Why Small to Medium Size Companies Purchase an ERP System

In most cases, companies will come to a decision point with regards to their legacy system.  The cost to maintain or enhance their system grows to a level where evaluation of additional options is required.  Many of the older legacy systems are often no longer support and thus pose an increased risk of failure.

• Many older systems will have security issues
• Old technology is often far more expensive to maintain than newer, lighter systems, from a general maintenance point of view
• Older systems lack flexibility to customize or integrate
• It becomes more difficult and more expensive to find a support for the outdated system
• They suffer from a lack of modern features and functionality

Probably the most powerful delivery from an ERP is the inherent visibility into inter-departmental activities.  No longer is the company siloed in its various departments.  An ERP will allow companies to use the same information across departments, stamping out the risk filled, time-consuming, money wasting practice of duplicate data entry.  The shared information and processes allow better governance to ensure distributed organizations operate the same way which in turn reduces risk.

Many companies realize that they need to alter their processes but finding the will and determination to make major changes across a company can be daunting.  Time and again, I have seen organizations use an ERP implementation as the primary change agent for their overall goals for the company.  Implementing an ERP system will force definition of business processes and procedures to be used in the future.  It allows for changing the “this is how we have always done it” approach. It also allows for the company to re-define their business to a more streamlined and efficient model.

Many large companies are looking to re-focus their operations onto their core business.  We have seen many companies “Spin Off” subsidiaries based on such changes in focus or goals.  While a subsidiary may be experiencing little to no growth as a part of the larger corporation, it may be quite valuable to sell as an independent operation.

For these types of organizations, it is essential to invest in a properly sized system and start over with clean data tailored to their business model.  Additionally, for a company spinning off a division or product, a new ERP system can facilitate the change of focus away from a product or service and help achieve a ‘clean break’.

Investing in an ERP system is imperative to any growing business. Often small to medium sized enterprises grow out of their legacy systems, and processes are quickly backed up. By upgrading to an ERP system, companies can be confident that their systems will scale and grow as their company continues to evolve and succeed.

Key Takeaways: 

• ERP systems are necessary for businesses of all sizes to remain competitive and handle growth and scalability.
• When selecting the right ERP system, change management and system costs are important considerations.
• ERP implementation is a major project, but new hosted and targeted ERP systems allow smaller organizations to manage better the Time to Implement.

Why Small to Medium Size Companies Purchase an ERP System?

Small and medium-sized businesses are increasingly embracing ERP systems to enhance their operational management and productivity. These systems offer a unified platform for managing an array of business processes, including:

• Accounting
• Finance
• Sales
• Inventory
• Customer Service

ERP systems effectively reduce costs and increase efficiency by optimizing and automating these processes. They also provide real-time insights into a company’s operations, enabling them to adapt swiftly to fluctuating market conditions and gain a competitive edge in their industry.

What Is An ERP System?

An Enterprise Resource Planning (ERP) system is a sophisticated software solution that enables businesses to manage their operations and resources with heightened efficiency. It serves as an all-encompassing system that seamlessly integrates various business aspects such as finance, accounting, sales, and customer service. 

Comprised of a wide variety of modules tailored to address particular business needs, ERP systems include functionalities such as

• Accounting
• Inventory Management
• Customer Relationship Management (CRM)
• Human Resources (HR)
• Project Management

These modules are interconnected, facilitating smooth data flow and providing a unified data source for the entire organization.

Streamline: ERP systems are specifically designed to help businesses streamline processes and enhance efficiency. By offering a consolidated data source, they enable businesses to make swift and accurate decisions. 

Improve: Furthermore, ERP systems grant greater transparency into business operations, allowing managers to monitor performance in real-time and pinpoint areas for improvement. 

Scale: Designed for scalability, ERP systems let organizations effortlessly incorporate new features as their requirements evolve.

Why Do Small/Medium Size Companies Use An ERP System?

