What is an ERP

erp business management software

Companies need simple systems that allow them to efficiently and quickly manage tasks ranging from production business operations, logistics, resources, inventory, accounting, managing their clients, etc. To do this, it is best to use ERP systems, that is, a modular software that implements all this type of tools for companies and organizations.

With this type of software, you not only automate and streamline the processing of this data about the company, you also allow all that data to be integrated, centralized and connected to each other to perform analysis much easier. However, to be efficient, the most appropriate ERP system must be chosen, since not all companies and sizes require the same type of software ...

What is an ERP?

The term ERP (Enterprise Resource Planning) refers to an enterprise resource planning system, as its name suggests. That is, a series of software tools that can process data from different activities in the business field, from production itself, to human resources, through inventory, logistics, etc.

Even though they suppose a consistent initial investment for companies (in many cases), they are quite important in an increasingly digitized sector. In fact, according to studies by Panorama Consulting carried out in 2013, more than 40% of companies that decide to implement an ERP system notice that their productivity increases, which also translates into higher profits.

what is an ERP and what is it used for

The reason for these benefits is based on the fundamental pillars of the ERP system, which are:

  • Optimize business processes of various kinds.
  • Facilitate access to data and greater control over it.
  • Data analysis and sharing capacity thanks to its centralized database.
  • Resolution of accounting, logistical, tax, and commercial problems, more easily.
  • Process reengineering. Process by which the company must modify a process to be able to orient it to the ERP system, which involves an initial cost, but ends up being worth it.
  • Flexibility. These ERP systems usually offer enough flexibility to adapt to different types of companies, clientele, etc., with an adaptation through parameterization.
  • They facilitate the personalized development of the company, although they can be complex and complicated at the beginning.

In addition, being systems Global allow you to centralize a large number of tasks that without this type of software it would be dispersed and without any type of interrelation for its analysis. Therefore, we are talking about quite complex software suites that usually follow a modular architecture (see Markets for ERP).

Types of ERP

types of ERP and what they are used for

The ERP systems can be divided into several types or categories based on various points of view. For example, its architecture can be observed to identify three fundamental types among those that are found:

  • Modular: Obviously these ERP systems are very complex, they have a large number of parts and tools to provide that integrated and centralized solution that I mentioned before. Therefore, they are usually mostly modular. Each of the modules has a function within the suite. For example, one module can be used for logistics, another can be used for accounting, hr, another for sales, inventory, warehouse control, etc. In other words, the ERP software developer provides everything.
  • Configurable: This type of ERP software can be adapted to the different needs of the company through the development of new functions. To do this, they integrate APIs or development environments so that programmers can create the functions that a company needs and adapt the ERP to what is sought. These are smaller, and avoid including some parts that not all companies need, but need the right staff for development and the costs that this implies.
  • Specialized: commissioned by a company that needs a very specific ERP software. That is, it is not predefined like the previous two. This avoids having a heavy package with modules or configurable and focuses from scratch on a customized product. This type is especially interesting for those changing companies that need an ERP in constant development to adapt to the news. Another case of this type of software could be directed to specific platforms, for example, to a specific architecture or operating system that a company uses and for which there is no ERP software.

But it can also be observed from the point of view of accommodation:

  • Location: that ERP software that is hosted on the company's own server. The data is always kept in the company itself, which provides greater security and confidentiality. On the other hand, they are limited in terms of scalability (it will depend on the server, if you need extensions you will have to invest in hardware) and from the device where it can be used (only where it is installed). The initial costs of the on-premise are usually broken down into:
    • Training: 20%
    • License: 20%
    • Software: 15%
    • Consulting: 10%
    • Maintenance: 10%
    • Migration: 5%
  • Cloud: cloud services also provide ERP systems. In this case, they are hosted on third-party servers, and are accessed remotely from any device. That allows for greater flexibility, and it can be scaled without the need to purchase new equipment, but it has its risks. For example, you do not have direct control of the data, since you leave it in the hands of the owner of the data center where the platform you use is hosted. In addition, they need an Internet connection at all times. In this case, the costs are broken down into:
    • Service subscription: 30%
    • Consulting: 25%
    • Training: 25%
    • Migration: 20%

According to the solutions encompassed, the ERP system could be:

  • Horizontal: they are more generic ERP systems, which cover a large number of functions to adapt to all types of companies. These are the modular type, and if you want to customize it, it can be somewhat more expensive and complex.
  • Vertical: they are more specific to certain companies in some specific sectors. They try to meet the needs of a specific type of company. For example, there are aimed only at industry, others to shops, others to the food sector, others to the health sector, hospitality, etc. They can offer better solutions for these specific cases, but they are less flexible, and their maintenance and implementation can be expensive.

