What is an ERP System?

We often hear IT personnel, consultants and software publishers refer to ERP systems, but what exactly is ERP?

ERP (Enterprise Resource Planning) is a business management system that integrates all facets of the business, including finance, planning, manufacturing, warehouse, sales, and marketing.  To be considered an ERP system, a software package generally would only need to provide functionality in a single package that would normally be covered by two or more systems.

Small and medium businesses (SMB) face very similar challenges when choosing an ERP system for their organizations.  To reduce the chances of a failed implementation several important steps need to be considered up front.  Design a plan that includes among other things, the definition of functional requirements, documentation of your current business processes, a cost analysis for the software and hardware and the benefits that will be derived from the implementation.  The plan should also include milestones and due dates that are critical to controlling the scope and cost of these projects.

Companies often require the assistance of a third-party consulting company to implement an ERP system.  The consultants involved in the implementation require both business and technical skills.  A business consultant studies and gains an understanding of an organization’s transaction flows and business processes and matches them to the corresponding processes in the ERP system.  Thus the organization’s business strategies are the central focus of the implementation and technology is being adapted around such practices and not the other way around.

Other factors to address:

• Executive sponsorship
• Resources both financial and human
• Managing change within the organization
• Communication
• Technical competency (internal and external)
• Project management
• User training and support both pre & post implementation
• Integration to other verticals or other key applications

There are numerous software publishers in the SMB-ERP space. They include:

• Sage Software – Sage Accpac ERP 500, Sage Pro ERP 500, Sage MAS 500
• Microsoft Business Solutions – Great Plains, Navision
• SAP – SAP Business One
• Oracle – NetSuite
• Intuit – QuickBooks

These applications enable small and medium businesses to implement the solution quickly with a rapid return on investment.  The offerings include core accounting modules (financial and operational), customer relationship management (CRM), human resources (HR), warehouse management (WMS), e-commerce solutions, business analytics and point of sale, among others.  Selecting the right vendor is important.

For SMB’s, an ERP project will set their operational direction for several years into the future.  Key features to look for are flexibility and freedom of choice!  The SMB market encompasses many different types of industries with vast operational requirements.  One size does not fit all.  With respect to the accounting modules, the solutions currently being offered are mature and functional.  SMB’s need to expand beyond their financial departments and require extended functionality to include customer relationship management, business analytics and logistics, among others.  In addition to flexibility, ERP applications need to be modifiable.  Integrating third party solutions and in-house developed applications is often required to deliver a “complete” solution.

As an SMB owner or manager I would also look at other key features that are listed below:

From a product perspective:

• Freedom to choose operating systems (Windows, Linux)
• Freedom to choose databases (Microsoft SQL, Pervasive, DB2, Oracle)
• Integration out of the box with the extended offerings (CRM, HR, WMS, EDI)
• Scalability
• Multi-lingual
• Multi-currency
• Multi-tiered architecture

From a software publisher perspective:

• Ascertain that software publisher is economically viable
• Size of install base in the SMB market
• Commitment to the SMB market
• Commitment to R & D

From a channel perspective (if applicable):

• Competency and industry experience of the value added reseller
• Number of other business partners in your local area (Plan B)