When it comes to enterprise resource planning (ERP) systems, the search for the right solution for your business can prove quite daunting.
Perhaps you’re in a small and midsized enterprise (SME) where Excel spreadsheets or accounting software like Quickbooks or MYOB can’t keep up with your requirements.
You’ve been tasked to find a new ERP solution, but aren't sure where to start; a quick Google search throws out a staggering amount of information on everything from the most basic accounting software to large enterprise systems designed for the Coca-Colas of this world.
We’ve put together this guide to help SME-based seekers like yourself get all the basic information you need to take the next step in the right direction.
It also contains links to other resources (always free!) that you might find useful in your search.
If you need more advice, you can always call us or drop us a note, and one of our ERP consultants will get back to you shortly.
Ready to learn more about ERP software? Let's get started!
1. What is (and isn’t) ERP?
To understand what ERP systems are, let’s first look at what ERP systems are not.
i. ‘Fancy’ Accounting software
SMEs often mistakenly think ERP systems are nothing but fancier, high-end accounting software.
In fact, we frequently get calls asking for ‘SAP accounting software’ or ‘Microsoft accounting system’. Once the caller learns it’ll cost more than their off-the-shelf accounting software, you can almost feel their stunned silence on the phone.
So what's the difference?
A typical accounting software revolves around facilitating accounting transactions. Common modules include general ledger, purchase order, billing, accounts receivables, payroll etc.
ERP software on the other hand, goes far beyond what accounting software offers.
A true ERP system covers a wide range of functionalities, including non-accounting ones, such as Procurement, Inventory Management, Sales & Distribution, Warehouse Management, Manufacturing, Service Management, Cost Accounting, Human Resource Management (HRM), and Customer Relationship Management (CRM).
As such, ERP systems are not fancier, scaled-up versions of accounting systems. Think of accounting software and its functionalities acting as a subset of what a true ERP software can provide.
ii. MRP or MRPII systems
Less commonly, ERP systems are sometimes confused with Material Resource Planning (MRP) and Manufacturing Resource Planning (MRPII) systems.
This is due to their long-shared history in the manufacturing sector.
MRP systems go way back to the 1960s and 70s. Back then, manufacturers used MRP systems to calculate their required materials in the optimum timeframe and quantities.
Ideally, a good MRP system helped them reduce inventory levels, associated costs, shortages, and better plan delivery and purchasing schedules. But as manufacturing businesses grew and their requirements became more complex, manufacturers demanded a better solution.
MRPII was MRP's next evolution. A MRPII system had MRP functionalities, plus capabilities like in-depth capacity planning, general accounting, quality assurance and so on.
This worked until 1990, when a new breed of solutions started hitting the market.
These systems not only had processes found in MRPII systems, but also integrated company-wide operations applications — financial management, supply chain management, procurement management etc.
Gartner termed these new solutions as ‘enterprise resource planning’, or ERP systems.
In other words, ERP systems evolved from MRP systems — and are still evolving today.
So What is ERP, Then?
Picture all the processes that take place within a business.
There’s accounting to be done, sales orders and/or inventory to manage, procurement and payroll to handle and so on.
Essentially, an ERP system ties all these processes together into one integrated system.
By utilising a shared database, everyone’s assured they’re relying on the same information, regardless of which department or function they’re in.
A full-fledged ERP software also provides real-time reporting and automation. This allows employees to directly pull information from one system, instead of maintaining separate spreadsheets or software. This minimises data loss and inconsistencies.
For SMEs struggling with manpower issues, this integration and real-time automation can really transform efficiency levels and service quality in the workplace.
Now you may be thinking:
But we have different systems/methods to divide up our workload, and each solution is specialised for its purposes. All we need is our teams to ‘get their act together’ and work more effectively.
Purchasing and gathering various point solutions are indeed useful – functionally. But these will not give you the same benefits as a fully integrated system, where every part works in unison.
Let’s use a typical sales order of what goes on in an SME with disjointed processes as an example:
Now imagine the alternative:
- Your sales orders are automatically flowing through your system with minimal or zero manual data entry
- Your orders department process new orders quickly, and any changes are swiftly communicated to production and warehousing, and vice-versa
- Your finance team can close their books with greater accuracy and speed
- Your sales team serves your customers proactively thanks to real-time, accurate information
- Your business owners get to view sales performance anytime
And that is just one difference made to your Sales processes alone.
In a nutshell, the ERP concept is more than a sum of its parts. To quote a CIO article:
Enterprise resource planning (ERP) software doesn’t live up to its acronym. Forget about planning — it doesn’t do much of that — and forget about resource, a throwaway term. But remember the enterprise part. This is ERP’s true ambition. It attempts to integrate all departments and functions across a company onto a single system that can serve all those different departments’ particular needs.
Like its MRP predecessors, ERP systems continue to evolve to reflect the changing business environment. Today, modern ERP systems boast functionalities such as business intelligence (BI), predictive analytics, warehouse automation (barcode scanners etc.), e-commerce and so forth.
With such advancements, it’s unsurprising more SMEs across various industries are investing in ERP. One ERP report even showed nearly half (47%) of the organisations surveyed are in the process or have completed implementing ERP software, while 22% indicated they’re in the software selection process.
2.What Types of ERP Systems Are Out There?
i. Enterprise vs. SME ERP Software
ERP systems have traditionally been associated with big MNCs. These enterprise ERP are the large, behemoth systems that take years to set up, and involve thousands of employees worldwide.