From a development point of view You can differentiate between ERP systems:

  • Private or proprietary: it is a type of software developed by a company and whose code remains hidden. Only the developer knows about it, and that could have its disadvantages, such as concealment of spying functions, back doors, data collection and reporting to third parties, etc. In addition, you always have to pay for its use.
  • Open Source- They are based on an open model, so there are no secrets in them and they can be more secure. They are usually totally free systems due to their licenses, or much cheaper in which you only pay for technical support if necessary. In addition, being open source you can correct problems more quickly, modify to adapt them to your needs, develop new modules, etc.

Finally, although it is not so frequent to subdivide the ERP according to level or Tier, it can also be cataloged in this other way:

  • Tier 1: They are large ERP systems. Intended for large companies (multinationals), with great scalability, and with very high license prices.
  • Tier 2: ERP systems for medium-sized companies, with a more suitable function / price ratio than Tier 1.
  • Tier 3: They are more basic ERP systems, intended for small businesses, and with more affordable prices.

Advantages

A company that decides to implement an ERP system could see some quite interesting advantages, whatever its size. Among the main advantages are:

  • Automate company processes.
  • The information is available centrally on a single platform.
  • Integrated databases to manage all company data from the same software.
  • Time and cost savings.
  • Possibility of applying BI (Business Intelligence) solutions, that is, solutions that allow reporting on the status of the company using data from the ERP system.

Disadvantages

Of course, like any system it has its drawbacks. ERP software has an impact on the company, although in most cases the benefits obtained from its implementation make it worth it. Between the notable disadvantages are:

  • The costes ERP software is one of the main disadvantages (if it is not open-source). In addition, the higher the level of customization, the higher the costs.
  • Costs indirect, such as the need for training to be able to use the software, hiring suitable personnel, etc.
  • You need an adequate infrastructure, that is to say, of a server where to install the software. Failing that, it can be used by hiring a cloud service, but it involves a cost and exporting the data outside the company to a third-party server.

Does my company need an ERP?

who needs an ERP and how to choose one

An ERP system it is suitable for all types of companies, of any sector, and size. Well implemented it can be beneficial for both SMEs and multinationals. Therefore, the answer is usually always yes. But the strategy for selecting the system and its implementation must be adequate if it is not intended to make an initial investment that does not lead to great benefits.

As well will need constant feedback or review, to know if it can be improved, scaled, or needs some adaptation due to some changes in the company itself. This is the only way you guarantee that the ERP system is delivering the benefits expected of it. That is, both before its implementation, and during and after, the following points should be watched to know that everything works correctly:

  1. Evaluate the results to be obtained with the implementation of an ERP software.
  2. Define the business / management model of the company in question.
  3. Outline an implementation plan or strategy.
  4. Review the IT infrastructure of the company to align it with the ERP.
  5. Also the training of the personnel to be able to use this software. Training or education is likely required.
  6. Analysis of the changes made and if the initial investment in hardware and software for the ERP has been worth it. Currently, SaaS-type cloud solutions allow you to have everything you need at good prices, without the need for your own server or maintenance.
  7. Quality control. Keep in mind that mistakes that can be made in certain areas could have consequences or repercussions in other areas due to the interoperability that ERP allows.
  8. Audits to verify the benefits of its implementation.

If you wonder about time for implementation of an ERP, the truth is that there is no simple answer. It will depend on each case, but the average estimates for an on-premise (local) is usually between 6 months and 1 year. On the other hand, for cloud services it is much faster and more intuitive, shortened to a few weeks.

Risks

Finally, I would not like to end this section without adding something else, and it is about the possible irrigation that could derive from an ERP implementation. Some common ones can be highlighted if an adequate adaptation and implementation process is not carried out, such as:

  • El chosen ERP software is not suitable and it does not cover the basic needs of the company. If it is open source and free, it would not suppose economic losses, only temporary. But if you own it, you would have paid for an inappropriate license.
  • Faulty data migration. If the data from the old platform or database is not migrated well, some data may be lost or not adapted to the new format. That would require adaptation processes and methods to avoid possible losses (eg backups or backup copies).
  • Lack of adequate or poorly trained personnel. No matter how well the plan is drawn up and no matter how good the ERP is, if you don't know how to use it, it will be of little use.
  • Exorbitant hidden costs. If you have not contemplated them, you may come across figures that you did not have foreseen. That is why an analysis prior to the implementation of the ERP is important.
  • Delays If the implementation schedule did not meet the actual deadlines, its implementation may take longer with all that this implies.

Examples of the most used ERP

Commercial ERP, know the most used

In the field of ERP software there are two undisputed world leaders. One of them is the North American company Oracle, and the other is the German SAP. However, there are also other developers with significant market shares, such as Microsoft, Sage, etc.

To help you choose the most suitable software, you should know at least the most popular ERP systems that exist today ...