Small and medium-sized businesses (SMBs) increasingly adopt Enterprise Resource Planning (ERP) systems to optimize operations and gain a competitive advantage. ERP systems are comprehensive software solutions that integrate various business aspects, from finances to inventory management and customer relationship management. By automating processes and streamlining operations, ERP systems enhance efficiency, cut costs, and elevate customer service for SMBs.

ERP systems offer multiple benefits, including operational streamlining, resource allocation efficiency, and informed decision-making. They also improve customer service by providing real-time access to customer data and facilitating inventory management to meet demand.

When choosing an ERP system, SMBs should consider:

• Cost
• Implementation time, and the type best suited for their needs, such as horizontal/broad ERP, vertical-specific ERP, or purpose-built/narrow ERP. 
• Ultimately, a well-selected ERP system proves invaluable for SMBs, enabling them to refine operations, minimize costs, and deliver exceptional customer service.

How Does SAP Help Small To Medium Sized Businesses

SAP is a leading ERP software provider that assists small to medium-sized businesses (SMBs) in streamlining operations and boosting efficiency. SAP Business One is SAP’s comprehensive suite that includes tools and applications for managing core business processes such as financials, human resources, supply chain, and customer relationship management; specifically designed for the SMB industry.

SAP’s ERP solutions offer flexibility, scalability, and powerful analytics, enabling SMBs to identify improvements, uncover opportunities, and make informed decisions.

SAP Business One also provides integrated solutions for customer relationship management, supply chain management, and more, creating a seamless system for SMBs to manage their operations. By leveraging SAP’s software, SMBs can enhance efficiency, reduce costs, and maximize revenue, helping them grow and stay competitive in a dynamic market.

On-Site Support

On-site support is crucial for successful ERP system implementation, as it ensures quick and efficient system setup. Provided by the SAP partner and typically included in the system cost, this support entails a team of experts assisting with installation, configuration, and training at the business’s premises

They also offer ongoing maintenance and troubleshooting services. On-site support minimizes downtime risk and guarantees optimal system performance while providing peace of mind that any issues will be promptly addressed and resolved.

Change Management

Change management is vital to any ERP system implementation, encompassing the planning and execution of changes within an organization to guarantee effective system adoption. 

This process involves preparing the organization for the transition, training staff, and offering continuous support while assessing the change’s impact and making required adjustments. 

Crucial for a successful ERP implementation, change management is an ongoing process that demands regular monitoring and adaptation as necessary.

Systems Costs

When choosing an ERP system for small to medium-sized businesses, system costs are a crucial consideration. These costs can range from a few thousand to hundreds of thousands of dollars, depending on the organization’s size, required features, functionality, and implementation complexity. It is essential to account for customization, training, additional hardware and software, and ongoing maintenance and support costs. Thoroughly assessing all these expenses is vital for selecting the most suitable ERP system for a small to medium-sized business.

Cost To Customize

Customization cost is an essential factor when selecting an ERP system for a small to medium-sized business. Although customizing an ERP system can be expensive and time-consuming, it is sometimes essential to tailor the system to the specific needs of the business. This process demands a deep understanding of business processes and available technology, as well as a team of experts to develop a customized solution.

Customization tasks can range from system configuration and custom report creation to third-party application integration and custom interface development. The cost depends on the complexity and type of system being customized.

When assessing customization costs, businesses should consider ongoing maintenance, support, and staff training expenses. Though these costs can be substantial, they are vital for ensuring the system’s proper and efficient use.

In conclusion, customizing an ERP system can be costly, but it is necessary to meet a business’s needs depending on the complexity of the processes and how specific the business wants their solution to be. Businesses should carefully weigh customization costs and consider ongoing expenses when choosing an ERP system.

Time To Implement

When choosing an ERP system, particularly for smaller organizations, time to Implement is an important factor to consider. ERP implementation is a significantly large project, requiring time and resources for system setup and maintenance. Hosted and targeted ERP systems can help manage the time to implement for smaller organizations.