These are the ERP systems you’d come across in articles on how complicated and costly it can get to implement an ERP system.
Just take the various components in SAP ERP – an enterprise-level system, as an example:
For most SMEs, this is too excessive (and not just to their budgets). What they simply need is a usable, affordable system that could integrate and speed up their functions.
In the past, this would've been limited mostly to the big 'fishes' in business. But over the last two decades, more developers have turned their focus to building ERP systems for the SME market.
There are many factors — near saturation of ERP adoption among large enterprises, growing pressures among SMEs to stay competitive in a global market, businesses getting smaller, etc.
The biggest reason however, is the SME market's attractiveness. One IDC study estimates SMEs are growing up to four times (4x) faster than large enterprises, making it attractive to software developers.
Even companies traditionally involved in enterprise-level software have entered the SME ERP market. For example, SAP introduced SAP Business One – its flagship product for the SME market – in 2002.
So today, apart from enterprise ERP, you'll find a whopping number of ERP systems designed specially for SMEs. These tend to be more standardised, easier to use, and boast functionalities that are ‘just nice’ for the average SME.
ii. On-Premise ERP vs Cloud ERP System
If your company has a substantial need for internal IT control, has complex requirements, or has already made a heavy investment in IT infrastructure, an On-Premise ERP software may be better for your business.
These ERP systems are designed to sit in your office’s internal servers, giving you the freedom to manage when and what to upgrade your ERP software. You also enjoy greater control over your system's customisation options.
On the flip-side, On-Premise ERP systems need higher up-front costs of ownership. The returns on investment could also take up to several years.
The same applies vice-versa. If you favour lower initial set-up costs, minimal IT maintenance, and convenient upgrades at the expense of less customisation, a Cloud ERP system may be more suitable for you.
Cloud ERP systems reside outside your office premises and are managed by your Cloud ERP vendor. You can run your ERP software and operations over the Internet with just your browser and an Internet connection for a subscription fee.
One good example is Microsoft Dynamics 365 Business Central. A true Cloud ERP system with all the above advantages, Business Central even promises 99.9% up-time with a money-back guarantee.
No more buying or installing or managing your own infrastructure. No more fuss.
iii. Generalist vs Industry-specific ERP Software
ERP systems can also be categorised according to whether they’re designed for most industries (generalists) or for a specific industry’s requirements.
Most ERP software for SMEs fall under the generalist ERP systems category.
Generalist ERP systems are highly flexible and scalable, and are easily integrated with other software (e.g. point-of-sales etc.).
They're also extremely efficient and suited for integrating business processes in any industry.
In addition, most generalist ERP software tend to be backed by large, globally recognised companies.
For SMEs, this is a big plus point. They know their hard-earned investment is not going to just go ‘poof’ someday. They also know these companies have the R&D clout to enhance their products, assuring long-term viability in the years to come.
Industry-specific ERPs, on the other hand, focus on targeted niche industries, like logistics or construction.
As its name suggests, these are designed for specific requirements and users, so they've certain performance features not found in generalist ERP software.
For specialised businesses, this means less customisation, faster implementation, and more affordable maintenance.
You may ask, “Well, isn’t it better to get an industry-specific ERP software then? I can get a software that’s tailored for my business.”
The answer is yes...
It really depends on how specialised your business requirements are.
A good rule of thumb is to determine which functionalities are must-haves for your company and which are nice-to-haves.
If your business doesn't require specialised features, then it may be better to give industry-specific ERP systems a miss. There’s a high chance your end-users will under-utilise these specific features or find them confusing to work with.
For example, if your company is involved in discrete or light manufacturing, a generalist ERP software like Microsoft Dynamics NAV will suffice with some light configurations.
Previously known as Navision, Microsoft NAV lets you :
- Easily execute multiple production strategies, such as assemble-to-order, make-to-stock, make-to-order, and more
- Quickly view WIP and actual cost through production tracking and reporting, while reporting production variances to standard costs
- Easily track resource and throughput costs in detail, and report production variances to standard costs
- Optimise production and materials planning, forecasting, and scheduling, and more
For most SMEs in manufacturing, these suffice with a few minor customisations.
But if your company has complex manufacturing requirements and/or is heavily invested in process manufacturing, then it's better to buy a manufacturing-specific ERP software.
The time and costs involved in customising a generalist ERP system to fit complex requirements may far outweigh one already designed for your business model.
3.What Can I Find In An ERP System?
There's a wide variety of ERP systems in the market, each with their own unique differences. However, they all share several common and basic modules at their core.
A typical ERP system for SMEs will have:
- Materials Resource Planning (MRP)
- Warehouse Management
- Service Management
- Project Management
In the section below, we’ll briefly take you through what each ERP system module does, and how it can benefit your business.
The core of any ERP software. This module(s) manages your company’s cash inflow and outflow by keeping track of all financial-related transactions. Features include the general ledger, account ledgers, budgeting, banking and reconciliation, tax management, financial reporting and analysis, multi-currency, and more.
Because this is already integrated with modules like Sales and Purchasing, you avoid costly data errors, manual reconciliation, double entries and other unnecessary redundancies.
The Sales module covers the entire sales process – sales queries and handling, quotation creation, document drafting and printing, sales order management (with the correct taxation), and tracking pending sales orders.
With this, you can easily perform key sales analysis through interactive dashboards, as well as calculate gross profit for created quotations.
