Types of ERP Systems
Is this situation familiar? Your business has started growing, and your multiple software programs have become cumbersome and chaotic to manage. Errors, data duplication, and internal miscommunication occur frequently. Or maybe it’s the other way round: Your business is stagnant and you want to implement changes to stimulate growth.
Many companies put all of their effort and time into the places where they interact with their customers. But although investing in customer touchpoints is vital, you won’t reach your full potential until you properly invest in the main instruments where all of your company’s work gets done — your internal systems.
Every company is digitally transforming. Companies automate their processes, decrease manual work, and change out legacy systems and practices to achieve more efficient workflows and boost their profits. And it works. The enterprise resource planning market has been booming and is projected to reach $78.40 billion by 2026, with a reported 95% of ERP software users seeing improvements in a few or all of their business processes.
Making informed decisions requires getting to know your options. We’ve prepared a guide to various types of ERP systems and what they do. We’ve also listed the best vendors for each type of system to make your research more efficient.
What is an ERP system and why should you use one?
An enterprise resource planning (ERP) system is business process management software that provides a system of integrated centralized applications that help with the automation and management of a broad range of business activities such as HR, sales, customer support, accounting, and inventory control.
An ERP serves as a unified database for the whole company and has a modular structure. The most common ERP modules are:
Each of these modules offers a wide range of tools to automate certain tasks and give a clear, comprehensive visualization of the current state and future outlook of all business units. Depending on the vendor, each module can have various additional capabilities.
The central aim of ERP software is to streamline business processes, increase efficiency, and improve communication among an organization’s departments. An ERP’s top benefits include better reporting and planning, data visibility, efficiency, and automation of manual processes.
Data visibility is often the leading reason why companies choose to implement an ERP solution. By seeing your company’s major business data all in one platform, you can make better-informed decisions, effectively plan out your budget, and create long-term goals. Data visibility is beneficial across all departments, but it is especially effective and helpful in finance.
ERP software provides comprehensive and flexible reporting tools that can be customized to fit your needs. Optimized reporting can make your organization react faster to complex data requests.
To make your operations more efficient, an ERP helps to automate manual processes like generating financial reports, creating invoices, and handling routine communications. Properly set up ERP software can complete these activities automatically.
Aside from offering data visibility, reporting, and process automation, an ERP system is vital for a company’s internal communication, especially if the company consists of many departments that require constant interaction with each other. When each department has its own system that no other department can access, it creates additional steps in the workflow. It decreases efficiency while increasing the time to complete tasks.
A workflow with such a decentralized system often looks like this: One department needs data stored in another department’s system. They send a request to access that data and are asked to provide the manager’s approval. After the manager gives their approval, the second department duplicates the data from their database and shares it with the first department.
When a company uses an ERP system, departments can retrieve necessary information without obstacles, as they have access to various modules. Hence, the workflow with an ERP system will look more like this:
This practical comparison of the two workflows demonstrates one of the core differences between using an ERP system and relying on many separate software systems.
Types of ERP systems
ERP types can be classified according to various characteristics:
- Custom-built, ready-made, or hybrid solutions
- Cloud-based or on-premises
- Generic or industry-specific
- Designed for small, midsize, or large companies
There are approximately 250 different types of ERP systems currently on the market, making it a time-consuming job to look through all of them to find the one that best fits your company’s needs. Below, we suggest ERP systems to consider according to the types mentioned above to help you in your search.
Custom, ready-made, and hybrid ERPs
Custom ERP software is built by your chosen ERP development company according to your exact requirements and to fit your business processes.
To find your perfect ERP development company, you can consult with platforms like Clutch, where you can find information on development companies including ratings and reviews by clients and average hourly rates.
A ready-made or off-the-shelf ERP is a pre-built ERP software package.
The leading off-the-shelf ERP software products are Microsoft Dynamics, SAP Business One, Acumatica ERP, and Oracle EBS.
A hybrid model is an option for when you already have an existing ERP solution but wish to develop new modules or integrate custom features.
We’ve described these types of ERP systems, their benefits and risks in-depth in a previous article.
Cloud-based and on-premises ERPs
When thinking about implementing enterprise resource planning software, it’s crucial to discuss whether you want on-premises ERP or cloud deployment. Cloud ERP systems are becoming progressively more popular. Almost every ERP vendor offers a cloud-based solution. However, there are still a couple of valid reasons why businesses might pick an on-premises solution.
A cloud-based ERP is an enterprise resource planning system hosted on a vendor’s servers and that can be accessed over the internet.
