ERP in 2020: Defining Enterprise Resource Planning
What Is ERP and Why Is It Essential to SMBs?
How we got here
Enterprise Resource Planning (ERP) in its various forms has been a consistent theme in business going back generations, back when it was simply referred to as enterprise management.
Machine calculating for governing aspects of production management started in en masse in the 1960s, typically in order to monitor output from factories producing goods.
This was defined as Manufacturing Resource Planning (MRP & MRP II).
For the sake of time, we’ll skip ahead to the 1990s, when the term ‘ERP’ came to prominence and became a central aspect to several business functions within companies.
These were principally finance, HR, marketing, project management, and tasks which would otherwise constitute the core processes of a business.
This initial period of ERP emergence was dominated by large corporations, which had the resources and appetite to incorporate the new technology into their organizations.
Towards the end of the decade, smaller businesses began joining in when affordability wasn’t as large an issue.
In short, decision makers around the county were lapping up ERP solutions, investing $300 billion (around $500 billion today) installing them.
These emerging ERP systems generally consisted of enterprise-wide, off-the-shelf solutions using a single database, installed on-site by a consultant.
These systems followed the break/fix model familiar to IT professionals.
NetSuite was founded in 1998 and was the first company to deliver ERP software to businesses via the Internet—a trend that would eventually lead to the current growing market for Software as a service (SaaS) model.
The Brass Tacks of ERP
In the broadest definition of the term, ERP systems streamline the business process and drastically improve the company communication structure of employees and systems.
ERPs are designed to give instantaneous reports into business processes at every level of an organization.
Whether it’s financials, customer service, or supply-chain management, decision makers are given the opportunity to analyze key functions of their business in a precise manner and act accordingly.
The opportunity to have centralized data available in real-time for immediate assessment on an ERP system is incredibly enticing for a business of any size.
As these systems have become more accessible to SMBs, the competition and necessity to implement them has become a primary goal across every industry.
Processes of ERP
- Project management: With financials directly linked to projects, it’s much simpler to determine the goals and successes of projects
- Inventory and supply chain: Tracking and measuring stocked goods, supervising goods flow from manufacturers all the way to point of sale
- HR: Employee databases, payroll, performance, timesheets; all examples of HR tasks that can handled effortlessly with an ERP
- Automated reports: Scheduled reporting of the most important takeaways delivered for each department to assess with ease
- Sales and marketing: CRM modules mean easier interactions with customers; following up on orders; sending automated invoices; using data to execute personalized marketing campaigns
The Business Value of an ERP System
Creating long-term value for your business
For many businesses, implementing an ERP solution has become a necessity.
As we head toward the end of the decade, adoption across all industries has become universal for SMBs that want to keep up and prepare for their futures.
ERP systems can provide long-term value by laying the foundations for a significant strategy for digital transformation.
Whether it’s an extensive implementation plan or a first exercise in installing new tech like a CRM, ERPs can give businesses value across the board.
As many decision makers know, implementation periods for ERPs can be long.
Digital transformation is a marathon, not a sprint, and installing an ERP can take at least 18 months, depending on the size of the business and its objectives.
The immediate values enjoyed by having an ERP system are typically defined by the efficiencies and productivity gained through its integration.
An estimated 95% of businesses report improvements in their processes after implementation. For example, automated tasks for processing data entry can free up employees to focus their energies on tasks that require a human touch
The Role of MSPs in Delivering ERP Solutions
Cloud-based management is becoming the go-to for SMBs
Just as on-site installations of ERPs transitioned to internet offerings in the late ‘90s and early 2000s, managed service providers are becoming an increasingly important fixture for small businesses looking to transform their work processes.
One of the most attractive aspects of an ERP is the modular capabilities and customization options that are available.
This means that turnkey solutions offered online, while perfectly capable of providing basic needs, are becoming less popular among SMBs.
Extensive ERPs are more affordable than ever, and MSPs are proving to be vital with ERP consulting, implementation, and management.
For many years, businesses have been more familiar with break/fix models for their IT tech, an expensive and counterintuitive practice wherein vendors benefit from the failing of their own solutions.
On the other hand, MSPs largely function as an extension of the businesses tech capabilities and will typically provide round-the-clock service and proactive support for the ERP structure within a company.
The MSP market has grown substantially during the last five years, almost doubling worldwide to $193 billion
The appetite from SMBs to partner with service providers is certainly there, but if you’re considering this yourself, make sure you’re with the right provider.
There are expectations, such as a great consultation and analysis and a vast array of ERP options that decision makers should reasonably expect from an MSP.
After all, this is a long-term project of typically 60 months—make sure your solution is being brought to you by the right people.
What the Future Holds
Expect more businesses to shift to managed cloud models
The reduced cost of cloud ERPs over the course of the 2010s, particularly the last five years, has meant widescale investment and adoption by SMBs in virtually every industry.
This has in-turn led to vendors and service providers diversifying their service offerings to meet this new demand.
Combined with the pressure of responding to competitors’ ERP integrations, competition is rife between businesses wanting to stay ahead of the game.
We can expect the industry to continue to pick up as digital transformation becomes the top priority for many SMBs.
- Evolved from basic solutions installed on-site; to cloud-based availability; to cloud-based management and support
- Can address a variety of processes in relation to efficiency and dramatically reduce repetitive, menial tasks
- Modular nature means businesses can tailor their unique solution to precisely serve their individual needs
- MSPs have grown in prominence to meet high demand, but having right partner is an essential consideration for a decision maker
Get Ahead of the Digital Transformation Game Today
ERPs are an essential part of a modern business’ organizational structure and helps SMBs remain competitive. By leveraging ERP capabilities, companies can reduce costs, improve efficiency, and achieve better customer satisfaction.
To learn more about Impact’s Enterprise Solutions department and ERP offering, call 866.544.7491 or click here.