This enables you to manage most (if not all) processes involved in procurement. The Purchasing module comprises functionalities ranging from purchase order to supplier invoice payment; think supplier/vendor listing and item linking, preparation and tracking of purchase orders preparation, inventory updating and other real-time reporting.
In short, this module enables you to maintain all your supplier and item master data in a centralised area, so you get full visibility of your entire purchasing process.
iv. Service Management
A must-have in any ERP software. The Service Management module enables you to efficiently and effectively run service, sales and contract management.
Think service reports, post-service analyses, or even cost management – situations where your sales and operations can take real-time information and use them to delight your customers.
In turn, this module helps you improve your sales and operations overall productivity.
v. Project Management
As its name suggests, this module lets you quickly create estimates, track projects, and manage capacity.
Keep track of basic resources and prices, whether it’s individually or in a group, and plan your capacity and profitability right down to the required detail level in the needed timeframe.
You can also keep track of multiple jobs (set up time sheets etc.) easily, so you get better visibility into your jobs’ billings and costs.
This module enables you to easily define a planning scenario and predict demand in advance. That way, you can adjust your material planning accordingly, and reduce errors and costs from stock excess and manual procurement.
Typically, it should also come with pre-defined report templates, making it simpler and faster to created detailed reports for better business decisions.
vii. Warehouse Management
This module enables you to easily track your stock to the zone and bins. Coupled with mobile devices like barcode/QR code scanners, the warehouse management module suggests the best put-away bin location and recommends a stock item’s pick location.
It also improves stock control by suggesting when to purchase and replenish according to MOQ parameters, which in turn boosts warehouse distribution efficiency and stock management accuracy.
So Which ERP Modules Do We Need?
Perhaps you might be wondering whether you need all these modules. Maybe you're in the service industry, and your company doesn’t need modules relating to inventory.
Or perhaps you’re in an industry that requires all these modules and more.
The good news is that some ERP systems are designed to be distributed on a modular basis. You simply pick the modules that you need for your business and run with that. From there, you can purchase and implement additional modules as and when deemed necessary.
Sage 300 ERP is one such example of a modular ERP setup. With Sage 300, you can choose and purchase only the modules necessary for your business requirements e.g. core financial modules.
If you need additional modules later (such as Project Job Costing), you can always top up your purchases by implementing those modules separately.
To help you get a better idea of the pros and cons to each ERP system type, check out the simple guide we’ve put together in the link below.
4.How Do I Know If We Need ERP?
Having said that, not every SME needs an ERP system to run their businesses.
A start-up for example, will do quite well with Excel spreadsheets.
Or an SME with relatively low volume transactions may find accounting software sufficient to automate their financial management, alongside Excel spreadsheets to manage areas such as sales or inventory.
The turning point happens when the company hits a specific growth wall.
This wall varies from business to business, but some common signs they're approaching this point are:
- Increased financial and administrative workload due to larger transaction volumes and inconsistent internal processes
- More employees describing a sense of feeling overwhelmed at work
- The systems don’t ‘talk’ to each other, making it difficult to analyse information on the business
- Recurring stock-out, and continuously missing delivery schedules
- Customers increasingly frustrated at being ‘bounced’ from one department to another to get their questions answered
- Being frequently late in generating management reports and tax reports
Let’s have a look at two indicators.
i. Increased Finance Workload and Employee Dissatisfaction
Increased transactions are great. But ensuring these transactions are accurately and quickly captured is another thing altogether.
If your finance team lacks visibility over all incomings and outgoings, and need to rely on other departments for information, you’ll see this manifest as data inconsistencies and inaccuracies across the organisation.
This problem is compounded by another issue unique to SMEs – un-scalable legacy processes. Often, these were put in place by their founders who, in most cases, are still leading the company.
Back when they started, the founders did what they thought best for the company’s survival and growth by using processes that worked in a low-manpower, low-transaction volume situation.
But once their SME grew, more processes and ad-hoc systems were added as a quick-fix to address challenges as they happened.
Along with the mindset 'this has always worked for us', the SME ends up with new workflows built on top of an old foundation of doing things – a foundation now unsuitable for their growth stage.
Unless proper, integrated internal processes are in place to manage transactions and improve information flow, inefficiencies will continue to grow.
This results in longer working hours, repeated tedium from manual reconciliation and entry, not to mention unhappy employees – especially during busy closing periods.
ii. Difficulty Analysing Business Information
Imagine a combination of Excel spreadsheets, an off-the-shelf accounting software here, a customised inventory system there – and none of them ‘talk’ to each other effectively.
Every time you request for reports, your team needs several days to pull the data together to generate what you need instead of being able to do so in hours or even minutes.
And there are other issues:
- You need to make a realistic, actionable forecast (e.g. a sales demand forecast for the following year), but the management team’s not confident the data in your forecast can be relied upon
- There's a problem with rising costs due to inventory wastage. You've an idea, but the information isn't clear enough to pin-point where it’s coming from in your supply chain, nor what measures you can take to stop it. At best, you make a guess-timate.
When data is located across different sources and retrieved by different department staff, it makes it nearly impossible to gather up-to-date data quickly.
Or to put it bluntly, if your business is running multiple systems that don’t ‘talk’ to each other, how will you quickly gather information for decision-making?
And if you can’t be certain your company’s data is reliable and up-to-date, how will you know whether the decisions made will achieve your company’s goals?
When you can’t confidently assess and make decisions quickly, it’s a sign your SME is due for much-needed systemic overhaul.
