Bringing The Best ERP Solution to Match an Individual Business’s Needs
ERP (Enterprise Resource Planning) systems can offer powerful solutions to Small and Medium Enterprises (SMEs), as well as larger businesses, in order to assist with the management of everyday workflows and corporate processes. Such systems can greatly increase the bottom line of a business when they are planned, strategized, optimized, set-up, and implemented correctly. Due to the very modular nature of ERP systems, planning the integration, implementation and use of ERP suites/modules – that match the business model, goals and vision of the enterprise – is key.
ERP systems often make up the core business IT (software) infrastructure of any given enterprise, and while such systems can greatly benefit a business by increasing efficiency and making daily workflows more optimized and feasible to complete, there are some downsides to using ERP systems in certain situations. Thus, it is very important to understand what ERP systems are, what they do and what they don’t do, and how to best determine what type of ERP system to utilize in order to ultimately meet the goals and needs of an organization.
What is ERP?
Enterprise Resource Planning (ERP) denotes enterprise, modular software suites that are used to integrate and manage everyday, corporate workflows. ERP software can be leveraged in order to track, strategize, manage and oversee most processes of a business, including finance and accounting, supply-chain management, warehouse management, inventory management, transportation management, human resources, business intelligence, customer-relationship management, accounting, marketing/sales, and more.
ERP software systems are typically modular, in that they are composed of different software suites that are made to integrate and communicate with each other – and with other corporate IT software systems – creating a powerful, core HQ system that can be used to manage and analyze all corporate processes in one place.
How ERP Solutions Can Benefit Your Business
Enterprise Resource Planning software systems can offer great advantages to businesses when the business needs are completely understood and matched with a particular ERP software suite. As long as an ERP system contains all of the specific functionalities that are needed to benefit the workflows of an organization in all of its departments, then ERP solutions can truly be advantageous to an enterprise. However, it is important to note that there are some very critical considerations that every company should understand and take into account when they are determining what type of ERP solution to use to meet their goals.
The Downsides of ERP Solutions
There are several downsides associated with using ERP solutions to meet an enterprise’s goals. It is important to understand that, while ERP solutions are modular, they often come from vendors pre-packaged to meet the general goals (and to fulfill the typical needs) of large enterprises. This means that such solutions are often inflexible, and are not able to meet the goals of a business without requiring extensive – and expensive – customization, such that without modification, such systems may make managing daily workflows more difficult due to being overly complex and/or bloated with features that are unnecessary. Thus, one of the major downsides associated with using ERP solutions, ultimately, is the need to customize the system’s modules in order to match the system with the most critical needs of the business. This need to tailor such systems often comes at a high financial cost, while working with pre-packaged ERP systems often has other disadvantages. In addition to this, the need to customize ERP systems to efficiently work with existing corporate workflows requires skilled implementations, maintenance, and extensive training in order for personnel to take full advantage of such systems.
The Challenges of Selecting the Best ERP
As noted above, obtaining pre-packaged ERP solutions (from the pool of vendors that sell ERP software systems) presents many challenges to enterprises. Primarily, since IT systems should ultimately assist with optimizing business workflows and thus should make daily processes easier, it is pivotal for businesses to identify all critical issues associated with day-to-day corporate processes in order to determine which ERP system offers the most appropriate and specific solutions. This is a necessary step due to the very complex nature of different ERP systems, which often come packaged with an unnecessarily large number of modules and functions, which ultimately detracts from the advantageous nature of ERP systems by making it too difficult to leverage the power of ERP modules. Per above, it is very important to note that, ultimately, choosing the wrong ERP system can make day-to-day management of corporate processes and workflows more difficult, instead of more feasible, when the software is not user-friendly and/or is overly complicated. This is why a planned-out strategy is necessary to match the specific needs of a business with the specific functionalities of particular ERP solutions. A solution for one business may be a problem for another, thus, the overly-generalized nature of ERP systems cannot feasibly match the unique needs of every business without the need for costly customizations. Additionally, such customizations – and baseline pre-packaged ERP software – do not always integrate well with other corporate IT systems, with regards to data integration and communication.
That said, the landscape of ERP vendors must thus be understood as well, including having thorough knowledge of the modules that benefit an enterprise the most, along with identifying the vendors that sell packaged ERP systems with the ability to adapt. While pre-packaged ERP systems often require a business to adapt its workflows and processes to the ERP software, a well-built ERP system will adapt to the needs of a business by being built for flexibility.
