Top 10 Signs Your Business Is Ready for an ERP System
It’s taking longer and longer to reconcile financials at the end of the month. Your sales forecasts are based more on guesswork than solid figures. Your business is having trouble keeping up with its order volume and customer satisfaction is faltering as a result. You have no idea how much inventory you have in your warehouse, and it’s a pain to find out. If this sounds like your business—or close to it—then it may be time to consider an ERP system.
Because every company is unique, there’s no single indicator that says, “You need ERP now!” However, the companies that would benefit most from ERP software often face similar problems and frustrations. Is your business facing some of these same issues? Read on to discover the top five signs that your company is ready for ERP.
Most businesses start out using a variety of simple, standalone tools to manage different processes – such as QuickBooks or Excel Spreadsheets. Here are five signs you’ve outgrown them.
1. You Have Lots of Different Software for Different Processes
Spend a few minutes thinking about how employees at your company record, track and process information. Do accounting staff use one system for receivables and payables, and sales use another to enter in customer orders? Is the process of taking those orders and getting them fulfilled and into accounting a time-sucking manual process? Do employees in your warehouse use a completely different solution to track shipping and receiving?
When various front- and back-end systems run separately, it can wreak havoc on the processes that are meant to ensure your company is running smoothly. Without accurate data from sales, inventory management may suffer, while not having the latest information from accounting can trigger a ripple effect on everything from marketing budgets to payroll.
ERP software integrates these systems so that every business function relies on a single database. With one source of information that contains accurate, real-time data, an ERP solution breaks up information logjams, helps staff make better decisions more quickly and frees up their time to work on more high-value exercises like helping the business grow even faster.
2. You have manual processes with multiple data sets
Are most of your departments using their applications and processes to get things done? If so, chances are you’re spending too much time on duplicate data entry. When information can’t flow between systems, reporting takes longer, errors happen often, and decision making is hampered.
3. You Don’t Have Easy Access to Information About Your Business
If someone asked you what your average sales margin is, how long would it take you to find out? What about other key performance metrics, like orders per day or sales to date? For companies that rely on siloed systems and spreadsheets that need to be constantly updated and reconciled manually, it could be a long wait.
The pace of business is faster than ever before, which means employees across your company need immediate access to key data. With an ERP solution, executives can get a holistic view of business operations at any time, while other staff can get the information, they need to do their jobs more effectively. For example, sales representatives should be able to view a customer’s full transaction history and more proactively improve renewal rates while increasing upsell and cross-sell opportunities.
4. You’re spending more time on daily activities
If it’s taking longer to manage key activities, like closing the books, too many disparate applications may be to blame. ERP software integrates solutions and data into one system with a common interface, making it easier for business units to communicate and do their jobs effectively.
5. Accounting Takes Longer and Is More Difficult
Often, the first noticeable signs that your company needs ERP software will come from your accounting department. If your employees rely on paper-based invoices and sales orders—and spend hours every week manually entering them into different accounting and sales systems—you need to consider how much time is being wasted on tasks that ERP software can handle in an instant.
The same goes for financial reporting—if it takes ages to consolidate or reconcile financial information across systems and through countless spreadsheets, an ERP solution can make a significant impact. With all financials in a single database, accounting staff won’t have to spend hours cross-posting information, rekeying numbers, or reconciling data manually. Your accounting staff will be more productive, freeing them to deliver critical reports without delays and frustration.
6. You have many unanswered business questions
Can you easily answer important questions about your business – such as revenue per product line or the number of returns? If not, segregated systems and a lack of access to metrics and KPIs may be holding you back. Enterprise resource planning software is designed to address these challenges.
7. You’re missing out on fast-moving opportunities
Are you spending so much time running your business that you can’t pursue exciting new opportunities? Newer ERP systems include advanced, intelligent capabilities, like machine learning and predictive analytics, that make it easier to identify and capitalize on profitable new ventures.
8. Sales and the Customer Experience Are Suffering
As companies grow, one of their biggest challenges is often inventory management. Ensuring that the right number of products is in the right location at the right time is a vital part of business operations.
When sales, inventory and customer data are maintained separately, it can create serious problems across your company. If you run out of a popular product, sales will be off until the next shipment arrives. Meanwhile, if a customer calls to inquire about an order and employees can’t track it to see if it’s been shipped—or if it’s even in stock—your company will start to develop a poor reputation for reliability and service.