SAP ERP

The german SAP is one of the most powerful and important business software developers in the world. Dedicated exclusively to this type of software, with products as interesting as its ERP system that can be divided into several interesting products:

  • SAP ERP: it is a robust, complete on-premise software, and with the guarantee of SAP. It is used to control sales, manufacturing, purchasing, services, finances, human resources, etc. Ideal for large companies.
  • SAP Business One: it is an ERP software oriented for SMEs. With great controllability to grow the pace of the business, on-promise or cloud implementation, innovation, ease and rapid implementation.
  • SAP Business ByDesign: it is a planning system that is fully integrated in the cloud, therefore it is a SaaS system. It allows access from any device with an Internet connection and browser. Includes CRM, Financial Management (FI), Project Management (PS), Logistics (SCM), Suppliers (SRM), Human Resources (HCM), Executive Management Support and Compliance. Ideal for SMEs.
  • SAP Business All-In-One: one of the best solutions on the market for medium-sized companies. As its name suggests, it is a complete ERP software, quick to implement, with lower cost, and modular.

oracle erp

Oracle It is the company with the largest market share today. Therefore, it is the most used ERP service among owners. You can use its various solutions such as Oracle JD Edwards EnterpriseOne or Oracle EBS (E-Business Suite).

The first is a platform aimed at promoting innovation in the company, with everything necessary to satisfy customers looking for a simplified and modern solution. It can be adapted to all users and needs, with the latest technologies to improve productivity.

The second is a complete suite compatible with constantly evolving business models, also seeking to boost productivity and with all the innovations expected from a modern platform. It has more than 30 years that endorse its experience, with a large number of functions and with excellent integration with Oracle Cloud.

Microsoft Dynamics

Microsoft has developed its Dynamics software, which can be found in various versions. In this case, it is proprietary software that includes ERP and CRM software, all on a single platform. What the Redmond company has done is integrate several tools into a single suite so that all types of businesses find what they are looking for.

Within this system you can find some variants on the table:

  • Microsoft Dynamics 365: it is the cloud service with the characteristics of Dynamics, but with the advantages of being hosted.
  • Microsoft Dynamics NAV: this suite was the one it was previously known as Navision, and is an ERP with Microsoft SQL Server database, specially designed for Windows, and with financial, sales and marketing, purchasing, warehouse, production control, project management, resource planning, service area, and resources capabilities. humans.
  • Microsoft Dynamics AX: it is another member of the Dynamics family, in this case it is adapted to companies larger than NAV. That is, it offers similar features to NAV but on a large scale.

ERP

Odoo (formerly OpenERP and before that known as TinyERP)It is one of the best open source ERP systems that you can obtain under the LGPL license and completely free of charge. Although there is also a business version under commercial and paid license that can be an alternative that has little to envy to SAP ERP and Microsoft Dynamics.

East all-in-one software It also includes a CRM, website, e-commerce platform, modules for billing, accounting, production control, warehouse management, project management, logistics, inventory, etc. In addition, since version 6.0 it is now distributed as a service (SaaS).

Sage murano

Sage murano It was one of the classic ERP systems, being one of the most used together with SAP, Oracle and Microsoft. Therefore, it is a platform that many companies trust for its management, and it will not disappoint you.

Today, this Murano software has evolved into a new ecosystem of comprehensive solutions that add greater value to your company thanks to sage200cloud, Sage's cloud service. It improves business performance and productivity, integrates Microsoft 365, allows real-time decision making, is 100% scalable, easy to use, and has excellent technical support.

Wolters Kluwer a3 ERP

This comprehensive management software is among the most used. This ERP suite is efficient, with a single centralized database that avoids duplication and errors. Of course, it is a very scalable system, with several versions and a range of modules.

And if you are concerned about its implementation and adaptation, it is software very easy that you do not need too complex a job to know how to control it. It is highly intuitive.

Other ERPs in the cloud

Apart from cloud service from Microsoft, there are also other alternatives such as:

  • Water: It is a very complete ERP software in the cloud, with good features. But it is not recommended for companies with more than 50 users.
  • Pound- It has everything in one package, adaptable, and does not need large investments. Instead, its implementation is complex and requires technical support.

Other open-source

There are other open source ERP software highly recommended that you should know, in addition to all the above. They can be good free alternatives, and some have little to envy the best payment platforms:

  • ADempiere: it is an integrated system ideal for small and medium companies. It is under the GPL license and has cross-platform support for Linux, Unix, macOS, Windows, and mobile devices
  • Apache OFBiz: complete suite for companies to customize the ERP to your needs. Allows modular use.
  • dolibarr: another ideal management software for SMEs, with the possibility of installing new functions through add-ons from your store, and under the GPL license.
  • ERPNext: it is quite classic software, designed from scratch and specially thought for SMEs. Supports free trial or subscription to use hosted service.
  • metafresh- Other Java-based ERP software like ADempiere, which enables cross-platform use. It is under the GPL license and allows a subscription hosted on its servers for 1-100 users.
  • Triton: is based on TinyERP, and is popular because of the flexibility it brings.
  • Axor ERP: it has many tools for management, so it is a complete ERP system. It is distributed under the AGPL license and can be used from a Docker image as well.