A cloud-based ERP is cheaper compared to an on-premises system, and the long-term cost is easier to calculate in advance. Usually, cloud software is available for a monthly or annual subscription, along with fees for training, support, and updates. This is usually a good solution for small businesses due to the affordable upfront price. In addition, implementing a cloud ERP system usually takes less time than implementing an on-premises ERP.
Another benefit is that you won’t need to hire IT specialists to maintain the system, since the ERP is handled by the vendor. On the other hand, it also means your control over the system is restricted and customization options are limited too.
Many people are cautious about cloud-based ERPs for security reasons, since data security is the vendor’s responsibility. To make sure your data is safe, choose a reputable and well-known vendor that has strict data security standards, or undertake a third-party security audit if you decide to try a less popular ERP vendor.
The most well-known examples of ERP systems include Oracle Netsuite, Microsoft Azure, Infor CloudSuite, and Acumatica Cloud ERP.
On-premise ERP software is installed on an organization’s own computers and servers.
An on-premises ERP system’s price is determined based on the size of the company and the number of users. It’s considered an investment, as the company pays the whole cost of the one-time perpetual license upfront. However, you will still need to pay for periodical training, support, and updates.
The company buying an on-premises ERP has full control over the system and can customize every module and aspect of it. However, to do this, you will need to hire IT specialists to maintain your software and make sure it’s regularly updated.
The most reputable types of enterprise resource planning software in the on-premises category are SAP ERP, SYSPRO ERP, and Microsoft Dynamics GP.
Certain vendors offer a hybrid ERP option, which is a combination of on-premises software with a private or public cloud for storage, services, or computing.
Generic and industry-specific ERPs
Should you choose a generic or industry-specific ERP? This is another crucial thing to consider before implementing your ERP. Although a generic ERP system is usually more affordable upfront, an industry-specific ERP can be a beneficial contribution to your business’s future, as such a solution offers many features that can meet your company’s needs.
Generic enterprise resource planning software provides a wide range of functionality for organizations across multiple industries. Generic systems tend to offer good financial management and accounting tools, but they don’t tend to offer a lot for operations.
A generic ERP works great as the first system for niche businesses as well as businesses that have typical processes or work effectively with a generalized approach. In addition, they tend to cost less than industry-specific ERP systems.
However, generic systems vary. Some may have modules that others don’t offer. The most common modules seen in such ERP systems are:
- Accounting and financial management
- Customer relationship management (CRM)
- Business intelligence (BI)
- Human resources (HR)
- Inventory management
- Supply chain management
- Planning and forecasting
Good representatives of such ERP packages include Epicor ERP, Infor ERP, and SAP Business One, though all three also offer some industry-specific features you can add to your system.
Industry-specific ERPs, also known as vertical ERPs, are tailored to a niche industry, like professional services or distribution. They provide basic modules and tools with the addition of features necessary for their industry that a generic ERP cannot provide.
Industry-specific ERP systems have features and tools to complete tasks unique to certain industries. To perform the same tasks with a generic solution, you might have to integrate a third-party product or develop one from scratch.
Midsize and large corporations often develop custom software that’s tailored around all of their business processes and requirements. Some smaller companies also invest in custom ERP systems if their processes are unique or unusual.
The best ERP solutions for manufacturing are Microsoft Dynamics, Infor CloudSuite, and QAD.
Businesses in the professional services sector go for Oracle NetSuite or Microsoft Dynamics.
Microsoft Dynamics and Oracle NetSuite are also considered excellent, reputable ERP systems in the distribution industry, along with Sage Intacct.
Top ERP systems by company size
Small business ERPs
Small businesses have fewer operations than multinational enterprises, and hence they generally don’t need a robust system with a full suite of functionality. Moreover, small businesses usually can’t afford to invest a lot in an internal system.
Small businesses usually opt for a lightweight ERP that, although it might lack some features or modules, is much more affordable.
A cloud-based ERP is a great solution for small companies. It can provide the base level of tools and features with an upfront cost that’s much less compared to an on-premises ERP. There’s also no need to hire a designated IT team to maintain it, as everything is done by the vendor. Moreover, cloud-based ERP systems do not obstruct your growth and allow you to expand in the future as well as add new features and tools when the time comes.
The best ERP systems for small businesses are Oracle Netsuite, Sage, and Acumatica.
Oracle Netsuite is a great scalable solution that can be easily customized as a company grows. It was developed for small and midsize businesses across multiple industries. Netsuite provides real-time insights and promises to decrease supply chain expenses by integrating and automating vital financial and operational functions.
Acumatica offers a number of cloud ERP options in its General Business Edition and in other more industry-specific solutions like:
- Retail-Commerce Edition
- Manufacturing Edition
- Construction Edition
- Distribution Edition
The General Business Edition of Acumatica lets you manage your company from anywhere and provides all of the essential tools for financial management, reporting, and customer relationship management.
