Implementing an ERP system tends to be a complex and costly process which leads many to wonder – is ERP worth it and will it really help?
Enterprise Resource Planning, commonly abbreviated as ERP, refers to a business management system that is comprised of various integrated software modules that help to manage and integrate the business functions in an organisation.
Since the late 1980s large companies such as IBM and Microsoft recognised the need of implementing an ERP system to ensure the smooth flow of data and information in face of the ever growing and complex business and technological environment. In order to make the best decision in a timely manner, businesses require efficient inter-organisational data flow.
Take for example Nestle USA. In 1997, the company decided to roll out an ERP system to integrate its various business operations in the country. The implementation would take 6 years, with a budget of approximately $ 200 million. While this may seem like an exorbitant amount, by 2002 the company reported savings of $ 325 million, increased integration within different regions, reduced training costs for employees, and more accurate demand forecasting among various other benefits. In terms of monetary investment alone, the move certainly panned out well. These benefits combined led to greater efficiency, competitiveness and an overall organisational ‘culture of continuous improvement’. Several other companies also share similar stories.
Greater integration and transparency within a company lead to increased productivity, better decision making, reduced operating costs and improved internal communication. Even the customers reap the benefits of successful enterprise integration – increased customer service, satisfaction and order fulfilment are one of the many benefits reported.
Not all businesses are capable, or even suitable for implementing a complex and costly ERP system; however, with the introduction of many out-of-the-box ERP soft wares that are very reasonably priced even small enterprises can reap the benefits of this system. It is apparent that in order to stay competitive in the market, greater efficiency provided by ERP systems and soft wares is necessary.
To be competitive, to be relevant, to be efficient – ERP is essential.
“Sure an ERP system is great, but is my data safe on the cloud?”
Due to common misconceptions, and with wide spread myths about cloud storage some companies remain hesitant to move forward into the future.
The cloud enables greater transparency and accessibility, rapid deployment of the software across the company and seamless scaling of business functions to meet market changes. There have been a number of high profile attacks on company data in the past year, a case in point being Sony. These stories are bound to make some hesitant about switching to the cloud.
These are the top buyer misconceptions when it comes to cloud ERP system:
1. Cloud data is more prone to attack
An ERP vendor has more expertise on data security than the average enterprise engaging its services. The physical location of the server, be it on company premises or within a cloud provider’s data center, has little relevance on the server’s potential vulnerability. The data’s security relies less on the physical location of the server and more on the security measures implemented by the center. Companies with on premise ERP have the added responsibility of maintaining its server’s security and maintenance. The generally superior to that of the average enterprise. Thus purely in terms of data security, the cloud system is the better option for most small and medium sized enterprises.
2. Data Residency Control
Many countries have regulations that restrict personal or sensitive data to be exported or stored in a different country. Companies that fear that their data and records may be outsourced without their consent can rest east knowing that there are legislative restrictions to prevent that. By choosing a reputable and reliable ERP vendor who is transparent about the internal and external policies governing the relationship, the firms can be assured that their data is in reliable hands and rest easy.
3. Rival firms with the same vendor can hack and sabotage
A persistent but unfounded concern is that a cloud based system that houses the data of multiple firms is inherently more susceptible to data hacks, leaks and attacks. In a cloud system, firms share a pool of network and storage resources, which brings about this fear, because in the business world, sharing is not about caring. Firms can be assured that the cloud providers segment and secure the servers and resources in such a way that essentially each company’s data is in their own private space, completely detached and inaccessible for others.
4. No Cloud, No Worries!
A firm that has not opted for a cloud ERP system may smugly assume that it is safer. “My data is not stored on the cloud, it is stored on my own computer. I am completely safe!” But if the computers are connected to the internet, the firm is already on the cloud. Given that most, if not all, companies are connected to the internet, no company is perfectly safe from attacks and data theft. 5. Data security is the sole responsibility of the Cloud Provider
The cloud ERP vendor does manage the network security and associated tasks for the firm. However, to rely solely on the vendor for all aspects of data security is a massive folly. Internal data management and confidentiality policies, password policies, employee accessibility, user management and security training of employees are equally, if not more, important when it comes to maintaining data integrity and safety.
