Enterprise resource planning (ERP) software gives companies the tools they need to run day-to-day business operations—from accounting to risk management and compliance to supply chain operations to customer relationship management and more. In years past, companies would choose a system and stick with it through version upgrades. Most companies hosted their ERP systems on site, as well.
Two trends are changing the marketplace, however: Many new players have entered the ERP space and cloud storage is easily available to companies of all sizes. Now companies are less likely to host on site or to demonstrate brand loyalty. Instead, they’re looking for the best solutions to specific business problems and turning to cloud experts to help them move their ERP off site.
A few common occurrences trigger companies’ desire for a new ERP:
- High growth. A small or medium-sized company might use QuickBooks for its simple needs, but as it grows will find the software lacking key components necessary to support their business.
- Companies with older systems often need to update their software and move to become more effective and efficient.
- Mergers and acquisitions. As large companies acquire more businesses, they can end up with multiple competing systems. Parent companies often look to move acquisitions to a common platform.
- Updated software versions. Vendors often do a strong push of new software to get their customers on the latest and best version.
Moving to the cloud
After making the decision to implement a new ERP system, one big choice they face is whether to keep systems on premise or to host in the cloud. Big advantages to the cloud are scalability, reliability, availability, and cost. Systems can be quickly scaled by purchasing additional cloud server space—much easier than buying and setting up on-site server equipment. For companies that acquire new businesses, for instance, cloud-based ERP systems allow for easier rollout to new personnel, reducing time and difficulty to scale up.
In addition, cloud contracts come with service-level agreements (SLAs) detailing up-time expectations and types of support service. This reduces the cost of having 24/7 in-house IT personnel ready to support servers if they fail.
People often worry that cloud systems open their companies to potential cybersecurity attacks, but that worry is overblown. The only way to protect yourself entirely from security issues is to not be connected to the internet. Cloud servers provide as good, if not better, firewalls and security protections as in-house servers.
Choosing the right software
Today’s ERP customer has more choice than ever. While SAP, Oracle, and PeopleSoft have always been the big players or Tier 1 solutions, they are now aiming more for the middle market, while Tier 2 solutions, such as NetSuite and Microsoft Dynamics, have moved into the Tier 1 space. In addition, “pure play” technology solutions like Salesforce’s cloud-based customer relationship management or Blackline’s financial close applications are also disrupters for Tier 1 ERPs. All that means is that companies have more options to consider and may end up with multiple solutions—one that handles traditional ERP tasks and another’s that further enable customer relationship management, the financial close, as well as, treasury, financial planning, or HR.
How do you know which software to choose? Here are some considerations:
Traditional ERPs are known for running day-to-day business operations, but updated versions and new software solutions offer tools that go beyond the basics. Some examples are visualization, automation, and global capabilities. New ERPs are starting to incorporate visualizations tools that allow users to easily create charts and graphs and visualize data in a way that’s easily digestible, just by clicking a few buttons on their computer, tablet, or mobile device. Instead of receiving a static PDF report, the software allows creation of real-time, interactive dashboards that enable end users to filter data on demand and click on information to dig deeper into the underlying data.
- Automation is also an important trend, as ERP systems leverage artificial intelligence (AI) to automate processes, reduce manual activity, and perform analytics. For example, AI and machine learning models are calculating credit scores and predicting the outcomes of giving loans to customers. Retailers are also using AI to monitor and adjust product pricing real-time based on consumer spending trends and predictive models.
- Globalization means that companies of all sizes are doing business in foreign markets, such as China, India, Mexico, and South America. With that comes the need to service customers and work with suppliers in those markets. To be able to do that well, ERP systems must have multicurrency and language translation capability, which traditionally have not been available.
Understanding marketplace disruptions
The current COVID-19 pandemic caused many businesses with traditional storefronts to move transactions online. This drives a need for technology that supports transaction processing, is user friendly, and can work with mobile devices since so many people shop directly from their phones. ERPs now are starting to come with a basic shell of what a mobile app needs to look like to support your business—whereas before, companies spent a lot of money to develop and customize mobile apps.
The pandemic also uncovered supply chain issues across many industries. ERP systems have jumped in to provide easy-to-access information and direct connectivity to suppliers and their customers to reduce on-hand inventory, delivery lead times, and inventory carrying costs. This functionality helps not only in times of crisis but going forward, giving companies more awareness into their supply levels and helping them make transactions easier and more enticing for consumers.
Measuring return on investment
Before jumping into an ERP upgrade or implementing a new system, it makes sense to consider ROI, whether in terms of resource reduction or work hours saved. MorganFranklin consultants can help you identify what’s most important for your business and build a robust business case for your ERP system plans. We can also give insight into how to conduct ongoing measurements to support your investments. Reach out today, and let’s start a conversation.