Enterprise Resource Planning (ERP) software was first used in manufacturing but has expanded into multiple vertical markets such as telecommunications, retail, financial and a host of other industries.
This sophisticated software was designed to deliver better control over a company's entire gamut of business information, enabling faster and more accurate decision-making, reducing redundant data-entry and storage, and thereby improving customer satisfaction, corporate productivity and profitability.
Producers of this software include many large and smaller software developers, ranging from Oracle, Microsoft and SAP to Sage, NetSuite and Infor.
What ERP Does
ERP software can consist of multiple applications such as customer relationship management (CRM) software; inventory control software; accounting applications; sales software; order-tracking tools; invoicing software; project-management and payroll programs, among others.
By consolidating all these tasks into one over-arching software suite, businesses can dramatically cut training and maintenance costs, ensure all data is consistent and up-to-date, and reduce software expenses. In addition, by having access to different departments' data, employees are more productive and satisfied, and customers are happier.
ERP solutions have been a long-time staple of large corporations, but price-cuts and developers' focus on creating software with fewer features are encouraging more small and midsized businesses (SMBs) to invest in ERP.
In fact, SMBs are expected to spend $80.3 billion, worldwide, by the end of 2012, representing a compound annual growth rate of 10.6 percent between 2008 and 2012, according to research firm IDC.
In addition to reducing operating cost, businesses sometimes are driven to invest in ERP to comply with government regulations or to remain competitive in their industry.
But SMBs do not want to spend time and money on expensive training, so vendors looking to reach this market should ensure their applications are easy to use, to learn and to maintain. After all, ERP is supposed to improve productivity and customer service, not lead to empty chairs for ongoing, time-consuming and costly employee training.
ERP costs can be kept lower through subscription services, rather than in-house, company-owned and operated applications.
When considering which of the many ERP solutions to buy, businesses should look at a number of factors. Up-front costs are, of course, one major consideration.
As a rule of thumb, businesses also should meet face-to-face with vendors to see the product put through its paces. Ideally, an internal committee consisting of executives from various departments--such as accounting, human resources, manufacturing, sales and information technology (IT)--will participate in the review process, giving their requests, demands and feedback.
Before making a decision, businesses should visit a local non-competitor that already uses the software under consideration to view it in real-life operating mode. Decision made, corporations should start small, rolling out the ERP system to one division, branch office or workgroup at a time to ensure a smoother transition without disruption of day-to-day operations and customer relationships.
Since ERP reaches practically all elements and departments within an organization, businesses should do a lot of work before looking at specific software programs.
Successful ERP implementation often reflects a company's prior planning through meetings, written or online surveys and other internal communications with both management and workers.
Skipping this step can lead to problems: The ERP selection may not fully address one department's usage, for example, or users may be loathe to fully use all the application's features.
ERP costs can vary widely, in part depending on the size and scope of the implementation.
While many ERP vendors do not disclose their per-seat or application pricing on their websites, a quick phone call with a brief description of the potential implementation's scope can lead to estimated prices. If a company already is working with a local reseller, value-added reseller (VAR) or integrator, this partner can be of invaluable assistance, even if they do not specialize in ERP.
These vendor partners often team up with other specialists to accommodate a client's needs. In most instances, this is invisible to the end-customer, who still deals with the familiar names and faces at their local VAR.
Solution providers have access to partnering tools through their distributors, industry associations and other modes. And since their reputation hangs in the balance, if a business has been pleased with this IT partner's previous work, it will make an extra effort to ensure that its subcontractor partner's work is equally well received.
With a well-planned approach to implementation, ERP can become a company's brain, retaining and leveraging all the data necessary to continue a business's growth and profitability.
- Photo Credit Orlando Pozo
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