However, selecting the best ERP system comes with other challenges, including: the time, costs, and overhead associated with maintenance (typically associated with old platforms that require frequent updates and maintenance work), the high cost of specific ERP solutions/modules (which is typical for top-tier platforms), long sales cycles and the need to obtain up-to-date systems, the difficulty associated with finding affordable, specialized (skilled) personnel for implementing the ERP solutions, and the high level of knowledge and involvement needed from an enterprise’s IT executives in order to determine and choose the correct ERP solutions for the business.
What Are The Pros and Cons of ERP Solutions?
As noted above, there are several pros and cons to using ERP solutions.
Some of the pros are as followed:
- Integration: Well-built ERP systems allow data from all intra-corporate departments to be integrated into a single, core system, allowing for easy data analysis, etc.
- Scalability: A well-designed ERP system allows for minor additions and modifications of the core functionalities in order to allow it to grow with the needs of an enterprise.
- Optimization/efficiency: ERP systems help with the optimization and management of daily workflows, while increasing productivity and making all business processes more efficient.
- Forecasting: The integrated, corporate-wide data, that is stored centrally within the ERP systems, allows managers and data analysts to make efficient predictions and forecasts, while ultimately helping executives to make better strategic, long-term decisions.
- Streamlining: The ability to manage and oversee corporate-wide business processes and data (e.g. supply-chain management, inventory, CRM, marketing) in one place allows a large amount of critical corporate workflows to be streamlined, via a single platform (the ERP system), with ease.
- Reporting: The ability to collate, parse and analyze corporate-wide, raw business data (i.e. business intelligence) in a single place, allows for optimal data analysis and efficient reporting based on the collected/analyzed data.
- Mobility: Well-built ERP systems provide mobile, corporate-wide access to a central system, which encompasses an enterprise’s data, accounting functions, reports, management functionalities, etc.
Some of the cons are as followed:
- Difficult and overly-complicated user interface (UI): One of the main downsides of ERP software is the typically-complicated UI, which often makes it difficult for non-specialized personnel to leverage the ERP’s power on a daily basis.
- Overly packed with unnecessary functionalities: The typical “one-size-fits-all” approach commonly associated with pre-packaged ERP systems often means that enterprise’s are burdened with too many/overly complicated functions and modules, making it more difficult to effectively use the ERP solutions.
- Inflexible and lack of adaptability: ERP systems are often produced as generalized “all-in-one” software packages for the general, large enterprise. This means that the unique business needs of many organizations will often not be met, requiring the organization to adapt to the ERP system instead of the ERP system adapting to the organization’s needs.
- Poor data integration between ERP systems and other IT systems (including system merging): Allowing access to all corporate-wide data from a single platform (the ERP system) should, in theory, be seamless, yet often requires APIs or the manual rekeying of data for correct data imports/exports between modules/IT systems. Additionally, when attempting to merge older systems with newer ERP solutions, issues often arise which turns the process into a difficult, time-consuming and costly endeavor.
- Expensive: ERP solutions are typically expensive, and top-tier platforms can often cost more than some enterprise’s are able to spend.
- High cost of customization: Per above, while pre-packaged ERP systems are expensive, customizing the ERP system to meet specific needs and goals often costs much more.
- Difficulty with installation/implementation: The installation process associated with implementing ERP systems in an enterprise always requires specialized personnel, while the process often runs into minor or major problems. Additionally, maintenance costs – due to faulty implementations of ERP systems (which is common) – often becomes unnecessarily expensive.
How To Select The Right ERP Solution
As noted above, choosing the correct ERP solution for a business can essentially make or break an enterprise’s processes, bottom line and budget. There are several steps that organizations should take when undergoing the process of selecting the right ERP solution for an enterprise. Those steps include preparation and strategic planning, working with upper management to gain insight and support, obtaining feedback from stakeholders and department directors, creating a clear list of issues that need to be solved (ERP system requirements), obtaining outsourced expert help, obtaining a list of appropriate vendors, fully evaluating ERP systems (including receiving demonstrations), measuring the true costs associated with the platform (including training and support/maintenance), and ensuring that the ERP solution truly fits within the organization to meet its end-goals.