5.So How Do SMEs Benefit From ERP?
Knowing what ERP systems can do is one thing; understanding how they benefit your company is something else altogether.
There are ERP users who complain about how their ERP software doesn’t give them the expected benefits. They feel let down by promises made by vendors; more so because they’re from SMEs where every dollar invested matters.
When you trace their dissatisfaction's root cause, it usually points to one or more of the following:
- Their ERP vendor misrepresented what the ERP system could do for their company
- The SME customer failed to perform due diligence and/or get buy-in from within
- Poor project scoping, solutioning, and system setup by their vendor
- Miscommunication between customer and vendor
- Miscommunication within the SME itself, usually between the decision makers and the ones leading the ERP project
So it’s not the ERP system itself that was the problem. It was the ERP software partner that led to problems.
But let’s say the ERP software is just right. And there’s a good expectation and capabilities-fit between the ERP vendor and the customer.
As a SME ERP user, you can expect several benefits:
i. Integrated Information and Streamlined Processes
The biggest benefit for any busy, growing SME. Those problems associated with complex data compartmentalised and silo-ed across multiple databases? Gone.
By having all information centralised in a single location, users will find their productivity increased as they collaborate effectively across departments with real-time information. Data re-entry and errors are reduced, so data remains consistently accurate.
A good ERP system also automates cross-department operations, thus streamlining daily processes like production, order completion, and delivery for greater efficiencies.
ii. Improved Regulatory Compliance and Data Security
Data security is a huge issue for SMEs working with multiple spreadsheets and disparate software across departments. With a proper ERP system in place, many SMEs find their data’s security increased, thanks to firewalls, built-in resources, and advanced user-related settings.
A simple example: managers can restrict access to sensitive data, or ensure certain transactions aren’t processed without the proper checks.
Robust data security and accuracy also supports regulatory compliance – a key factor, alongside the system’s ability to improve product traceability.
For SMEs in certain industries (such as food & beverage) where maintaining compliance is an ongoing challenge, these benefits are essential for success.
iii. Long-term Flexibility and Scalability
Many SMEs compete in a tough business landscape. Those that succeed are the ones that manage to adapt and stay ahead of their competition.
Reputable ERP systems are flexible and configurable enough to meet a SME’s changing requirements over time. They are also able to scale alongside growth, allowing companies to easily add new users and supporting functions when needed.
In the long-term, this helps to reduce the total costs of ownership – a key factor for consideration for budget-conscious SMEs.
iv. Faster Reporting and Forecasting for Smarter Decisions
Managers and decision makers love this benefit. Good ERP software lets end-users quickly generate and customise reports using centralised, real-time and accurate data.
Not only does this save manpower time and reduce reliance on IT personnel, it also improves top management’s responsiveness and decisions towards complex issues.
User-friendly dashboards and forecasting tools also make it convenient for managers and decision makers to create realistic, accurate estimates and plans for the business.
v. Improved Mobility and Customer Service
Every SME wants to deliver quality customer service. A good ERP system enables SMEs to do just that through improved mobility and customer service.
With centralised accurate data, sales and customer support staff interact with customers quickly, without having to go through the finance or production departments for information on the customers’ history.
Also, most ERP software comes with mobile applications for iOS, Android, and Windows devices. This on-the-go mobility further enhances staff productivity.
For example, a salesperson at a customer’s place could find out whether there are any outstanding transactions or observe buying patterns through his mobile app, without going through the finance department. He could then try to up-sell another product, or remind a customer of outstanding payment.
Similarly, a managing director could check her dashboards in her mobile app for real-time updates on critical business KPIs, enabling her to make faster, accurate decisions anytime, anywhere.
6.What Costs Can I Expect for an ERP System?
People new to ERP software tend to make one oversight when it comes to setting aside a budget.
They assume their next investment comprises mostly software fees.
From there, they set a budget – and then get a shock when they discover there are more cost components than just software fees.
To properly estimate the total cost of a new ERP system requires a wide range of factors.
These include (and aren’t limited to) your business size, your industry’s unique requirements, the scope of usage and so forth.
As you can imagine, this varies significantly from one organisation to another. What your friend at ABC company paid for a new ERP system will be quite different from what you’ll be getting for your business.
However, that doesn’t mean you go ‘blindly’ into a discussion with an ERP vendor without any budgetary gauge on your end.
In the section below, we'll show you several factors you can budget for:
i. User Licenses Fees
ERP systems are typically purchased based on a per-user license basis. ERP software developers usually sell their software using one of the following approaches:
Concurrent User Licenses
Sometimes referred to as ‘floating’ licenses, concurrent user licenses can be shared among an unlimited number of users in your company.
The number of users who can log in at the same time however, are limited by the number of licenses purchased.
E.g. There are four user licenses but five registered users. If user A, B, C, and D login at the same time, the fifth user E will get an error message and will not be able to login to the ERP system.
It’s only when one of the users A, B, C, or D logs out, will E be able to login to the system.
Depending on how your business is run and how many employees you require to be using the ERP system at any given point in time, you could potentially save some money with concurrent user licenses.
Examples of ERP systems that use concurrent user licenses are Sage 300 ERP and Microsoft Dynamics NAV.
Named User Licenses
With named user licenses, you can only create users based on the number of licenses you purchased. Unlike concurrent user licenses, the sessions are independent.
E.g. There are four user licenses. Only four users A, B, C, and D can be created. You cannot add a fifth user E to the ERP system.
