will make in customer service?
- Will this system help me increase sales?
- Will the ERP system give my business a competitive advantage?
- What competitive advantage will I get by implementing ERP software into my enterprise?
- Can ERP software improve the supply chain in my enterprise?
- Can I set goals for collaboration with suppliers, taking into account the ERP system work?
- (after time of use) Are the indicators consistent with my pre-set goals?
This list of questions will help you determine what ERP software your business needs and evaluate its potential effectiveness. A checklist will help you understand which ERP software modules your business really needs. Also, take advantage of these questions during the first consultations with an IT company or ERP software provider - this way you can understand how one or another service suits you.
But even after consultation you may have questions or misconceptions about ERP software. We will present you the most common ERP systems myths that our experts have successfully debunked. Perhaps this will help you navigate in the specifics of this software better.
ERP software myths
The MassMedia Group specialists gave their comments on the most common myths about ERP software. And we decided to share this valuable information with you.
Myth 1: Is it true that price determines the quality of ERP software as a complex solution?
“It depends on what is considered to be the “quality of the ERP software". You probably mean "utility." In that case, not true. There are many scenarios when off-the-shelf solution will be enough, and these solutions are cheap. And those products will be able to deal with all the necessary tasks.
But more often there are scenarios when on the contrary, you cannot go without custom software. If its value is higher than the cost (and most likely it is) - then it makes sense investing your money in it ”
— Olena Ostrovska, Sales Manager at MassMedia Group
Myth 2: The quality of the ERP software depends on number of functions that are implemented?
“The quality of ERP software does not depend on the number of functions, but on the architecture, technology, development quality and hosting capacity that are embedded in. The architecture affects the scalability - and therefore the number of functions that can be implemented... Technologies, development quality and hosting power affect the speed of information processing ”
— Oleksandr Shyrokyi, COO MassMedia Group
Myth 3: Is ERP software suitable only for large business?
“No, ERP is suitable for business of any scale. The main factor is when a business cannot go without an ERP software. It can happen with small, medium and large businesses. I think that even a large business can work with no ERP implemented. The question is how high the expenses will be and whether the business is ready to put up with it it”
— Serhii Verzhbytskyi, Co-owner of MassMedia Group
With all this information you probably already have become an expert in ERP software, systems and modules. We hope that now it'll be much easier for you to understand why ERP software is great solution for your business.
Now you have answers to all your questions. If not - our experts are always ready to help and collaborate with you. Choosing ERP system for your business, remember that among all the variety of IT solutions you need to find the one that will make your enterprise more productive. Do not save money or time on it, as high-quality solutions can take your business to a new level. And you already know how it happens.