Selecting an ERP system requires evaluating the project scope and necessary resources, including implementation, staff training, system management, configuration, data migration, testing, and going live. Customization costs and the time needed for implementation should also be factored in.

It’s essential to consider the ERP system’s impact on the organization, including processes, staff, and culture. Assess the time required for staff training and potential effects on morale, as well as the system’s integration into existing processes.

Lastly, ongoing maintenance and support are important considerations, including system updates, management, and additional training or support services.

In summary, time to implement is a key factor when selecting an ERP system, taking into account the project scope, required resources, customization costs, and ongoing maintenance. Moreover, the system’s impact on the organization’s processes, day to day business operations, staff, and culture should also be considered.

Large Companies Only

Large companies possess the resources and personnel needed to manage complex ERP systems, but they still face challenges. These include managing numerous users, customizing the system to suit the company’s requirements, and maintaining security. Moreover, multiple locations can complicate system consistency. 

To tackle these issues, large companies may choose specialized ERP systems designed for larger enterprises that support multiple users and locations or deploy a mix of ERP and non-ERP systems. They might also opt for a third-party provider to manage the ERP system and its users, reducing ownership costs and ensuring proper maintenance and security.

Types Of ERP Systems For Small And Medium Businesses

Small and medium businesses often face the challenge of selecting the right ERP system to support their growth and streamline operations. Various types of ERP systems cater to different business needs, offering unique benefits and features. Understanding the advantages and characteristics of each system will help businesses make an informed decision about the most appropriate ERP solution for their needs.

Horizontal/Broad ERP

Horizontal/Broad ERP systems cater to multiple industries and offer a diverse array of features and functions. These systems are ideal for smaller organizations that do not need industry-specific capabilities. Generally more cost-effective and quicker to implement, Horizontal/Broad ERP systems deliver benefits such as enhanced workflow, data accuracy, and organizational visibility. 

They also enable seamless integration with other systems and applications, facilitating improved operational management. Furthermore, these ERP systems grant a comprehensive perspective on an organization’s performance, empowering managers to make informed decisions and boost efficiency.

Vertical Specific ERP

Vertical Specific ERP systems cater to the distinct needs of particular industries, such as manufacturing, retail, or healthcare. Highly customizable, these systems allow companies to precisely tailor their ERP to meet their unique requirements, making them popular among large organizations seeking specialized solutions.

These systems offer numerous benefits, including enhanced customization that can boost efficiency, accuracy, and cost reduction. Seamless integration with existing systems and processes, such as accounting and inventory management, further improves operations. Moreover, they provide improved visibility, enabling managers to make well-informed decisions.

Designed to meet industry-specific security requirements, Vertical Specific ERP systems offer greater protection against cyber threats. Additionally, their scalability allows companies to effortlessly adapt their systems as their businesses grow.

In summary, Vertical Specific ERP systems deliver a range of advantages, including tailored customization, seamless integration with existing systems, improved visibility, and enhanced security, all contributing to better efficiency, accuracy, and cost savings.

Purpose-Built/Narrow ERP

Purpose-Built/Narrow ERP systems offer flexibility and customization to address the unique needs of a specific business. These systems can handle various tasks such as customer relationship management, inventory tracking, accounting, finance, supply chain management, manufacturing, or project management, making them suitable for smaller businesses or those with distinctive requirements.

These systems are usually more cost-effective and easier to implement than larger, all-encompassing ERP systems due to their tailored nature. Consequently, businesses can quickly set up and utilize their ERP system.

Security is another advantage of Purpose-Built/Narrow ERP systems, as they are designed with data protection in mind, ensuring the confidentiality of business information. Furthermore, their user-friendly interfaces cater to a diverse user base, from IT professionals to non-technical users.