With an ERP system, on the other hand, staff in every department will have access to the same, up-to-the-minute information. Customer-facing reps should be able to answer customer’s questions about order and shipping status, payment status, service issues, etc., without having to hang up the phone and check with another department. Better yet, customers should be able to simply go online to their account and view status information. Meanwhile, the warehouse manager can see that stock is getting low and can reorder.
9. Your IT Is Too Complex and Time-Consuming
One of the biggest downsides of having multiple systems across your business is that IT management can become a nightmare. Customizing these systems, integrating them and maintaining them with patches and upgrades can be complex, costly and critical time and resources.
If your patchwork of systems includes on-premise, legacy business software, system upgrades can be more trouble than they’re worth. Not only are these updates expensive and time-consuming, but they may also undo customizations implemented by IT staff. Given that, it’s no surprise that two-thirds of mid-size businesses are running outdated versions of their business software.
Rather than adding more software—and complexity—to an already ineffective system, ERP technology can give you the agility to respond to changing business needs rapidly. That’s why selecting a cloud-based ERP system updates is no longer an issue, and new functions are easy to add as your business grows and changes.
10. You have runaway business processes
Are there areas where your processes are getting away from you? Maybe it’s harder for you to manage inventory, satisfy customers, or keep costs in check. If so, your business processes may need to be restructured to accommodate growth or changing priorities – a natural fit for ERP software.
ERP System Pricing Models
An ERP software can be termed as consumer software and this enterprise application software is typically not bought and sold instead it is licensed for use. It may be licensed to be used by a company, on a particular computer or by other criteria such as several users. Buying it once doesn’t mean you can duplicate it and share it with all your friends, or even sometimes use it on all your computers. For enterprise application software how you pay for that license and the term of the license can vary.
How Much Does an ERP System Cost? For any business investing in an enterprise resource planning (ERP) system, pricing is an important factor.
ERP software isn’t cheap, and prices vary depending on the type of deployment, number of users and level of customizations. Some vendors publicly display pricing on their website, especially for cloud ERP solutions, while others only provide a quote after finding out a company’s business requirements.
Depending on the type of deployment, ERP vendors use two pricing models: perpetual licensing and subscription plans. Here’s how they work:
Companies that choose to host ERP software using their servers (on-premise deployment) generally pay a perpetual licensing fee. This one-time cost is paid up-front and is based on the number of users and the level of customization.
Perpetual licenses usually don’t include recurring costs like maintenance, support, and upgrades. However, Today, a software license can be perpetual. This means you pay for it once and can use the enterprise application forever. Even in this case more often a perpetual license agreement might have a stipulation that you have the right to use that software only for as long as you continue to pay maintenance to the software vendor that provides the product. But perpetual licenses are not the only type offered. Instead, your license might be for a specific period. This is generally referred to as a “term” license. At the end of the term, you must either renew the license or discontinue the use of the software.
Companies can also pay a subscription fee to access cloud ERP software, which the vendor maintains and hosts on a third-party data server. The software-as-a-service (SaaS) pricing model means fees are paid per user monthly or annually.
Subscription plans often require companies to have a minimum contract length and come in various tiers with increasing functionality and modules.
ERP implementation is famous for being a long and expensive process. Costs include:
Modules or features not included in the base price
Some solutions may charge additional fees for individual modules or advanced features, including payroll, manufacturing, and e-commerce. There are also industry-specific solutions that offer features for a particular market.
Many companies require customizations for their specific business processes, and costs can add up quickly. Businesses should make sure they focus on adding only the features they need.
Many vendors, especially larger ones like Oracle, SAP, and Microsoft, use third-party consultants for implementation. Costs can vary significantly for services like change management and data migration.
Companies that want an on-premise deployment will need to purchase data servers and hardware infrastructure to host their ERP system.
Some vendors may include basic training services for free during implementation, but others may offer them at an additional cost, especially if the training is done at the client’s site.
Small to medium-sized businesses can expect to pay between $75,000 and $750,000 for implementation. Costs for large businesses range from $1 million to $10 million.
Companies that can’t afford large up-front implementation costs should choose a cloud deployment, which doesn’t require hardware installation and may not offer as many customizations.
Ongoing Costs to Consider
ERP systems often require additional resources that aren’t generally included in the base price, such as:
ERP systems can be complex to manage. Companies that choose an on-premise deployment will need internal IT staff to handle any technical difficulties that arise.
Basic support (e.g., knowledge base, email support) is typically included in the price of an ERP solution. However, vendors may offer plans that include advanced support, such as priority support or access to a dedicated customer service manager.
