Businesses always needed a system to operate effectively. No matter how large you are, or for how long have you been on the market. To boost the demand for your services and eliminate the system mistakes, enterprises resort to the ERP solutions. In a nice conversation with Dmitry Garbar, the department head and a partner at Belitsoft, we’ve discussed ERP systems. Dive into the article and see, what came out of our talk.
‘For the first time ever, we have a good handle on our future requirements for components raw and materials. When our customer demand changes, we can manage changes to our schedules on a very coordinated and controlled basis. I don’t see how any company can do effective supply chain management without ERP.’
ERP - Making It Happen
What on Earth is ERP: a Beginner's Guide
‘Enterprise resource planning (ERP) systems are designed to address the problem of fragmentation of information or “islands of information" in business organizations.’
International Journal of Operations & Production Management
ERP (Enterprise Resource Planning) is a software suite that automates and decreases the manual labor. It allows your company to perform in a cost-effective manner.
ERP systems include a set of software modules, which manage the information for a separate business function or a group of those. It connects departments to one internal database and centralizes all the information. The database in turn exchanges data flow with the modules.
For example, every month we have to inform the payroll office how much has each worker done. Employees should concentrate on their direct duties. By means of ERP automatization we minimize their involvement to the task and its tracked implementation.
To see the whole picture of what can be done by Enterprise Resource Planning alone, enjoy the graph:
So, make a step forward and simplify the process by implementing ERP systems:
- ERP analyzes the functional side of your enterprise and along the way automates and/or removes the irrelevant business functions.
- Each department has its own unique software that automates simple processes.
- Simplified working process.
- The info is already in the database, ready to be used. That will make the information exchange between the inner systems simpler and more robust.
- The modules have an access to each other’s outputs, while reduced time and effort consumption please the eye.
- Increased performance and stable implementation
These make all segments of the company system fruitful; removes the spots of possible mistakes (e.g. human factor) and saves a great deal of time.
Why do you need this?
The main purpose of Enterprise Resource Planning is to run the business in a rapidly changing and highly competitive environment far better than before.
But let’s turn the case into the statistics:
So, the main reason why people involve so much effort and money into the software of ERP is the need for constant improvement. The enhanced performance will push business processes increasing the efficiency and drawing customers’ attention. Visually, the influence of ERP systems looks like that:
ERP is the 93% success. That surely makes entrepreneurs of all levels and budgets treat the costs as an investment in future prospects.
On-premise vs Cloud: To choose the best - know what is good
Trojan war where the taste in women and a wooden horse led to the fall of the whole ancient nation; Middle ages with countless raiding-and-retreating to the huge castles with moats and spikes around...
The picture has changed, but the substance remains the same. We still fight and protect, but the war against hackers and competitors is waged in the depths of the Internet.
That is why, lots of enterprises choose to store the data inside their “fortresses". But what does it take to get some peace... And is it worth the efforts?
‘Cloud is when numerous companies store their eggs in one big basket and hope for it won’t be dropped.’
Today, a number of modern companies prefer this type of ERP. And BelItSoft isn’t an exception:
‘Belitsoft used to rely on the on-premise servers what I can’t consider as a complete mistake. To be honest, the experience of using those was quite enlightening, though frustrating. Now we operate on the Cloud services.’
However, because the security here is still questionable, some would prefer to have their data behind the walls:
However, people still are suspicious of the Clouds. According to the Panorama report, 72% of respondents were frightened of the possible risks of data loss, and 12% of a possible security breach.
- Fast and easy data sharing+the access is seamless and handy.
- Saves money (no need in servicing and specific equipment)
- Good choice for small companies that are looking to start without going into too much technical aspects of setting their own hosting
- Deprives a full control over the data (hosting-provider is the one responsible for stable work and data integrity)
- Data security is in the hands of the vendor
- Still expensive: the price of VM in the Cloud is higher than in the local data-center
‘On-premise is when you have a freedom of choice; when your suit was tailored just for you and fits you perfectly.’
On-premise hosting means using your own resources for the software deployment (you need your equipment to make it work). However, you may also use VPS (Virtual Private Server) or VDS (Virtual Dedicated Server).
As my interlocutor noticed, “To keep the machine working you need to hire people that could manage fixing whenever it breaks. Moreover, the space taken is also a reason to think your choice over". So, to make sure nothing will spoil “the moment of truth", the on-premise ERP holder should think of:
- Maximum security for your corporate data
- Full control 24/7 (physical access to any data on the server)
- Excellent for large and mid-sized enterprises which have a data control and safety in the first place
- Additional expenses (hiring specialists for servicing the equipment, space, safety, electricity)
- Complexities with data access for the distant branches
- OPEX (operating expenditure) is more profitable than CAPEX (capital exp.) you have buying facilities
Ready-to-go vs ERP from the scratch. Budget decision
“Ready-to-go ERP" opens the season. Since wisely developed system equals success, let’s see what does the market offer.
Today you can purchase everything effortlessly. You may choose the way of the least resistance and check out what ERP software has been developed years ago and is still relevant.
‘However, we can’t say that the purchased product is the cure that works straight away. There are always things to change that make developers remove lots of discrepancies. It also happens that some existing modules that are not necessary anymore may be eliminated.’
So, before the implementation, developers have to straighten everything up, adjust and test the results - to make sure the work is done the way you’ve expected.