Preparation and strategic planning encompass the first step associated with determining which ERP solution to utilize in an enterprise in order to meet its goals. The planning stage should always include obtaining in-depth feedback and information from both internal and external sources. This helps with the determination phase which should always be based on a clear understanding of what internal issues need to be fixed and/or processes that need to be optimized. Having a clear understanding of such issues allows executives to craft a list of ERP system requirements, in order to ensure that the solution truly helps to make the business operate in a smoother and more efficient fashion.
Get Upper Management Support
As noted above, it is crucial for planners (during the preparation phase) to obtain support from upper management in order to gain a clearer understanding of the issues at-hand that should be dealt with via the ERP solutions. This should include executives in the enterprise, financial officers, IT directors, chief managers, etc., all of which will be largely impacted by the ERP system when it comes to long-term planning, strategizing, management, leadership, etc. Thus, upper management should be able to present clear goals and requirements that the ERP system should be able to meet in order to increase the efficiency of workflows associated with executive-level processes.
Involve Representatives From Every Stakeholder Group / Department
In addition to above, it is important for representatives of all stakeholder groups, associated with an enterprise, to be involved in the preparation stage of choosing the appropriate ERP system. Stakeholders will often be able to present numerous, pertinent requirements and functionalities that an ERP system should have in order to ensure that all corporate processes are efficient. It is typically a necessary step to consult with stakeholders and upper management to ensure that all parties are in agreement regarding the determination of a specific ERP system for the enterprise.
That said, it is also imperative to consult with the department heads within an enterprise – and with key personnel – to obtain more in-depth feedback on specific internal processes that require refining via ERP system optimization. This step can greatly aid planners with the details needed to craft a list of specific requirements, and to project how specific ERP modules may help to solve major issues and increase the efficacy of corporate operations.
Create a Clear List of Requirements
As noted above, crafting a detailed list of requirements is not only crucial to choosing the correct ERP solution for an enterprise, but is predicated upon obtaining feedback from managers, stakeholders, department heads, personnel, etc. during the planning stage. A definitive, in-depth list of ERP module requirements helps executives and planners to understand the core issues of an enterprise, and how an ERP system can be leveraged to solve such issues and increase the bottom line in the future.
Consider Getting Outside Expertise
Matching ERP requirements with the vast number of ERP vendors is a challenging task. Due to the expansive nature of ERP solutions, the landscape associated with ERP vendors, modules, packaged systems and ERP software suites is very complex. Thus, obtaining expert assistance from a consulting agency or research firm may help planners and executives with navigating the landscape in order to choose the best ERP system for the enterprise.
Build a Short List of ERP Vendors
Matching the detailed list of ERP requirements with an appropriate ERP system requires the next, logical step of building a list of pertinent ERP vendors and implementation partners (system integrators). Consideration should be given to the vendor’s expertise in your company’s industry and with other customers of similar size. With such a list, it will be feasible to determine which ERP system/vendor is most appropriate for meeting the enterprise’s goals.
Tips on Evaluating an ERP Solution
There are several strategies that executives and planners can use in determining which ERP system is best for their enterprise. When matching a list of specific ERP requirements with relevant ERP systems/vendors, it is best to evaluate the ERP solution for how well it fits with the organization’s infrastructure, operations, processes, and work-culture.
Functional Fit – What Are the System’s Functionalities and How Easy Are They to Use?
Perhaps the most critical criteria for evaluating whether an ERP system is appropriate or not is its functional capabilities. This criterion includes both what the ERP system does and what it doesn’t do, along with how difficult – or user-friendly – functionalities are. It is important to choose an ERP system that has the required functionalities that will benefit the enterprise, while it is equally important for the ERP system to be devoid of unnecessary functions that make it difficult to utilize effectively. That said, evaluating an ERP system’s functionalities may also include analyzing the appropriateness of its modules and determining whether the system/modules can be feasibly customized or modified. One way to evaluate whether the ERP system’s functionalities are both appropriate and feasible to use, is with a hands-on demonstration.
Industry Fit – Is the ERP Solution Appropriate for Your Industry?
It is important to note that modular ERP systems are often industry-specific. Vendors focusing on government-based ERP systems may include functionalities and modules that will not be present in an ERP system that was crafted specifically for medical systems. Though ERP systems have a general modular layout, ERP systems are often tailored for businesses in specific industries. In line with the above evaluation criterion for ERP systems, this means that modules in an industry-specific ERP systems may be crafted with additional functions that are more appropriate for specific industries, while a generic ERP system may lack such features.
