Why ERP software is a great solution for your business in 2020 & in the future
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?
It is clear from the definition of Enterprise Resource Planning (ERP) what this software is responsible for. These are software and systems responsible for planning and managing processes and resources in various enterprises. Among these processes are:
- supply chain;
- client-management and services;
- financial operations;
procuration and other production processes.
ERP software is also widely used to improve and automate customer relations management, project and risks management. Wide functionality and capabilities make this type of software indispensable when working with large amounts of data.
Software products for business automation, such as ERP software, significantly speed up the work of production, which is useful for businesses of any size. This IT solution can be represented as a standalone application or as a set of applications. Several ERP applications running on a single enterprise together make up more efficient ERP system. This IT-solution turns the enterprise into one organism, which function in more harmony 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. It is when the Gardner Group first used the term enterprise resource planning, but ERP systems have been improving workflows on enterprises and factories for over a century.
Technologies are changing 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.
Modern business has the opportunity to choose both a comprehensive system or 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. For just one enterprise there can be a huge number of different modules and individual features 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 choosing options.
Types of ERP systems:
This is the name of ERP systems that have an ability of adapting to business processes in any industry. It is easiest to achieve compliance with the needs of the business when working with systems like these. It happens by integrating the system into the enterprise workflow. These solutions are one of the most popular on the market, so their suppliers are the largest of the existing ones. Individual customization of generalistic 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 full-time developers on their staff. 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. It creates the best option for optimizing the 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 it's suppliers understand the field of their activity, such solutions at first do not need to be changed or adapted. But there is one catch - they soon become outdated.
An example: platform Microsoft Dynamics AX
These are off-the-shelf IT solutions, cloud or on-premises, with a modular structure and stripped down functionality. These ERP systems differs from complex solutions - most often they focus on automating only 1-2 processes. Therefore, those who work with lightweighted solutions will have to sacrifice the productivity of other production. elements. 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 developer company. Hybrid functions partially offline, partially through the cloud, which gives its user more flexibility in every-day use and customization.
Each ERP system has its own modules that optimize the work of individual business areas. 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'll 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 workflow;
- 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 work processes reporting analysis, 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
- building industry
- production of household goods
- electronics and technology
- car manufacturing
- defense systems
- healthcare and pharmaceuticals
- food production
- clothing and fabrics manufacture
- wholesale / 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 in the warehouse; expenses do not justify costs - all this is a sign that your company no longer works 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 workflow. 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 not to have time to submit relevant information. ERP software can't make these mistakes.
Thanks to the automation of financial turnover processes 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 change 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 production tasks.
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. What you felt 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 business cannot scale without technology, in today's realities. But what if you have software products that are too expensive? Too much money is spent on their maintenance and updating, which are not returned in the form of profit.
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 among all this list you see something familiar, 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 a off-the-shelf solution.
Each of these options has its advantages and disadvantages, so we advise you to choose according to your businesses individual needs. To do this, we will show you the difference between choosing one and the other IT product.
Off-the-shelf ERP software
Custom ERP software
Software supplier: the creator of the finished 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 about what you need yet.
Software development company: buying a custom solution you, in fact, buying a technical partnership. Many companies offer services for maintaining ERP software after it's presented 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 its software, but you'll have to find other support team for the IT solution.
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, this solutions are not flexible. Off-the-shelf ERP software is not suitable for you if there can be 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 in the software solution possible. And integration of other modules will also be possible. Therefore, custom software is suitable for your business, if your workflow may vary 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. 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 why we created a checklist to help you.
Ask your chosen development company or software provider these simple questions to evaluate your business need for ERP software.
- Will this system make the work of my employees more productive?
- What are my productivity goals with ERP software?
- 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 working 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 the needs of your business and evaluate the potential effectiveness of ERP software. 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 answers 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 an complex solution?
“It depends on what is considered 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 (which will be cheap). And it'll be implementing all the necessary tasks. But more often there are scenarios when on the contrary, you cannot go without custom software. If its value will be higher than the cost (and most likely it will) - then it makes sense to invest in it ”
— Ilya Savchuk, Sales Manager, MassMedia Group
Myth 2: The quality of the ERP software depends on number of functions that are implemented?
“The quality of ERP software work 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 and 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”
— 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 systems 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 can happen.