However, the time and duration of A logging in to the ERP software has no effect on other users B, C, and D.
Software Maintenance/Assurance Fees
Do note you’ll also need to factor in for software maintenance fees — an annual fee paid to the software provider (e.g. SAP or Microsoft) to ensure the vendor provides you with upgrades.
This is typically charged as a percentage of the license fees you paid for. The ERP vendor then invests these proceeds into areas like research & development, so you can be assured your ERP software will have periodic updates (fixes), new features, and upgrades in the future.
For true Cloud ERP systems, this software maintenance fees are often included within the annual license subscription fees.
ii. Implementation Costs
From the SME’s view, implementation is simply installing the software, ensuring the data and reports are correctly set up, and getting their users trained.
But from your ERP vendor’s perspective, there are many other factors to consider. These include:
- Complexity of your industry and business type
- Volume of transactions, scope etc.
- Any unique business requirements and workflows
- Number of employees involved, and level of training required
- Local and overseas deployment
- Any additional hardware and infrastructure necessary
- Any integration with third-party systems e.g. Point-of-Sales, Bank Giro and so on.
As a rough guide, you can expect the software-to-services ratio to be at least 1 : 1.5 onwards, depending on complexity and customisation levels.
An exception may be said for true Cloud ERP systems. True Cloud ERP deployments follow more standardised processes, with less flexibility for customisations. This makes it possible for the cost ratio to be lower.
To ensure your operations continue to run smoothly after implementation, you’ll need to invest in post-implementation support services.
Software Technical Issues
Your employees will, from time to time, encounter issues using the ERP software. Investing in a decent post-implementation helpdesk support service will help your employees focus on doing more at their work – and less on technological issues.
Infrastructure and Hardware Maintenance
If you’re investing in an on-premise ERP system, you’ll need to factor in regular infrastructure and hardware maintenance services. This ensures your applications continue to run smoothly and securely.
Regular data backups and proper security setups will also safeguard your critical data.
On the other hand, if you’re investing in a true Cloud ERP system, there’s minimal to zero hardware and infrastructure maintenance needed.
Periodically, your ERP software vendor (e.g. SAP or Microsoft) will provide new upgrades for your ERP system.
If you intend to upgrade your on-premise ERP system, you’ll need to set aside funds for your ERP implementation partner’s services. Your ERP partner will help get your ERP system and users up to speed with the latest upgrades.
For true Cloud ERP systems however, these upgrades are usually done automatically and overnight.
On a side note: there’s a common misconception that ERP systems are too expensive for SMEs.
While they do cost more than your average accounting system, ERP software like SAP Business One, Sage 300 (formerly Accpac), and Microsoft Dynamics NAV (soon to be Dynamics 365 Business Central) fall within the budget range of most SMEs.
To top it off, there’s government financial help for Singapore SMEs seeking to up their productivity and innovation through technology. Find out what you may be eligible for in our Budget 2018 post.
7.Who Are the Top ERP Brands in the Market?
The question ‘who’s the best ERP software vendor in the market’ gets tossed around a lot in the search process.
Want to know what our answer is?
There isn’t one. Because there isn’t a magical one-ERP-solution-for-all out there.
And because there isn’t a magical one-ERP-solution-for-all out there, you won’t be able to find a single top vendor behind it.
Having said that, there are ways to identify the more reputable ERP software vendors in the market. One way is to review reports from independent, credible research firms.
Powered by Gartner methodology, the FrontRunners report evaluates over 350 ERP products. Of these, only the top performing ERP software brands are added to the FrontRunners Quadrant below.
You can head here for more information on how this ranking was done, but there are a few things to pay attention to.
First, no one quadrant is better than the other. To quote the FrontRunners Quadrant creators:
Every product in this quadrant offers a balance of capability (how much the products can do) and value (whether they’re worth their price/cost) that makes them stand out in the race for small business software success.
In other words, depending on your SME’s requirements, any of these solutions could be a good fit for your business.
But in the interest of space, we'll cover just three ERP software in the FrontRunners Quadrant:
i. SAP SE
Mention ERP, and most people will think of SAP.
SAP has long established its reputation as the world’s leader in enterprise application software. The company has over 365,000 customers worldwide, across 25 industries and six industry sectors – discrete, process, service, consumer, public, and financial services.
SAP provides software and software-related services in both the On-Premise and Cloud market space.
These include asset management, corporate strategy and sustainability, finance, human resources, information technology, manufacturing, marketing, procurement, research and development, engineering, sales, service, and supply chain management.
With 87% of Forbes Global 2000 companies being SAP customers, it’s not surprising many SMEs believe SAP systems are far beyond their reach.
But SAP has clearly shown their interest in growing their SME customer base. The organisation owns a large product portfolio designed specifically for SMEs.
These range from ERP systems like SAP Business One and Big Data options like SAP Cloud Platform Big Data Services, to front-office solutions like SAP Anywhere.
In addition, SMEs make up a surprisingly large proportion of SAP customers. For example, in 2015 SMEs comprised 88% of SAP’s net new on-premise customers – or four new SMEs every hour.
The software giant also has a clear direction and road map for their products.
In keeping with industry trends, SAP’s mid-term goal is to continue building on its successes – rapid growth in the Cloud, strong software momentum and operating profit expansion, with the expectation that predictable revenue (i.e. total of cloud subscriptions & support revenue and software support revenue) will reach 75% by 2020.
