Pros and Cons of ERP
Data is at the core of every business. We collect, analyze and use it to enhance our services or products, improve customer experience, and increase sales volume. To use the data more effectively, companies from startups to enterprises invest in business software like enterprise resource planning. Is it justified? Let’s find out.
What’s enterprise resource planning?
Enterprise resource planning, or ERP, is an extensive system that can handle and automate numerous business operations. It takes away the need for manual paper handling, breaks down data silos, stimulates the efficiency of various organization’s processes. ERP plays the role of a company’s central system and provides real-time organization-wide insight into major business processes. This helps an organization’s leaders to plan out the funds smarter, empowers employees to provide better customer service and enhances internal communication.
ERP solutions come in three types: custom-built, ready-made, and hybrid.
“Custom, Off-the-shelf, or Hybrid ERP: Which Do You Need?” provides an in-depth explanation of these broad types and which type you should invest in based on your circumstances.
SOURCE: Allied Market Research
Previously, having an ERP was a luxury, only large enterprises could afford. Luckily, the ERP market has evolved, giving companies of all sizes an opportunity to benefit from ERP’s features.
In fact, in 2018, the global ERP market was estimated to be worth $35.81 billion and is expected to reach $78.40 billion by 2026, according to AMR. This immense escalation demonstrates the popularity that ERP software gained in recent years. The latest reports also confirm that 95% of companies that implemented ERP, improved a few or all of their business processes. And 53% believe that ERP is one of the priority sectors for investments.
But what makes this software so attractive?
Benefits of ERP
#1 Improves financial planning
Finances are the engine that fuels various business processes, and planning them effectively is vital to every company. ERP’s modules have multiple tools and features that help with this process, like collecting and sorting data on a wide range of characteristics as well as reporting and making forecasts based on historical and real-time data.
#2 Streamlined processes
ERP eliminates data duplication and repetitive processes, reduces fraud, and centralizes your business functions. Moreover, it allows the automation of numerous kinds of tasks, like financial reporting.
#3 Improved internal communication
Employees enter data into the ERP which others can access and update, keeping everybody on the same page and the communication transparent. This helps departments work with each other efficiently, no matter where they are located. The system also gives a clear overview of the major business information which allows to catch issues early and notice when workloads can be optimized.
#4 Enhanced customer service
ERP can largely benefit your customers as well by removing the need to upkeep spreadsheets and instead allowing your employees to focus on improving customer service. Most ERP software includes tools that collect and analyse client information, helping your sales department to plan effective marketing campaigns, acquire prospects and transition them to customers. Modern ERPs have a satisfactory CRM module and also allow you to integrate a full-suite CRM if you have your own.
Disadvantages of ERP
#1 Initial costs
ERP can be a significant investment, especially for small businesses. In long term, however, it saves lots of resources, like time and money. Moreover, there are many ways to reduce expenses, for instance, implementing ERP module by module.
#2 Learning curve
Any new software requires some level of learning, especially such complex software, like ERP. Many users report a high initial learning curve, which can be significantly lessened by providing company-wide training for staff.
#3 Slow implementation
ERP is a large complex system that covers all of your major business processes and it is okay for it to take some extra time, especially if your previous software is outdated. To have a smooth transition from old to new software, it is recommended to plan it ahead of time. Another workaround is to consider cloud-based ERP solutions which are usually faster to implement, however, it can’t be guaranteed.
Do you need an ERP?
Although an ERP system is an absolute necessity for many, some smaller companies and startups can delay this project until they’ve grown enough.
#1 You have multiple systems that don’t work well together, worsening internal communication, plus wasting time and resources. Or some of your software got outdated and stopped working with your other systems.
#2 Your current software is not flexible which obstructs your growth or company expansion.
#3 Your company cannot meet clients’ expectations, like providing them with a mobile version of your site.