In conclusion, Purpose-Built/Narrow ERP systems are an ideal choice for businesses seeking a tailored, cost-effective, secure, and user-friendly solution to accommodate their specific needs.

Why ERP Systems Are Essential For Growing Companies To Remain Competitive

In today’s dynamic, digital,  business environment, growing companies must stay competitive by leveraging the advantages of ERP systems and technology solutions. These systems offer incredible  benefits such as growth and scalability, seamless transition from legacy systems, improved visibility across operations, effective change management, and streamlined spin-off management. 

By adopting a suitable ERP system, small and medium-sized businesses can ensure agility and adaptability, leading to sustained success in an ever-evolving market.

Growth And Scalability

Selecting an ERP system with growth and scalability in mind is important for small and medium-sized businesses. These systems are designed to handle the increasing complexity of operations as businesses expand. An ERP system centralizes all operational records, enabling businesses to make informed decisions based on accurate, historical data. 

Moreover, ERP systems offer the flexibility to scale up or down according to an organization’s evolving needs. By choosing the appropriate ERP system, businesses can swiftly incorporate new features, modules, and capabilities as required, ensuring agility and competitiveness in a dynamic market.

Legacy Systems

Legacy systems, comprising outdated or unused computer systems, applications, and software, can be challenging to maintain due to their age and lack of support. These systems not only incur high maintenance and upgrade costs but also restrict a company’s scalability, flexibility, and security. 

Transitioning to a modern, robust ERP system offers benefits, such as streamlining business operations, reducing legacy system costs, enhancing visibility, and improving decision-making. Furthermore, an ERP system contributes to better customer service and satisfaction.

Visibility

ERP systems offer improved levels of visibility for small and medium-sized businesses, providing a comprehensive view of operations and enabling informed decision-making. By serving as a single data source, ERP systems facilitate access and analysis of information from various departments, breaking down silos and creating a unified business perspective.

Real-time performance tracking is another key advantage, allowing businesses to swiftly identify and resolve emerging issues, allowing them to manage discrepancies and problems with ease and efficiency. .

Supply chain visibility is also improved through ERP systems, enabling businesses to monitor inventory levels, evaluate supplier performance, and promptly detect potential disruptions. This ensures the availability of necessary materials to meet customer demands which is especially useful in today’s world of supply chain uncertainty.

Lastly, ERP systems support regulatory compliance by offering up-to-date financial data and reporting, reducing the risk of fines and penalties.

Change Management

Change management is a crucial aspect of ERP system implementation for small and medium-sized businesses. It encompasses the process of identifying, analyzing, planning, and adapting to changes in the business environment, including modifications to processes, technology, personnel, and organizational structure. Effective change management is essential for ensuring the optimal use of the ERP system.

The change management process involves identifying potential changes, analyzing their impact, developing a plan to address them, and implementing the plan. Additionally, it includes communicating these changes to stakeholders and monitoring their effects. By focusing on change management, businesses can ensure the ERP system aligns with the company’s goals and objectives.

During ERP implementation, prioritizing change management is vital for proper system usage and seamless adaptation. Clear communication with stakeholders and monitoring the impact of changes are also essential components. Ultimately, change management is a key factor to consider when selecting and implementing an ERP system.

Spin-Offs

Spin-offs, also known as divestitures, frequently occur in the business landscape. Companies may spin off certain divisions or products to concentrate on core competencies or enhance profitability. 

In such situations, ERP systems prove invaluable by offering a unified view of the entire company, enabling more effective spin-off management. These systems also facilitate the transition from a single company to two separate entities while supplying essential data for the spin-off’s success.

Furthermore, ERP systems allow the parent company to maintain control over the spin-off and gain insight into its operations. This transparency enables the parent company to evaluate the spin-off’s performance and make any necessary operational adjustments, ensuring overall success.

What Distinguishes Financials From An ERP?