This is good news for any SME considering the viability of a possible SAP investment.
ii. Microsoft Corporation
Microsoft covers everything from business software, to consumer electronics, computers, and services. It’s also considered the world's largest software maker by revenue (as of 2016), and one of the most valuable organisations worldwide.
While Microsoft is well-known for its Windows and Office products, the US-based technology giant also offers business solutions through its Microsoft Dynamics product line. These range from ERP and CRM, to supply chain management and financial management.
It’s this sheer array of solutions that sets Microsoft Dynamics apart from other brands. If a SME wants to extend their Microsoft Dynamics ERP system’s functionalities, there’s (nearly) always a Microsoft solution or hardware to complement them.
For example, if your company needs:
- Servers: There’s an entire suite of Microsoft server systems such as Microsoft SQL Server, Microsoft Office SharePoint Servers etc.
- Cloud Hosting: Microsoft Azure is a popular platform, and comes with hundreds of supporting applications and services
- Office Tools: Microsoft Office and its Cloud alternative Office 365 provides the familiar SME working staple of Word, Excel, Powerpoint etc.
- Business Intelligence: Microsoft Power BI tool is available for free to SMEs, and more
Microsoft has also shown a clear commitment to building the company around the Cloud and artificial intelligence (AI), instead of relying on its Windows legacy.
Satya Nadella, Microsoft’s CEO, re-structured the organisation in early 2018 to focus on a ‘Cloud-first’ approach. This included shifting resources and leadership away from the Windows and Devices group, and re-directing them to the Cloud and AI Platform group.
In short, SMEs seeking a well-established, future-centric organisation with the resources to back their business solutions will find Microsoft an excellent option for consideration.
iii. The Sage Group
The Sage Group is best known as a software vendor of financial and accounting solutions for the SME market space. They serve large enterprises as well, but their main product focus remains on SMEs.
Unlike SAP (a Tier I ERP vendor*), Sage is considered a Tier II* ERP vendor. This means they offer mid-range solutions that are robust and agile enough to meet the requirements of most organisations.
Sage is a UK-listed organisation, and boasts a wide presence across Europe, Asia, North America, Australia, and Brazil. Though their origins lie in accounting and payroll software, the company has diversified into business solutions like ERP (for example Sage 300), CRM, and human capital management that span across multiple industries – construction, chemicals, wholesale distribution, food and beverage, and non-profit.
SMEs looking for an ERP software with strong accounting origins may find Sage solutions attractive and relevant to their requirements. But those keen on Cloud-based ERP systems may find Sage Cloud offerings slightly underwhelming. This is not unexpected; the majority of Sage customers use On-Premise systems, which also happens to be what Sage is traditionally good at.
*according to Panorama Consulting
8. How to Select an ERP System
At this point, you might be wondering: with so many ERP vendors in the market, how do you decide the best path for your business?
Furthermore, investing in a new ERP system is a transformative business decision. Done correctly, it can reap huge competitive advantages for your SME.
Conversely, a bad decision can result in months or even years of costly, ineffective corrections.
To help you narrow your ERP software options, here are three tips for consideration:
i. Assess the ERP software’s technology capabilities
All ERP software share similar core features. Thus, core features aside, you need to consider an ERP software’s technology capabilities.
Ask yourself questions like:
- Is the ERP software designed to be scalable? Can it perform just as well with a significant increase in users, transactions, and data?
- How fast does the system work? Is it designed to be user-friendly, with intuitive workflows and processes?
- Is the ERP software a turnkey solution, built with industry best practices, or is it designed specifically for an industry?
- How much customisation do we need for it to work well for my business?
- How often are new features or functionalities added in upgrades?
- Can the ERP software easily support multi-company environments?
Let’s take SAP Business One as an example. SAP Business One comes with the option to run on a Microsoft SQL server (common with many ERP software), or upgrade to HANA – an in-memory, column-oriented database.
Sage 300 ERP, on the other hand, is designed to run only on Microsoft SQL.
So why does that matter?
Having HANA is like replacing a standard Mazda engine with a Maserati engine. You get more power and speed, plus lightning-fast analytics and other best-in-class functionalities you can’t get on a Standard Edition of Microsoft SQL server.
Of course, SAP Business One doesn't trump Sage 300 just because of HANA. Not everyone needs a powerful engine, and there are other factors to consider such as costs and hardware specifications. But knowing the technological differences beneath the software will help you make a more balanced and fair evaluation.
ii. Evaluate the ERP vendor’s reputation and strategic direction
Sometimes SMEs invest in an ERP software for short-term purposes. They need an ERP system to tide them over for a while, before switching over to an enterprise-level system from their parent companies.
But that’s not the norm.
More commonly, SMEs invest in an ERP system for the long-haul. They expect their ERP software to grow alongside them, and be flexible enough to accommodate future business changes.
Which brings us back to the brands behind the ERP software. Features aside, it’s essential to consider the vendor’s background when assessing a ERP software’s mid to long-term viability.
Try asking the following questions:
- How long has the vendor been in the industry? What are they best known for?
- Has the vendor changed their organisational direction over the years? Are they staying ahead, merely keeping up, or lagging behind industry trends?
- What are their most recent products? What’s their roadmap for their existing products, especially for their ERP solutions?
- Are their ERP solutions designed from the ground-up for SMEs of similar requirements and size like yours?