Sage Business Cloud is specifically designed to serve small businesses. The system provides insights into how a business is performing and can be configured to the unique needs of your industry. This ERP can adapt to your team and workflows, streamlines management, and offers secure cloud and mobile access to business data.
Midsize business ERPs
Midsize companies usually seek new ERP systems when they’ve grown out of their disparate programs and desire to implement a connected system that can automate some processes and provide visibility into all major business data.
Generally, midsize organizations don’t require a lot of customization options. Those who do, however, opt for a custom ERP system.
In other cases, midsize companies usually want to automate many of their operations to boost efficiency and have complete visibility of their data.
Midsize organizations can also greatly benefit from cloud ERP solutions. The most reputable ERP systems in this category are Microsoft Dynamics 365 Business Central, Oracle JD Edwards, and Oracle NetSuite.
Microsoft Dynamics 365 Business Central was designed with small and midsize businesses in mind. The ERP gives you a comprehensive streamlined view of your entire business and its flow. It also accelerates financial closing and reporting and automates various processes.
Business Central is an adaptable system that is built to enhance various operations, from customer service to warehouse optimization.
Oracle JD Edwards offers a simplified and modern user experience and enables your organization to work faster and smarter thanks to integrated digital technologies.
It also offers a wide range of databases and deployment options, including public and private cloud, on-premises, and hybrid cloud. JD Edwards has more than 80 application modules, personalization capabilities, and end-user reporting.
Oracle NetSuite’s rich and flexible functionality allows the ERP to adapt as a business evolves. The ERP has built-in business intelligence and provides insights into the company’s important data and processes, which help leaders make informed decisions.
Large companies often go for on-premises or hybrid ERP systems to have unlimited control over their systems. This also allows them to connect company departments and share information with remote locations. Hence, if a company needs to send its specialists to another country to do work for an overseas customer, employees can retain access to the databases and tools they need.
Enterprise-level ERP systems are often generic, although they typically have an extensive set of modules, tools, and features.
Large corporations are known for developing custom ERP systems in-house or ordering custom systems from reputable development companies. For instance, in 2015, Tesla ditched upgrades of their old system and built a custom in-house ERP in just four months.
The most common ERP systems for enterprise-level companies include SAP S/4HANA and Oracle ERP Cloud.
SAP S/4HANA is available both on-premises and in the cloud. This ERP is aimed at large or upper midsize organizations, and consequently, it has complex structures to meet industry requirements. Its smart technologies automate various processes and connect analytics and transactions to provide accurate insights that help leaders steer their companies towards success and growth.
Oracle ERP Cloud is a Software-as-a-Service (SaaS) platform and an excellent scalable solution for large businesses. While small businesses can implement it too, consultants advise that the size and price of this ERP can be too much for them to handle.
Because the ERP operates in the cloud, it’s vital to ensure the most advanced data security. Oracle claims that their vertically integrated stack can guarantee data security while keeping deployment options flexible and creating a multilayer approach. In addition, the ERP has a wide variety of components such as reporting, analytics, user experience, and automation tools.
How to choose the right ERP software?
The best way to go about choosing your ERP software is to have a clear plan of action. Here’s what we recommend.
#1 Prepare a plan
Preparing a plan includes defining your requirements and expectations:
- Which departments and locations are going to use the ERP
- Expected number of users
- Cost of ERP
- Type of ERP
- Replacement vs upgrade
- Vital functionalities
When preparing your plan, it’s also time to secure buy-in from your stakeholders.
#2 Discover and consult
In the second stage of choosing your ERP, it’s crucial to look for the pain points in your current business processes. Consult with your company’s departments to discover their issues with the current system and detail how they would like to resolve them.
#3 Analyze ERP systems
There are a number of ways to create a list of the top ERP choices:
- Read reviews
- Consult industry professionals
- Collect advice from articles by reputable organizations
- Talk to leaders of companies similar to yours who have recently invested in an ERP or are pleased with their current system
From there, contact vendors of the ERP systems you like and schedule consultations.
#4 Make a decision
At this final stage, it’s important to check everything one more time to make sure the system you’ve selected meets all your needs. Confirm costs with your vendor to ensure you didn’t miss any hidden fees. Finally, make sure you know which aspects of the ERP system are maintained by the vendor and which are your responsibility.
We developed our own ERP system at Steelkiwi (more on that story here) that we’ve successfully used for over three years and that has been growing together with our company.
If you’re looking for a unique custom solution that can address all of your company’s concerns and provide an excellent base for future growth, we would love to offer you our expertise and discuss your ideal ERP system!
— Originally published on Steelkiwi.com