These days, most major companies around the world are well-acquainted with the term ERP and everything it encompasses.
But are you? Let’s take a closer look at what really stands behind these three letters.
What is ERP?
ERP stands for Enterprise Resource Planning (ERP) and as its name suggests, it is a type of software used by organisations to manage their day-to-day activities and to structure their resources in the best way possible. Often referred to as a business management software, an ERP streamlines and integrates a range of applications (such as customer relationship management or supply chain management) while letting them communicate data between them. Applications typically address a core business function – like human resources, finance, order processing or inventory – so companies can pick and choose the applications that suit them and scale according to their needs. By using common data and operating on a single database, ERP aims to serve all departments of a company, avoiding data duplication and ensuring data integrity. On the long term, as the company expands, an ERP must also have the capacity to scale and accommodate growth.
At its core, ERP simplifies company operations by using common data and operating all processes on a single database.
ERP integration – a complex matter
Because it means redesigning the entire way a company operates and getting people to change their ways, implementing an ERP system is not an easy feat. To take full advantage of a new system, it is often necessary to rethink the company’s processes and for employees to change habits. This in itself can be challenging. Let’s not be mistaken, integrating an ERP solution is time-consuming and difficult which is why it should be done appropriately. In fact, an optimal implementation is organised in six phases:
- Planning – The first step involves understanding a company’s situation, establishing its inefficiencies and areas of improvement, laying out the project and target dates.
- Designing – The second step is designing efficient workflows using input from the actual users.
- Developing – Once the overall design has been decided comes the development phase. This is when the software is configured and customized to meet the established needs of the company. Training material to guide the users in the new system is also created at this stage.
- Testing – Modules and applications are then tested by the users and adjustments are made accordingly.
- Deploying – With the applications tested and fixed comes the all-important deployment. At this stage, well-planned data migration ensures a seamless transition to the new system.
- Supporting and updating – Finally, the last stage of an ERP implementation is supporting the users and providing updates as and when necessary. As the company grows, new configurations may be needed and new staff may require training sessions.
Beyond the issue of the implementation, the question of cost must also be addressed. The amount of work required to switch systems may result in spending more money than expected and training costs to get acquainted with the new system should also be considered. Nonetheless, despite adversities, the long-term benefits of installing an ERP are worth the hassle.
So what are the benefits of ERP?
ERP aims to improve business efficiency and effectiveness in several ways. According to the marketing intelligence company Aberdeen Group, it is estimated that the implementation of an ERP improves operational costs by 23% and administrative costs by 22%. Other than the financial aspect, there are many reasons businesses are turning to ERP to help improve their day-to-day activities. In fact, we’ve found six reasons all companies can benefit from ERP on the long term:
- Improved productivity – By streamlining and coordinating core business processes, departments can collaborate thanks to a common database and easily overcome obstacles like time zones and language barriers.
- Better visibility – Cutting down on data duplication and working with a single source of truth makes it easier for a company to guarantee traceability and for each employee to find an answer to their question.
- Accurate tracking – Any company would agree that decision-making should be based on accurate data. With ERP systems, real-time information can be organised into customisable reports which can then be shared seamlessly across the company.
- Reduced risk – Gathering all sensitive documents and information into one secure place reduces the chances of fraudulent practices or security breaches.
- Simplified IT – Integrating applications in one software that shares a company-wide database simplifies the company’s overall IT system as well as the everyday activities for all its employees.
- Enhanced agility – Because every company is unique, ERP is entirely customisable to adapt perfectly to a company’s needs.
Types of ERP deployment?
Also referred to as “on-premise” ERP, this is the traditional mode of deploying software. Installed directly in the data centre on the company’s premises, these systems are designed for all businesses, but are more appropriate for small to medium companies. Because it is maintained “in-house” this type of deployment requires a dedicated IT team to manage and update it. While this has long been the preferred type of deployment, it is both costly and complex. In response, the internet has heralded the arrival of a new model: the cloud.
At a time when remote working is becoming a common practice, cloud-based ERP is gaining momentum. Based on a subscription model, cloud ERP systems are also categorised as “software-as-a service” (SaaS) and rely on an external provider for updates and maintenance. Cloud ERP allows for fast and remote data access and because it relies on a license rather than a purchase, its cost is lower than local ERP. An added value is that cloud ERP solutions make it possible to operate businesses from multiple locations as well as from mobiles instead of desktops.
As its name suggests, hybrid deployment is a combination of on-premise and cloud solutions. While this type of deployment relies on a general local solution accessible by all core functions, cloud solutions can then be added to meet the needs of specific functions or regions. This option has several advantages including reduced cost, adaptability to business needs, and less complexity.
ERP meets the fintech world
ERP and fintech have similarities: they are both designed to solve the organisational challenges of companies. While ERP solutions continue to improve, fintechs are also looking to provide enhanced services to the B2B world. As a result, new players are now offering the best of both worlds: fintech capabilities built in ERP systems. By seamlessly integrating fintech solutions in ERP systems, companies can enjoy the full benefits of both and an all-inclusive software experience.
By using these technologies together, businesses can improve their best practices and automate time-consuming processes that used to be done manually. Having access to readily available data from other core functions gives employees an inclusive understanding of their company and a better grasp of its activities, both of which can save time and money, and improve the company’s performance.