By paying attention to the ERP vendor’s current and future direction, you can get a better sense of whether your potential ERP software will continue to support your requirements in the years ahead.
iii. Determine the ERP system’s ‘real’ cost of ownership
No one likes being surprised by unexpected costs. You should also ask questions like:
- Will the licensing costs be a one-time expense, or a recurring annual expense?
- If they’re recurring, how many years will it take before this becomes more expensive than a one-time expense ERP software alternative?
- Can your SME afford to use this system on a continuous basis?
- What are the annual maintenance and upgrade charges?
- Have we factored in that the software maintenance fees are separate from the implementer’s fees?
- Are there any hidden costs? How much leeway do we get in our ERP project’s scope before we have to make additional payments?
Some ERP partners keep their implementation costs low and their project descriptions vague, only to charge you heavy fees for every request you make later.
A clear, well-defined project with a reputable partner shouldn’t lead to sneakily hidden costs. Avoid such situations by starting your ERP software and vendor search off on the right note.
9.Factors to Consider Before Implementing an ERP Software
So you’ve decided on your ERP software. You’ve shortlisted your list of ERP partners to the best possible few.
From there, it sounds easy enough – choose the right ERP partner, define your project, set up your new ERP system, run some testing, get your staff trained and voila! Everything’s running smoothly.
Or is it?
Many SMEs underestimate what goes into their ERP system project. They fail to set aside enough time and resources for the implementation, and then wonder why the software and their ERP partner are performing below expectations.
To make matters worse, this is sometimes exacerbated by enthusiastic ERP sellers who claim their systems can be ‘up and running’ in just three weeks.
Yes, there are exceptions. However, most ERP projects require more time before everything’s running smoothly.ERP systems involve most, if not all your business operations, making it more complex to implement than an accounting software; a hastily done or poor project will result in many painful months (if not years) ahead for all involved.
It’s always better to overestimate and 'over-prepare' for an ERP project. We're going to share a few tips to get you there.
To boost your ERP project's success rates, you should broadly prepare for two key aspects:
i. The Human Aspect
A new ERP system means change for almost everyone. Some will welcome it, while others will find it difficult to keep up with the new implications.
You can pre-empt troublesome HR issues with proper preparations in two areas:
- Creating a dedicated ERP project team
- Setting resources and time aside for training
- Creating an ERP Project Team
Start by building a go-to team. Decide on the individuals who'll be in charge of the implementation and significant changes.
These employees should be answerable for any questions or issues that may pop up during the implementation.
Here are some questions to help you get started:
i) Who are going to be the primary users?
ii) Who is going to be the main backer(s) supporting the project’s success? Who has the most motivation to see the project succeed?
ii) Who needs to have an overview of the entire operations and/or has a better understanding of the core business processes?
Next, set time aside to prepare them for what'll happen during the upcoming implementation. This is more than just a quick briefing; you should make every effort at this stage to win buy-in from your newly assembled team.
After all, a convinced team is a committed team, and commitment is essential to drive your project forward.
- Set Aside Time and Resources for Training
Be practical when costing for training. Some SMEs try to save costs in this area, hoping their staff will get by with online videos and instructional manuals.
Others take advantage of their ERP partner’s call-in helpdesk support as a substitute for training.
There’s one big problem with these approaches.
Self-learning just doesn’t work for some individuals. Sometimes it may even increase his or her resistance to change.
Employees like these tend to require more hand-holding and guidance, especially if they’re less tech-savvy than their peers.
Also, your ERP software partner's Support Helpdesk is not a good substitute for properly structured training.
While it may seem like you’re saving costs by reducing training services, what really happens is your staff end up spending more time getting help for minor tasks instead of focusing on what you’ve hired them to do.
And without the right training, your employees will take longer to learn how to use the system effectively.
Just think of all the hours wasted on making and rectifying mistakes, or searching for answers just to perform the most basic tasks.
So rather than being ‘penny-wise, pound-foolish’ with your hard-earned capital, set aside some funds for sufficient employee training, so your business can experience a smooth transition into the new ERP system.
If you’ve any concerns about staff capabilities, have a discussion with your ERP partner and seek their training recommendations.
A good ERP partner should have many years of experience dealing with companies from various industries, and will be able to advise you on the best training approach for your employees.
ii. The Business Process Aspect
People aside, SMEs need to evaluate their existing business processes before starting an ERP project.
SMEs that rush into implementations run the risk of:
- Automating existing inefficient business processes
- Caving into change resistance and missing out on standardisation opportunities
Michael Hammer, a business process reengineering expert, once described this tendency to revert to old ways as ‘paving the cowpaths’ – a reference to building on existing processes of doing things without considering whether these processes are effective or efficient in the first place.
His advice, published in the Harvard Business Review in the 90s, still holds much relevance for businesses today:
Instead of embedding outdated processes in silicon and software, we should obliterate them and start over. We should “reengineer” our businesses: use the power of modern information technology to radically redesign our business processes in order to achieve dramatic improvements in their performance.
No ERP system, no matter how modern or powerful, can transform a business if the underlying corporate mindset remains the same.
Here’s a real-life example. Some time ago, we had a SME who invested in one of our ERP systems.
The condensed conversation with the General Manager basically went like this:
Eventually, the General Manager recognised they had to change their internal processes if they wanted to get the most returns from their ERP investment.
Once they did so, they started seeing improved efficiency and time savings across their local and overseas offices.
So how can you take the first steps to evaluating your SME’s processes?
Get Buy-In for Change from Management
Key to your project’s success are your CEOs, CIOs/IT Managers, and project managers. If they’re genuinely keen on business transformation, they’ll set aside the appropriate effort, focus, and resources to enforce changes in processes.
