With digital transformation high on the national and business agenda globally, IT is increasingly expected to play a strategic role for the business. The role of the CIO, for instance, has never been more critical: CIOs are expected to protect the organisation from threats, stay abreast of new technologies to future-proof the business, and explore ways to transform business operations in a bid to improve efficiencies.
To that end, it’s not difficult to appreciate that technology forms the backbone of a modern business. Enterprise resource planning (ERP) in particular has been an unsung hero in IT: it’s not usually spoken about in a way that VR, AR, AI or IOT has been hyped about, yet ERP is an invaluable part of business as it connects front and back-office functions such as warehousing, accounting, HR and payroll in an efficient and functional manner.
To fully appreciate where ERP software will take businesses in 2020, it’s worth taking a step back to understand how ERP started and its evolution throughout the past few decades.
MRP Systems to ERP Systems: The Early Days
Gartner first coined the term in the 1990s but ERP is in fact rooted in the manufacturing context in the ‘60s and ‘70s. Material Resource Planning (MRP) or Manufacturing Resource Planning (MRP II) systems were mainly used by manufacturing companies to reduce inventory levels, associated costs, shortages, and better plan delivery and purchasing schedules.
As manufacturing companies matured and grew in complexity, so did their requirements for a more advanced solution. MRP II was the next evolution: it had MRP functionalities, plus capabilities like in-depth capacity planning, general accounting, and quality assurance.
In the 1990s, a new breed of solutions started entering the market. This birthed ERP, which represented a larger whole that reflected the evolution of application integration beyond manufacturing. Not only did it have processes found in MRP II systems, but it also integrated company-wide operations applications — financial management, supply chain management, procurement management etc.
By the mid-1990s, ERP expanded beyond the manufacturing core and began to encompass core functions of an enterprise beyond finance and accounting, to include components like maintenance and human resource. At this point, businesses beyond the manufacturing sector like government and non-profit organisations began embracing ERP, signalling the tipping point for wider cross-sector adoption.
As businesses today are being pressured to disrupt or be disrupted, the role of ERP in business is changing. There is a high expectation on IT to keep pace and help solve business problems. Furthermore, today’s cloud era is forcing business leaders to rethink their strategy, and in doing so, they have to overcome old perceptions of ERP as being merely transaction systems that work with data and create reports.
Cloud ERP versus On-Premise ERP Systems
Businesses who began life as a cloud-first company get to experience the immediate benefits of cloud ERP. For instance:
- Customised ERP solutions consider operational and departmental needs because there are different system modules for different departments, e.g., finance, sales and distribution, product management, and personnel management modules.
- Since the system is available on mobile, employees can use the system anytime from wherever they are. As the information is available real-time, the ERP system serves as a single source of truth, increasing efficiency and productivity in all areas of the business.
- Real-time data analysis and reporting that is provided by the ERP system can help to determine the future of the business .
- This in turn dramatically speeds up the decision-making process within the business as the system allows for updates to be made centrally that then gets applied to every department.
But for companies who deployed ERP on-premise – an endeavour that usually requires a burgeoning server and application platform estate – migrating ERP to the cloud requires a proper assessment, reconfiguration and significant process changes.
As with any change management, migration comes with challenges. In fact, research indicates that fear of misstep may be stopping many businesses from implementing ERP or shifting on-premise ERP systems to the cloud. Often, the importance of employee education is under-indexed in the process. The mindset that “this has always worked for us” is not an easy one to unlearn. When getting buy-in from employees, business and IT leaders need to coordinate efforts to demonstrate the improvements and outcomes that can be achieved by cloud-driven ERP, compared to manual methods of working.
Fortunately, lower upfront costs and customisations of platforms by ERP providers for specific industry sectors are lowering the barriers to adoption of cloud ERP solutions. In fact, according to industry research, the global ERP software market is projected to reach $78.40 billion by 2026, growing at a CAGR of 10.2% from 2019 to 2026.