‘A half of the office works on customization for the ready-made solution. Everything works just fine. However, I’ve never seen the software fits perfectly the client we are working with, or him fully agreed to change his business processes to fit the product. There are always some customizations for ready solutions.’
Let’s sum up the information. The advantages of the ready-to-go ERP are:
- Short-term savings (by avoiding high costs associated with customization).
- Faster implementation
- Stable knowledge support (lots of outside experts on the software who can provide long-term training and advice)
- Software Sophistication (few bugs, industry-specific solutions and extensive elaboration)
And the disadvantages are the following:
- The need for adjustments and additional development
- May be difficult to customize it to your processes
- You have less control over the product (software vendor holds the rights to the code)
Developing ERP system from scratch. Some entrepreneurs may find it much more difficult to wisely develop an ERP core that holds their systems together.
Firstly, you need to analyze what and how do people do their job in each department. “Each role that is performed in the company is under the question of automatization", Garbar said. “So to get the ball rolling, business analytics (BA) have a chat with every employee in the company to understand the mechanics better". And after the picture of company’s “back-end" has been drawn, we are ready to discuss the time frame, costs, individual desires, and suggestions.
The overall process builds a totally unique architecture that is capable to adapt to the further changes in the company’s work.
However, that coin has two sides. Pros:
- You get a unique software tailored to the specific nature of your business
- You have a full control over the software code
- You save money on the long-term prospects
- Intellectual property rights to the ERP increase company valuation.
- Long development time
- High costs compared to off-the-shelf solution
- May become obsolete by the time of implementation
The costs and time frames
The final cost for the software is always formed individually and depends on the range of factors. Speaking of ERP system developing, the price includes:
- Company size (the number of employees, branches, locations and so on)
- The industry of the business
- Solution (industry-specific and customized, or general and flexible)
- Resources required (external consulting, user training, task tracking, etc.)
- Specific requirements
For instance, if you expect to see a sophisticated custom ERP system, you may not find complete designs and architecture that will fully satisfy your desires. In such cases, the implementation may require heavy customization and third-party add-ons, which will increase the costs.
But even if the price was named, it can’t be steady when push comes to the software expected to support your business for decades:
In numbers, USA companies charge from $10K up to $10 million and more:
- Small businesses: $10K - $150K
- Mid-sized: $150K - $500K
- Large enterprises: $1 million - $10+ million
‘Considering Belitsoft, it’s difficult to name even the average price we offer. The projects we are involved into are diversive and usually require a wide spectrum of services: from the company size and technology team to personal wishes and preferable time frames.’
In Belitsoft the effort on the project varies from 2000 hours to 96 man-months. And a plethora of those that need ongoing support and constant improvements.
The question that doubts is shall the project pay off? Well, let’s see:
According to the Panorama report, since last year there has been an 11% decrease in respondents who hadn’t yet recouped the costs of their software investments. And a 14% increase in those who were unsure whether any costs were paid off or not.
Besides, the rate of recouped costs in two years and less fell by 15%.
Time. If only “as fast as you can" would be taken literally and fulfilled right away. But in the real IT world all we have is to nod hearing 25, 32, 48+ months from the developer. But what takes them so long?
- Size. Same as with the costs. The size of your company, the amount of employees, and many other factors influence the time spent on analysis, chosen technology, the type of data storage etc.
- The industry you are operating in
- Types of ERP. The time needed for the final implementation of purchased and adjusted ERP on the Cloud differs from the on-premise solution tailored directly for the business you run.
- Personal desires. Any additional functions you want to see in the final product need extra time for development and adoption
- Respect the deadlines. Not many IT companies may boast for their accurate relationship with deadlines and set time-frames. According to the 2017 report, project duration was over scheduled by 59% in total:
Just face the fact that such a giant as Enterprise Resource Planning solutions can’t be developed in a day. It needs a constant updating and support, as an ordinary child does. Consider ERP as a life-time project that has a huge impact on everything you love.
The best technologies for ERP implementation
‘Java is a high level language what gives the widest Range of Applicability and highest Manageability & Flexibility you could ever get.’
The choice of technology arises from the size of a company you run. In Belitsoft we offer PHP for small and mid-sized businesses, Java or .NET for larger companies.
Developing a desktop application for a Football Federation we’ve chosen .NET - as a prevalent technology - accompanied by C# and PHP.
‘One independent company carried out the technical audit of the project we were going to engage in. The focus was on specifications and architecture. In the end, they acknowledged only Java and .NET as the most secured technologies.’
As a programming language, Java shows itself as a perfect tool in finance and enterprise development. Amongst its advantages, the most substantial one is versatility. Java is essentially reliable and proven partner when it comes to the building software castles, skyscrapers and highway bridges.
However, no one stops mid-sized companies to choose Java as well. It is a balanced language with well-oiled filling for the diverse purposes.
Two words: simplification and automation. Enterprise Resource Planning systems:
- Is a complex process that requires a distant understanding of the target.
- Requires re-orienting and teaching staff to work within a totally new environment.
- Transforms your enterprise into a computerized structural body managed by a set of software. modules covering the entire business.
- Provides the techniques accompanied by effective forecasting, planning, and scheduling processes.
- Makes the data exchange between modules much easier and more systematic.
- Helps to avoid repeated data entering.
- Automates business functions so that business processes go flawlessly.
The software is the investment in your future. If you want improvements and transformation of the complex system into a balanced organism - implement the ERP system and enjoy. That brings your enterprise up to the next level.
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