Maintenance and upgrading
Most on-premise ERP deployments charge an additional fee for annual maintenance and software upgrades. However, maintenance and upgrades are typically included with subscription pricing for cloud deployments. So, a maintenance agreement, which is a recurring cost, typically provides both technical support and certain innovations. Some of those innovations will be included in your maintenance fee and others may still need to be purchased. Maintenance is typically priced as a percentage of the software license.
The Future of ERP
The future of ERP exhibits the future of business. Open source is the future. Web, mobile, and cloud solutions are increasingly built predominantly on open source infrastructure. With the increase of AI and mobile app development services, businesses are ready to put data at the heart of every decision. Companies now prefer cloud-based ERP. As per a recent survey, more than 94% of enterprises regard cloud-based ERP as a safer option.
Then you need to know about the trends that will shape the future of ERP in 2019.
1. More ERP users will switch to Cloud
The year 2018 saw the movement of several software platforms to the cloud. Till now ERP is lagging with the integration of cloud computing. In the year 2019, expectations are ripe that more ERP users will switch to the cloud. This trend holds great importance for small to medium businesses. With cloud ERP solutions, they need not maintain in-house infrastructure. They can avail of the benefits of a comprehensive system with minimal human resources. It will help them access ERP systems which they cannot afford. As per recent reports, a total cloud-based market with cross the levels of US $411 billion by 2020. This trend has found favor with big corporations also. They are availing enterprise mobility solutions for their cloud ERP requirements.
2. Businesses must be ready for Updates
With the rising trend of cloud ERP solutions, there are going to be more updates available. This will need the businesses to keep their personnel always ready. They cannot rely on an old-release version for much longer. To be prepared for one big release, the company will have to adapt to many smaller releases. This will help reduce the steep learning curve between the systems. It will need businesses to invest in staff training and upgrading of skills. Meeting these demands is possible with the help of mobile ERP solutions.
3. The blockchain is the future
Blockchain has found takers in various enterprise software. It will find its way in the ERP also. The blockchain is one of the most secure platforms for carrying out transactions. Though, it is only in the nascent stages right now. But the future of ERP will feature blockchain. Specific organizational functions can become more efficient with blockchain. Supply chain management and customer acquisition will become more active with this technology. Many companies where shipping and tracking are essential functions have started using the services of blockchain consulting firms. You can enlist the services of enterprise app development providers. They will help integrate blockchain with your ERP.
4. Artificial Intelligence is the way to go
Artificial Intelligence services are impacting every facet of business operations. The concept of machine learning is going to revolutionize ERP. It will help businesses achieve high levels of automation. It will replace the need for human resources across various functions. The concept of robotic process automation (RPA) is catching up. Whereas previous systems focused on specific processes, RPA is applicable across all departments. This will help the company reallocate wasteful human resources to more productive avenues. Another extension of AI is in the form of Chatbots. One can hire the top Chatbot Development Company to integrate the AI-enabled chatbots to reduce the cost of operations. The reallocation of funds will be towards business automation. Companies offering Enterprise mobile application development in India can take care of this.
5. Personalization of ERP Solutions
As per the ERP system predictions for the next 10 years, businesses will opt for personalization instead of customization in ERP. It will help them stay up to date with the industry trends. Business users will look for personalization of solutions instead of modifications. It provides the company with a specialized solution at a fraction of the cost. The market for personalized ERP solutions will cross the US $ 15 billion by 2020, as per a report by Forrester’s. Companies can reduce the need for dedicated IT teams to manage ERP. In the future, all the activities of ERP will focus more on customers.
6. Opensource Cloud ERP
Trends show that enterprises are more likely shifting and implementing more Open Source Cloud ERP, due to the excessive License and maintenance fee of the Closed source Cloud ERP.
As technology continues to advance and evolve, more businesses of all sizes are considering cloud ERP than ever before. This popularity is largely a result of factors such as cost, reliability, speed, and access. To stay on the cutting edge of innovation, you need to understand what cloud ERP is and how it could help your business. This resource will put you on the right track toward evaluating, implementing, and managing the right cloud-based ERP system for your company and team.
Open source Enterprise Resource Planning or ERP Software system is like a shell created outside the core system to meet the business needs and line-up with the company organization. If implemented within an organization the right way and used the right way, it can drive significant benefits, including better information sharing, reduced operational costs better synergy between marketing and sales leading to more revenue, better automation and integration of processes. All in all, a healthy proposition.