One way of determining whether an ERP system is focused on a particular corporate demographic is analyzing whether other businesses in the same industry are using the ERP platform. This is important since the level of industry-knowledge and expertise of the ERP vendor – and of the partner/system integrator implementing the solution – will determine whether the ERP system is appropriate for any given enterprise in a specific industry.
Technical Fit – What Technologies Does the ERP Vendor Offer?
It is important for an ERP vendor to build a technically sound ERP solution, which will help to mitigate possible maintenance costs associated with technical ERP bugs. That said, as a part of the corporate IT infrastructure, it is imperative that an ERP solution integrates well with the existing IT systems. Thus, the technical expertise of an ERP vendor is very important to evaluate, while it is equally important to note whether the technologies used by the ERP vendor are current or antiquated, etc. How technologically up-to-date the ERP system is impacts the ability of the system to integrate with existing, modern corporate systems, along with impacting the feasibility of finding support personnel – both of which impacts financial overhead.
Long Term Platform Viability – Where is the Specific ERP System in the Vendor’s Product Lifecycle?
Another significant factor that must be analyzed when choosing an ERP system from a specific vendor is determining where the system is in the vendor’s lifecycle. If the ERP system is still receiving upgrades and/or enhancements, then that is significantly different than an ERP system that has moved to a maintenance-only lifecycle. Additionally, it is important to note the ERP vendor’s Research & Development budget and efforts with relation to specific ERP systems, along with noting the number of vendor developers that are actively working on new releases of the ERP system.
When evaluating the long-term viability of an ERP platform, it is also important to note the current consolidations occuring in the ERP market, in order to determine whether a particular vendor will apply unnecessarily expensive annual maintenance fees for its customer base, rather than investing in specific solutions for its ERP systems.
Vendor Viability – Check the Vendor’s Situation and Reputation
As with any major IT investment, it is important to take note of an ERP vendor’s reputation amongst businesses in any given industry. This includes checking a vendor’s references, and the entirety of a Vendor’s Viability, which includes the financial health, company leadership, R&D budget, development staff, support staff, etc. of an ERP vendor.
Insist on a Detailed Demonstration
As noted beforehand, it is imperative that an ERP vendor or system integrator provides an in-depth, hands-on demonstration of the entirety of the ERP package. This includes testing the functionalities to ensure that they operate according to the enterprise’s needs and goals, along with a visual demonstration of the ERP solution showing how the ERP system meets the specific requirements of the business.
Check the True Cost of the ERP Solution
ERP systems are expensive investments, and while overall costs and overhead are usually projected to be at an approximate rate during the sales cycle, it is critical to note that implementation timeframes, installation costs, maintenance costs, customization costs, etc. often result in much higher fees overall. Additionally, ongoing support costs must be taken into account, along with the cost for hiring specialized personnel for ERP system installation/implementation, and for training personnel. Other components of the overall cost includes: software licenses or subscriptions, hardware or hosting requirements, network requirements, additional software requirements (e.g., database licenses, specialized modules like address validation or sales tax calculation, etc.), ongoing software maintenance costs, ongoing support personnel costs, etc.
Will Support and Training be Provided?
Evaluating an ERP solution to determine whether it is a good fit for an enterprise also includes determining whether support (maintenance, updates, patches, upgrades, etc.) is provided by an ERP vendor. Additionally, executives and planners should take note of whether training (for personnel) is included by the vendor, since ERP systems require special skills in order to leverage their power effectively.
Do They Fit Culturally?
The ERP vendor’s mode of operation and resource management should also be a good fit with an enterprise’s work culture to ensure that all issues are handled without any disputes. Different organizations have different ways of operating, so it is important for the work culture – the goals, expectations, ethics, values, and mission – of an ERP vendor to align with the culture of an ERP customer.
Always Evaluate Your Options Carefully
Choosing an ERP solution essentially comes down to determining which ERP system – and which ERP vendor – best aligns with the needs, goals, mission, vision and culture of an enterprise. This includes evaluating an ERP system’s/vendor’s functional capabilities, industry-expertise, technical soundness, long term viability, reputation, and overall cost. When executives are able to match an enterprise’s requirements and needs with a flexible, well-built, cost-effective ERP solution, there exists great potential to positively impact the company’s bottom line, and ultimately, the company’s top line.