On hearing the term ERP, many people think that this is a complex and not user-friendly software. It may have started like that, but nowadays, even small and medium enterprises can use an ERP system to cut down on operational costs, increase their revenue and, overall, manage efficiently the resources available to them.
ERP stands for Enterprise Resource Planning, which could be explained as a “business planning system”. There are countless analyses and scientific papers online about the ERP system. However, the prevailing definition is that ERP is a software system, which manages all the business operations in order to boost the business performance (Wikipedia ERP definition). This is achieved through a more rational management and use of data and business resources (human resources, material, financial resources etc.)
ERP: Historical background
Since its beginning in the 1990s, when it was used to introduce accounting functions and human resources/payroll into an MRP (Manufacturing Resource Planning, ERP has evolved technologically at a very fast pace. So, modern-day ERP systems have incorporated other capabilities, such as client relationship management (CRM), warehouse management system (WMS), Electronic Data Interchange (EDI), even Integrated Quality Management (IQM).
Many people confuse EPR systems with commercial software packages. However, an ERP system is way more than an accounting management system.
The difference is that the ERP system can manage and make use of all data, supporting business operations that may range from financial services and human resources to the supply chain and customers relations.
All the above have been made possible thanks to the unified database in which all the data and transactions are registered and monitored in real time (or almost real time in same cases).
ERP benefits in brief
An ERP solution helps a business to:
- Increase its revenue stream
- Improve its efficiency by unifying various operations (Finance & Accounting, Manufacturing, Supply Chain, Customer Relationship Management, Human Resources, BI/Reporting)
- Increase human resources productivity by automatizing its procedures
- Reduce its operational costs
- Increase the safety of its business data
- Extract information from different business departments
What does an ERP system include?
In its essence, the ERP system consists of incorporated modules which are used by the business to gather, store, manage and interpret data for many (ideally all) of its activities.
Some of the ERP modules are:
- Commercial management
- Financial management
- General ledger
- Fixed asset management
- Warehouse management
- Human resources management (HRM)
- Distribution management
- Supply chain management
- Client Relationship management (CRM)
- Retail management
- Product planning
- Production management
- Service management
- Financial accounting
When a business has recognized its general and particular needs and examines all options for an ERP solution, it is important to take into account the characteristics of the solution itself as well as the added services offered by the ERP vendor, regardless from the cost, and whether the solution meets its needs.
So, the specific characteristics of ERP systems, as well as the respective development companies must be compared so that transitioning, installing, learning and finally using the application is without any problems and on-time.
In particular, the features and added services to be examined are:
- Application version: Are the needs of a business met by the standardized ERP combinations of a specific version?
- Implementation time: How long will it take to implement the solution?
- Data transferability: What are the options for data migration?
- Upgrade frequency: How often is the ERP upgraded to include critical updates and add new capacities?
- Installation type and deployment options: Is there a choice between a SaaS (software as a service) and an on-premise (in-house) mode?
- Security: How strong is security when it comes to business data and information?
- Speed: How fast can the application upload the information/data the business needs?
- Scalability: Is the ERP system ready to incorporate any required changes, in a growing and expanding business?
- Adaptability: Can the solution be adapted to specific business needs?
- Platform: How user-friendly is the ERP interface?
- Training: Is there sufficient training and continuous information on new versions?
- Purchase (Software License): This specific type refers to the case where the business has acquired the ERP system by purchasing licenses for an indefinite period. Apart from the initial purchase, the business will have to pay a sum to establish the right to use newer software versions.
- Subscription: In this case, the business pays an annual subscription to use the ERP software for a specific period of time. The annual subscription usually includes any upgrades and newer software versions.
Deployment options: On-premise, Saas or Hosted
- On-premise: The ERP system is installed in the customer/business IT infrastructure. Under the specific model, the business is responsible for the infrastructure, maintenance and management of the software (support, upgrade, backup creation etc.)
- SaaS: The ERP system is hosted in the software provider’s cloud infrastructure, which is in charge of its operation and support. The business uses the software by means of a subscription, which includes of all the services provided.
- Hosted: In this specific type, the ERP system is hosted in the provider’s cloud infrastructure, but the business still bears the entire responsibility for software operation and management.
What is a Cloud ERP
The purchase of a business software shifts from particularly big and complex systems to ERP solutions which are much more cost effective and useful, while offering greater flexibility.
A solution that is constantly gaining more ground is that of Cloud ERP or, as it is also known, SaaS ERP (Software as a Service ERP).
But, what is Cloud ERP? This is a particularly popular solution as it responds to many of the challenges linked to big ERP installations. A Cloud-Based ERP makes use of internet-based capabilities regarding resource management and data storage, enabling all the business management tasks to be carried out in the Cloud. A Cloud ERP can be ready to run in no time, because no software is installed in the company’s servers (unlike the case of the on-premise installation.) Moreover, it is always up to date enabling the customers to always work on the latest version.