Financials and ERP systems serve different purposes when it comes to managing a company’s financial data. Financials are mainly used for tracking and reporting financial information and transactions, while ERP systems are designed to manage a company’s entire business operations, including financials. 

Financials lack the integration and automation capabilities of ERP systems and are usually limited to a single currency. In contrast, ERP systems offer a comprehensive view of a company’s operations, including multiple currencies and languages, and can integrate with other systems such as accounting and CRM. 

Overall, ERP systems offer more advanced features and capabilities for managing a company’s financial data and operations compared to financials.

Softengine Has The Capability To Assist You With Your ERP System!

Softengine is a leading provider of ERP solutions for small and medium-sized businesses powered by SAP Business One. Our team of experienced professionals has the expertise to help you select the right ERP package for your business. We understand that each business has unique needs and goals, and our experts are committed to helping you find the perfect solution.

Our ERP solutions are designed to help you streamline operations, improve performance, and maximize profits. We provide comprehensive on-site support as well as 24/7 continuous support, change management, and thorough breakdowns of system costs. We also offer cost-effective customization options, so you can tailor your ERP system to meet your specific needs.

We understand that ERP systems are essential for growing companies to remain competitive. Our solutions are designed to provide scalability and visibility, enabling you to manage change, spin-offs, and legacy systems. We also offer comprehensive financials to help you get the most out of your ERP system.

Final Thoughts

ERP systems offer several benefits to small and medium-sized businesses, including increased productivity, streamlined operations, and scalability. Selecting the right ERP system is essential and requires consideration of factors such as change management, system costs, and implementation time. 

There are several types of ERP systems to choose from, such as horizontal/broad, vertical specific, and purpose-built/narrow. It is important to understand the difference between financials and ERP systems as they serve different purposes. Softengine can help businesses optimize their ERP system and maximize their investment.

Don’t miss out on the opportunity to take your business to the next level with an ERP system from Softengine. Contact us today to learn more about our ERP solutions and how we can help your small or medium-sized business streamline operations, boost productivity, and stay competitive in today’s market. Head over to our contacts page and fill out the form to get started!

FAQs

How important is ERP for growing organizations?

ERP is essential for growing organizations. It provides the tools and processes needed to manage growth, scalability, and visibility. By automating tasks, streamlining operations, and providing better access to data, ERP can help organizations of all sizes to remain competitive.

Why do companies buy an ERP?

Companies buy an ERP to improve their performance. ERP systems provide a platform to manage operations, track performance, and make informed decisions. ERP systems also allow companies to streamline processes, reduce costs, and improve customer service.

Is ERP a growing industry?

Yes, the ERP industry is growing. According to research, the global ERP market is expected to reach $41.69 billion by 2027. This growth is driven by the need for businesses to remain competitive and the increasing demand for ERP solutions.

How does ERP improve company performance?

ERP systems can improve company performance by automating tasks, streamlining processes, and providing better access to data. This can help companies to reduce costs, increase productivity, and improve customer service.

What are the benefits of ERP to the industry?

ERP systems provide a range of benefits to the industry. These include improved performance, increased productivity, reduced costs, improved customer service, and better access to data.

Is the ERP system effective in making the company successful or not?

Yes, an ERP system can be effective in making a company successful. By automating tasks, streamlining processes, and providing better access to data, ERP can help companies to remain competitive and improve performance.

Is ERP only for big companies?

No, ERP systems can be used by companies of all sizes. Small and medium-sized businesses can benefit from ERP by streamlining operations, reducing costs, and improving customer service.

What is the growth rate of the ERP industry?

The global ERP market is expected to reach $41.69 billion by 2027. This represents a compound annual growth rate (CAGR) of 7.2%.

Why do companies adopt an ERP solution for their business?

Companies adopt an ERP solution to improve their performance. ERP systems provide a platform to manage operations, track performance, and make informed decisions. ERP systems also allow companies to streamline processes, reduce costs, and improve customer service.