Enterprise resource planning (ERP) systems aim to solve the issue of information fragmentation or “islands of information” within business organizations. ERP is a software suite that automates and reduces manual labor. It enables your company to operate cost-effectively. According to the statistics, ERP software cuts operational costs by 23% and administrative costs by 22%.
ERP solutions consist of various software modules that handle information for specific business functions or groups of functions. These systems connect different departments to a centralized internal database that, in return, shares data flow with the modules.
For instance, on a monthly basis, we need to update the payroll office about each employee’s work. To allow employees to focus on their primary responsibilities, ERP automation minimizes their involvement in this task while ensuring its accurate implementation is tracked.
To get a comprehensive view of the capabilities of ERP solutions on its own, take a look at the graph:
Source: Panorama report on ERP systems and Enterprise software
Take a leap forward and streamline your processes by incorporating ERP systems.
- ERP examines the operational aspects of your business and, in the process, automates and/or eliminates unnecessary business functions.
- Every department utilizes specialized software to automate straightforward processes.
- Streamlined workflow.
- The information is already stored in the database and ready for use. This enhances the simplicity and robustness of information exchange between internal systems.
- The modules can access each other’s outputs, contributing to a visually pleasing reduction in time and effort consumption.
- Enhanced performance and reliable implementation.
These aspects enhance the productivity of all segments of the company system, eliminate potential mistakes (e.g., human errors), and save a significant amount of time.
People invest considerable effort and money in ERP software primarily for continuous improvement. Enhanced performance drives business processes, boosts efficiency, and captures customers’ attention.
ERP based on the cloud
Today, many modern companies prefer this type of ERP. However, some still have concerns about security and would rather keep their data behind walls. According to the Panorama report, 72% of respondents expressed fear of potential data loss risks, and 12% were concerned about the possibility of a security breach.
Advantages:
- Enables fast and easy data sharing with seamless and convenient access.
- Saves money (no need for servicing and specific equipment).
- A good choice for small companies looking to start without delving into too many technical aspects of setting up their own hosting.
Disadvantages:
- Lacks full control over the data (the hosting provider is responsible for stable work and data integrity).
- Data security relies on the vendor.
- Still expensive: the price of a VM in the Cloud is higher than in a local data center.
ERP hosted on-premises
On-premise hosting involves deploying the software using your own resources, requiring your equipment to make it work. Alternatively, you can use a VPS (Virtual Private Server) or VDS (Virtual Dedicated Server).
To keep the machine working, you need to hire people who can manage fixes whenever it breaks. Moreover, the space it occupies is also a factor to consider in your choice. Therefore, to ensure nothing spoils “the moment of truth,” the on-premise ERP holder should consider:
Advantages:
- Maximum security for your corporate data
- Full control 24/7 (allowing physical access to any data on the server)
- An excellent choice for large and mid-sized enterprises that prioritize data control and safety
Disadvantages:
- Additional expenses (include hiring specialists for servicing equipment, managing space, ensuring safety, and covering electricity costs).
- There are complexities with data access for distant branches.
- Opting for OPEX (operating expenditure) is more cost-effective than CAPEX (capital expenditure) when you have purchasing facilities.
Choosing Between Ready-to-Go ERP and Building from Scratch: A Budget Decision
Today, you can effortlessly purchase everything. You can opt for the path of least resistance and explore ERP software that was developed years ago and is still relevant.
However, we can’t claim that the purchased product is an instant cure. There are always adjustments to be made, requiring developers to address numerous discrepancies. Sometimes, existing modules that are no longer necessary may need elimination.
So, before implementation, developers must organize, adjust, and test the results to ensure the work aligns with expectations.
Not every ready-to-use ERP software perfectly fits a client. Often, clients are not entirely willing to change their business processes to accommodate the ERP product. There’s always room for the concept of a customized ERP solution.
Let’s summarize the information. The advantages of ready-to-go ERP include:
- Short-term savings by avoiding high costs associated with customization.
- Faster implementation.
- Stable knowledge support with many outside experts on the software providing long-term training and advice.
- Software sophistication, with few bugs, industry-specific solutions, and extensive elaboration.
And here are the drawbacks:
- The need for adjustments and additional development.
- It may be challenging to customize it to fit your processes.
- You have less control over the product, as the software vendor holds the rights to the code.
Developing an ERP system from scratch may pose a greater challenge for some entrepreneurs when strategically creating a core that integrates their systems.
Firstly, you need to analyze how people perform their jobs in each department. Every role within the company is up for automation. To kick things off, business analytics (BA) engage in conversations with every employee to better understand the mechanics.
Once the back-end of the company has been outlined, they can proceed to discuss the time frame, costs, individual preferences, and suggestions.
The overall process constructs a completely unique architecture capable of adapting to future changes in the company’s work. However, this coin has two sides.
Pros include:
- You obtain unique software tailored to the specific nature of your business.
- You get full control over the software code.
- You save money on long-term prospects.
- Thanks to intellectual property rights to the ERP, your company valuation rises.
Cons include:
- Long development time.
- High costs compared to off-the-shelf solutions.
- May become obsolete by the time of implementation.
In Conclusion
Enterprise Resource Planning (ERP) systems involve a complex process that demands a thorough understanding of the target. It necessitates reorienting and training staff to operate within a completely new environment. The system transforms your enterprise into a computerized structural body managed by a set of software modules covering the entire business.
ERP offers techniques with efficient forecasting, planning, and scheduling processes. It streamlines data exchange between modules. The system prevents the need for redundant data entry. Finally, companies use this software to automate various functions and ensure seamless and flawless business processes.