Cloud ERP helps the company cut down on operational costs, since it does not require any additional hardware, while it is invoiced using an annual subscription (usually on a yearly and on a per-user basis).
It is worth noting that SoftOne was the first software provider to introduce the subscription model in Greece and at a time when the Cloud concept was unknown to businesses and to the end users. Essentially, with the S1aaS (Soft1 as a Service), SoftOne was the first to offer IT business solutions as a service, regardless of whether the Cloud distribution system was available or not.
Another critical parameter of Cloud ERP is the ability to access business data from everywhere, using any mobile device.
Lastly, data security with a disaster recovery plan is considered a given, since any real Cloud ERP is found in modern data centers.
For example, SoftOne uses Microsoft Azure technology and the respective Microsoft services, that offers full control and separation between data and software, so that the solution is fully compatible with European Union directives etc.
Cloud ERP benefits
Cloud ERP has indeed reduced operational and IT costs. A Cloud ERP solution:
- Does not require costly investments in hardware and data services, nor does it add extra costs for user licenses and upgrades as it operates in the provider infrastructure and is available by subscription
- It frees IT executives from complicated, time-consuming and costly system support (upgrade, backup copy etc.) enabling a more efficient use.
However, Cloud ERP benefits are even more and go beyond saving in IT operational costs.
- Access and use from anywhere, since the software operates in the Cloud and does not require system installation in remote locations.
- Utmost security as the data is not saved in local servers but in state-of-the-art data centers with continuous control, backup and advanced retrieval solutions.
- Fast and easy set up without the need for any hardware and software installation in local business servers.
- Flexible configuration as the installation can be tailored to the real business needs
- Predictable IT related cost, since a cloud solution allows to scale expenses based on the actual resources consumed each time
Private or Public Cloud?
Regardless of the benefits it provides, Cloud ERP comes in 3 specific types, depending on where the solution is hosted.
Public Cloud: This type operates in data centers, owned and run by third companies (Microsoft, Google, Amazon etc.) This means that there are no management expenses for the clients. This is the ideal solution for small and medium sized enterprises; the basic advantage offered lies on the ERP implementation speed, as well as on the flexibility regarding the acquisition cost (pay as you go).
Finally, given the huge size of Public Clouds, businesses can change their demands in IT resources based on their needs in no time.
Private Cloud: Private Cloud is comprised of dedicated servers, who are found either in the business premises or in a third data center. Private Cloud offers all the flexibility, expandability and efficiency of Public Cloud while it offers higher control and safety levels which make it an ideal choice for big multinational and governmental organizations with rigorous policies in the field of data management.
Moreover, in a Private Cloud, the business can easily adjust the processing power, storage space, safety and networking following specific standards.
However, in that way, it is also burdened with the private Cloud creation cost, which is rising significantly when the Cloud is located in the business premises.
Hybrid Cloud: This specific approach is a combination of Public and Private characteristics which makes use of the advantages of both approaches in the most efficient way possible for a business. Public Cloud can be used for less sensitive data, while the Private cloud for data that are critical to business operations. That specific operation model incorporates all the existing resources, achieving an incredibly flexible and financially efficient business solution.
ERP for small businesses
ERP is not addressed to big businesses only. On the contrary, even the smallest business can benefit from the advantages it offers.
From the moment the business owner realizes that the Excel and/ or a small accounting software is not enough to manage his activities, the implementation of an ERP solution becomes a necessity. However, the choice is not simple and the concerns are numerous. Apart from various ERP system vendors, there are many other available choices (On-premise or Cloud based).
Another point of concern is whether the implementation of an ERP system presupposes or not the existence or the creation of an IT department in the business. The existence of such a department is particularly useful. However, the usual practice is that the software vendors’ consultants, implement the installation, proceed in the configuration and are responsible for the system maintenance – which is included in the contract.
Using an ERP system results in change the way people perform their work, as e-mails and Excel worksheets are replaced by a unified and advanced task flow. A system’s user-friendliness, is a decisive factor when choosing an ERP solution.
What are ERP market trends?
Nowadays, businesses are forced (even violently in some cases) to cope with technological developments that take place at a staggering pace. So, the CIOs will have to make important decisions which will likely influence their business’ livelihood.
Using new technologies and trends such as the Cloud and mobile computing in business operations is a one way street.
A global research in 2012 showed that almost 2/3 of smartphone users, use their devices for business operations. On the other hand, since mobile devices (smartphones and tables) use public mobile telephone networks to connect to the internet, the CIOs are highly concern about their safety. It looks difficult for a big business that manages crucial data (even if a big part of its activities is managed in the Cloud) to give ERP access to its employers via smart phone devices.
In this case, the Hybrid Cloud solves the problem as it ensures controlled access to “crucial” data.
Nevertheless, Enterprise Mobility is a trend that cannot be ignored. Through relevant apps that offer encrypted communication to and from the business ERP cloud, employees may work equally efficiently wherever they are. The relevant apps communicate with the installed ERP regardless of their operating model (on-premise or Cloud based).