Enterprise resource planning software (ERP) is complex, especially for businesses that are considering it for the first time. A quick Google search doesn’t do much to clear up the complexity, either.
You may have heard that ERP is essential software for most businesses that have more than a handful of employees. Maybe you’ve run across the term while looking for a better solution for accounting or handling supplier relationships. Or you’ve learned that your competitors use it. Perhaps a venture capital firm has recommended ERP software. No matter how you have arrived at the topic, though, you probably have some basic questions regarding ERP.
As an SAP Gold Partner with more than 20 years experience and more than 500 ERP implementations under our belt, we’ve worked with plenty of businesses that are just starting their ERP journey. Here are seven of the most common questions we hear from businesses investigating ERP.
- What is ERP?
ERP is the nerve center for your business. It manages, integrates and organizes all data and business processes business across an organization, including production, finance, procurement, human resources, distribution, supply chain and other areas according to business needs and requirements. When properly integrated, the software analyzes, standardizes and streamlines company data as a unified whole.
Whereas ERP once was expensive and therefore limited to large enterprises, today cloud-based ERP solutions have reduced costs, complexity and software management, making them accessible to businesses of all sizes.
- What are popular ERP systems?
Large providers such as SAP, NetSuite/Oracle, Microsoft and Workday have the deepest experience with implementation and functional needs, as well as sizeable infrastructure to support cloud operations. There also are niche ERP vendors such as QAD, Infor and IQMS that specialize in industry-specific solutions.
Businesses often work with both a vendor such as SAP and an implementation partner such as Navigator when they roll out a new ERP system. That’s because ERP systems are complex, and setting the right foundation during implementation is important.
- Who uses ERP?
Almost every organization that manages, people, processes, products or services—along with sales and accounting of those products and services—can benefit from cloud-based ERP. ERP handles all of these basic functions as an integrated software platform customized with industry-specific configurations to handle business-specific functions.
Businesses should start considering an ERP system when they have more than 10 employees and annual revenue of at least $1 million.
- What is the difference between ERP and CRM?
Customer relationship management software (CRM) stores and manages customer data such as contact information, purchases and marketing engagement. It is a customer address book that ties into other systems.
ERP, on the other hand, is the complete business system. That means that ERP includes CRM, but it also encompasses financial data, operations, supply chain, human resources and every other aspect of a business.
Businesses can use ERP instead of CRM, or they can integrate it with a third-party CRM solution such as Salesforce or Hubspot.
- How much does ERP software cost?
ERP systems costs will vary depending on company size, selected platform and implementation partners, the customization scope, and other considerations such as training and change management investments. There’s no single magic number, because each system will vary according to the company using it.
Cloud-based solutions will have a significantly lower implementation and operating cost than on-premise ERP system, however.
Typical implementation costs range between $50,000 and $500,000 for small to medium-sized businesses. Medium-sized businesses to large enterprises can expect to pay between $500,000 and $2 million for an ERP implementation.
Cloud-based ERP subscription costs will vary based on the system selected, but they typically range between $20,000 and $35,000 for 20 users, and anywhere from $250,000 and $400,000 per year for large enterprises with more than 100 users.
- What are the risks involved with launching an ERP project?
ERP can potentially deliver numerous operational and organizational benefits, but it is an extremely complex, time-intensive undertaking that also could result in cost overruns, operational disruptions, work delays, and employee resistance if not properly managed.
The key to a successful implementation and rollout is proper planning from the onset. We’ve put together a workbook that can help you get started with that process.
- Who needs to be involved in the process?
An ERP implementation involves seven phases, including planning and solution evaluation, configuration, customization, data conversion, integration, testing, and training.
While the CFO or a project lead will oversee the process, they’ll rely on a cross-functional team and participation from all management levels. Your whole company should be involved with the rollout of a new ERP system.
The executive team must be on board with the adoption of ERP and a specific solution. Working with the ERP implementation champion, it will be on the leadership team to create a culture of acceptance, adoption and excitement among the company’s workforce.
It’s also important to select an external implementation partner to guide the company through the process and help mitigate any project risks.
ERP software, if implemented correctly, has the potential to drive operational efficiency and create new business opportunities by managing an organization’s operations end-to-end and delivering a 360-degree view of a company. ERP can also deliver enhanced analytics and forecasting as well as tools for improved financial management.
Our guide, Understanding Cloud ERP for Non-IT Executives, makes a good starting point for your journey