Otherwise, no matter how good your software or ERP implementer is, your company will return to treading familiar, comfortable cowpaths.
Determine Standardisation Extent Early in the Project
Most SMEs begin ERP projects with the intention of standardising their business processes. The extent of standardisation will differ from company to company, and depends very much on your company’s priorities (hence there’s rarely a one-size-fits-all approach to ERP).
It’s important to decide whether standardisation will take place during the early phases of your ERP project, because of the ramifications further down the project.
For example, if substantial standardisation is going to happen, you should set aside time and costs for the business process analysis phase with your ERP software implementer.
On the other hand, if your company prefers less standardisation and more customisation, you should prepare to spend more time and money on the latter part of the ERP project – designing, testing, and training to ensure your customisations work.
In summary, before embarking on a new ERP system, take time to address the human aspects and business processes within your business.
At AFON, we’ve helped many SMEs successfully get their new ERP system up and running, so you could say we know a thing or two about what to consider for an implementation.
If you need advice, click here to get a free consultation today.
10.Extending Your ERP System’s Capabilities
Let’s face it: there’s not a single ERP system that can fulfil a business’s requirements perfectly.
Sometimes it’s necessary to explore options that can extend your ERP system’s capabilities to support your business priorities.
Going by its description alone, this sounds straightforward enough. Since it’s just ‘extending’ it should be as simple as adding extra functionalities, right?
Well… yes and no.
One of the more challenging aspects in ERP implementation is getting your data integrated properly.
Data taken from additional applications or add-ons must seamlessly connect to and communicate with your ERP system – think financial and other core modules that reside within.
It’s not a simple case of ‘plug and play’. To do so, you’ll need to work with implementers who have proven expertise in integrating that specific application or add-on with your ERP system.
Now there are many applications and ERP add-ons out there that perform a gazillion different functions. It’s impossible to cover them all in this post.
But for simplicity’s sake, here are two types of applications that have proven popular among our customers:
i. Reporting Tools
Most modern ERP systems come with inbuilt reporting functionalities.
For some SMEs, these inbuilt reporting features are sufficient for their requirements.
But sometimes, business situations and goals change. Perhaps your employees find the ERP system’s templates too limiting. Or perhaps there are specific requirements that require customisation, and your company ends up repeatedly paying your ERP system vendors more to build these reports.
If you’re using an ERP system and find yourself in such a situation, it may be more cost-effective to invest in a separate reporting solution that empowers your team to build reports on their own.
Ideally, this solution should integrate seamlessly with your ERP system so your employees can get the data they need without much hassle.
Take Jet Reports for example. Jet Reports is certified by and developed with Microsoft. It seamlessly integrates with Excel's familiar interface, so your team can start using it quickly.
- Draws data directly into Excel, so your users have up-to-date, accurate data; saving them from tedious exporting and/or repeated copy and pasting
- Has a collaborative publishing platform, so your users can instantly share reports they've built
- Helps you save time and money, thanks to a user-friendly customisation platform that's five times faster than manual coding
- Gives you complete data warehouse automation
ii. Business Intelligence Tools
Business Intelligence (BI) tools help explain why certain things happened in your business, and suggest actionable steps which you can take to improve performance.
With BI tools, you can draw upon multiple data sources, drill-down and view the results in meaningful interactive dashboards.
From there, you can quickly ‘slice and dice’ for the insights you want.
In doing so, you unearth new data relationships within your business that could help you address unforeseen underlying issues, or explore new business opportunities.
For example, you can use BI to analyse your company’s delivery performance over time, against factors such as seasonal demand and customer satisfaction.
By uncovering new possibilities and insights, you can then optimise your processes to reduce inventory wastage and delivery timing. In turn, this helps improves your customer satisfaction.
By combining data sources in novel ways, you receive meaningful, actionable insights to grow your business.
This makes BI tools especially relevant for higher management and/or business owners, who are in the capacity to translate new insights into opportunities or business change.
One example of an affordable BI tool for SMEs is Microsoft's Power BI.
This Cloud-based BI suite is not just powerful and intuitive to use, it also comes free for the Desktop Edition.
With Power BI, users can pull various data sources into one dashboard for rapid, accurate insights. The user-friendly and immersive visuals make it easy for anyone (even those without coding experience) to unearth insights from your data.
In the free version, you get access to Power BI’s basic features. Generally, that’s good enough for you to get quick, accurate insights from various data sources.
Its immersive visuals also means it’s quite easy to uncover the story behind your data (e.g. revenue, spending etc.) on your own.
Alternatively, you could pay for the more robust version – Power BI Pro. This is a paid service that gives you access to all basic features, plus the ability to collaborate and more.
Do note you’ll need a Power BI Pro license to interact with a file containing Pro features – free users won’t be able to do so.
And if you want to share the templates across your organisation, you could either subscribe to the Power BI Report Server (on-premise or Cloud), or Power BI Premium.
Now Take the Next Steps
Ultimately, ERP is all about integration. By streamlining various systems in a SME together within a single centralised database, you can quicken workflows, share accurate and timely information with the right people, and make better decisions based on data-driven insights.
We hope you found this ERP software guide useful. If you want to know more about which ERP system could help your business, drop us an enquiry here and one of our ERP consultants will get back to you shortly.
Alternatively, you can get your free copy of our popular 5-Min ERP Software Comparison Guide below.