There are several reasons to choose a cloud based solution for your business needs. Lower costs, greater accessibility and flexibility are some of the many reasons that firms are increasingly opting for cloud-based ERP. The common myths and misconceptions regarding data security on the cloud are more fiction than fact. Enterprises looking for a suitable ERP system can be rest assured that the cloud options are safe.
Choosing among the various ERP options can be a daunting task. With a large number of vendors and options, businesses need to be careful and choose the system that best suits them. The right ERP program can boost the organization’s productivity, lower operating costs and set the company on a path of growth.The plethora of options available need to be carefully assessed to decide on the most suitable system for their needs. The following are some key aspects to keep in mind when weighing your choices:
Have a specific, concrete list of requirement
The foremost task for businesses should be to list out their requirements of the ERP system. The enterprise should pinpoint the current challenges and issues it faces, and how it expects the ERP system to solve it. The company should identify the specific business processes and key functions required. If the organization already has a system in place and is looking for a new system to match its needs, it should identify the key issues and problems of the current program and voice their concerns to the ERP vendors. Optimally, companies should opt for ERP programs that address the industry specific needs. Having an extensive ERP system where the majority of the components are not used by the organization is a waste of organizational resources. The functionalities required by the business need to be specified in advance to target the most suitable ERP providers.
Technological requirements and Compatibility
The companies must consider options that are compatible with their business and resources at hand. It should note if the ERP program requires additional hardware, servers and IT related investments. If the company needs a system with their current technology it should opt for vendors that cater to their specific need. For instance, the majority of small and mid-sized enterprises use computers that run on a Microsoft operating system, and frequently use Word, Excel, Access etc. for business purposes. For these companies, a .NET ERP program would be compatible with their current system and integrate well with the existing framework.
Cost of ERP and Payment Options
The company must consider the options that are within their budget. The cost of implementing the ERP is an important consideration. Some key questions would be whether the ERP deployment requires large upfront payment or investment or does the vendor offer a pay-as-you-go, monthly or yearly subscription option. Another issue to keep in mind if the cost of updating the ERP when the subscription runs out. Businesses should choose programs that are scalable and can be altered as needed to suit the needs of a growing business.
Accessibility and User-friendliness
Businesses must be clear on how much accessibility they want to allow their users. Typically onsite ERP systems are very restricted in nature and can only be accessed within the premises of the office. Cloud based systems allow users to access the data from any part of the world using their web browser. Businesses can choose between an onsite, cloud or a combination ERP system. A key aspect to consider is the user friendliness of the ERP software. Would employees require extensive training to use the program or is the ERP system intuitive and easy to use? The cost of training employees and the additional time required must be considered. The highly competitive nature of the current business environment requires the company data be accessible by users through the computers, mobile devices and tablets. In order to maximize the benefits of ERP and increase productivity companies should choose a program that would be compatible with multiple devices and operating systems.
Implementation and Customization
The organization must consider how long a particular ERP system take to be successfully deployed and fully functional. The implementation process and the time frame must be considered. Onsite ERP programs take an average of 12 months to be implemented whereas cloud based programs take approximately 3 to 6 months. Typically, the greater the customization of the program, the longer the deployment period. Additionally a highly customized program costs more, not only initially but each time when the program is renewed and updated as well. A highly customized system would address the need to the enterprise better but would require more time to tailor, implement and cost more. It would also take additional time whenever the program is renewed and updated as the customization have to be re-done. The companies need to strike a balance between the additional benefits of a customized program and the greater costs and time lags associated with it.
Vendor reputation and Support
Often not discussed but an important matter nonetheless is the vendor’s reputation. Is the vendor known to deliver upon his promises and are former and current clients satisfied with the services provided? A business may ask for references to clients in the same industry to obtain feedback about the vendor’s product and services. The services offered by the ERP Provider are another important aspect to consider. The enterprise needs to evaluate the support system of the vendor and the promptness of the support staff in addressing and rectifying issues that may arise with the ERP program. A business must carefully weigh all key aspects and optional before choosing an ERP solution. It must be ensured that the system needs the requirements of the enterprise and is well suited to the organizational objectives.