5 Steps To Selecting The Right ERP Software For Your Business
Given the complexities involved, it’s no surprise that ERP software selection can seem like a daunting process. But with strategic planning, businesses can start to get clarity in their search, before narrowing down a selection, and finally pulling the trigger on the right solution. Here are some steps to consider:
1) Examine and document processes, pain points and strengths across the entire business.
Indicate the desired outcome and then list out the business requirements that are needed to bring that outcome to life. An example of a pain point may be that it takes several days for a department in the business to pull the data together for a report. A desired outcome is to have that department be able to do so within hours, if not minutes. The corresponding business requirement then would be to have up-to-date data across different systems that “talk” to one another.
2) Assess the technical fit. The right ERP solution needs to align with the business’ current IT infrastructure.
A turnkey solution might work well for some businesses but other companies may require customised ERP solutions that are designed specifically for a certain industry. Ideally the ERP solution should be scalable and can perform just as well even with a significant increase in users and data. In determining which applications and modules are needed, it would be prudent to also find out how often new features and functionalities are included in upgrades.
3) Determine the true total cost of ownership.
ERP pricing is not straightforward; it is a long-term financial commitment with high stakes for the business. Find out costs pertaining to licensing, implementation, upgrades, software maintenance, fee structure for additional requests, and any other hidden expenses. Determine which costs are one-time fees and which ones are recurring.
4) Create a checklist to choose the right ERP vendor
Selecting the right partner for ERP implementation is just as critical as selecting the right ERP software for the business. A checklist that addresses the following questions can help to narrow down options:
- Do the vendors have a proven track record in a specific industry? Ask for successful implementation case studies and referrals from them. Read up on the awards or accolades they may have won as those usually speak to the vendors’ quality processes and technical expertise.
- Do they have enough resources to handle the implementation? If the organisation in question is a worldwide business, ask if the vendors have handled worldwide implementation previously.
- What is the vendor’s methodology on effective user training and change management?
- How involved is the vendor’s senior management in the implementation phase?
5) Develop an implementation plan with a goal to meet not only immediate objectives, but also sustained results over time.
According to McKinsey research, the most crucial factors when it comes to implementation success or failure are organisation-wide ownership of and commitment to change, prioritisation, and sufficient resources and capabilities. ERP implementation plans can be co-developed with the ERP vendor, but the business itself should lead the change effort and monitor its progress. A cross-functional, multi-disciplinary project management team reporting to a C-level executive is an effective way to foster organisation-wide ownership and commitment.
Our Picks For The Best ERP Systems In 2020
According to Allied Market Research, the vendors below are the key market players in ERP systems:
- SAP – reputable and long-established leader in ERP software. SAP provides ERP software in both the on-premise and cloud market space across a wide range of industries and industry sectors.
- Oracle – natively connected with all Oracle enterprise cloud applications and scales inherently to support added users, transactions and sites as business grows and scales.
- Sage – offers mid-range ERP solutions that meet requirements of most large enterprises and SMEs. Origins of their ERP solutions are in accounting and payroll software.
- Workday – cloud-based ERP that suit global businesses of all sizes in a variety of industry verticals.
- Infor – offers cloud-based ERP for businesses of all sizes, promising last-mile functionality for manufacturers, distributors and service industries.
- Epicor – aimed at manufacturers who want to harness data and automation to stay productive and profitable.
- SYSPRO – focuses on manufacturing and distribution sectors, and designed to simplify complexity and provide businesses with greater control and visibility.
- Microsoft – well known for Windows and Office products, this tech giant offers ERP solutions through its Microsoft Dynamics product line.
- IFS – offers tailored ERP solutions for aerospace and defence, telecommunications, energy and utilities, engineering and construction, manufacturing, as well as service industries.
- Deskera – provides cloud-based online ERP software for companies of all sizes, with a special focus on SMEs.
It can be overwhelming with so many vendors in the ERP market, but there’s no one-size-fits-all partner since businesses are complex entities and have unique people dynamics. To reap the full benefits of the ERP programme over time, a business-driven approach, where a company looks at building its structural and process capabilities with a proven change management programme, is generally recommended. An ERP partner with a proven project setup and execution methodology can help the organisation unlock the value from their ERP programmes.