Previously, we reviewed 10 enterprise-level general ledger accountingsoftware solutions. And, while financial accounting is certainly a critical component of any company’s software suite, many enterprise-rated organizations will have business process needs that warrant moving up to enterprise resource planning (ERP) software. Fortunately, almost all of the accounting vendors we reviewed earlier are also capable of extending their product platforms to full ERP functionality.
These suites are designed in a modular fashion for the most part, which means you can purchase just the features your organization needs. Plus, the suites are aimed squarely at the small to midsize enterprise (SME) market. Typically, we review products aimed either at small to midsize businesses (SMBs) or enterprise organizations. The SME designator is less an indication of size than of the complexity of the business. To make an investment in ERP software worthwhile, a business has to have a need for custom business processes, multinational commerce, or fairly complex manufacturing or supply chain requirements. That’s where SMEs become the better indicator rather than SMBs. A SME organization can still be roughly the same size as a high-end SMB (figure SMEs will typically grow between 100 and 1000 employees), but it’s a business with enough complexity and high-end requirements as to make ERP a good investment.
What’s Enterprise Resource Planning (ERP)?
ERP generally describes a modular software solution that incorporates the financial side of the business and then adds closely integrated app modules that address other areas of the business, including customer relationship management (CRM), supply chain management (logistics), business intelligence (BI), Materials Resource Management (MRP), which includes capabilities such as Just-in-Time (JIT) Inventory, point of sale(POS), fixed asset management, and even project management.
In essence, ERP is a systemic approach to managing the entire enterprise, not just its finances. And, by integrating all of these modules into a single, cohesive whole, customers can gain new insights and create new processes that weren’t possible using separate tools.
For example, most ERP systems also enhance accounting and overall management by adding features or capabilities to enhance a basicpayroll tool into a more comprehensive human resources (HR) management framework, or to expand inventory management to more closely adapt to the specific type of business the customer operates, such as companies that center around warehousing or distribution.
Sometimes More Is Better
When looking at a company’s management information systems portfolio, it’s sometimes not obvious that a generic app may not be the best approach. A good example of this is payroll. The payroll for a service organization, for instance, incorporates time and billing and possibly expense management; it’s considerably different from the payroll that should be used for a food and hospitality organization, which requires that the company track employee tips. And that’s very different from payroll for a construction company, which often requires multiple rates for the same employee depending on what job they’re performing (and also has to report to multiple unions).
Inventory is another area in which needed functionality differs depending on the type of business. For example, the inventory for a manufacturing company might require component tracking using bar codes to identify parts bins as well as Bill of Materials Processing(BOMP) that provides a list of all the parts and subassemblies needed to construct a particular product, or even Kitting, which consists of inventorying and tracking subassemblies rather than discrete parts.
The point is, because ERP platforms are (a) modular and (b) so broad in terms of the situations they address and the features they provide, the planning process for choosing the right ERP solution begins at home—long before you actually speak to a vendor. You need to start your selection process by sitting down with the front-line managers of all your key business processes, and mapping out exactly how your company does business. Exactly how do your web customers go from a credit card transaction to a shipping box arriving at their front door? How are payments processed, orders fulfilled, warehouses managed, inventory moved and tracked, and shipping orders picked up and delivered? How is all of this information used to provide ongoing BI for the organization? What kinds of information aren’t you getting that you really need? The list of appropriate questions will get much deeper in the real world and extend far beyond the typical IT questions that get asked before installing SMB software (such as servers required, per seat licensing costs, etc.), though those questions still apply to ERP as well.
The reason you need to get a comprehensive understanding of how your company does business is because ERP systems not only run the gamut of business process features (as discussed earlier) but they also provide varying degrees of integration between their various modules. With standard SMB software, it’s rare to find direct feature synergies between warehouse management and the HR framework, for example. But with an ERP system, not only can that be possible but you can also tweak that integration to work even more effectively for your organization. For specialty warehouses that store specialized inventory (like dangerous chemicals, for example), your HR system can automatically kick in its shift-management capabilities to make sure that, when such chemicals arrive at a particular warehouse, the right staffers who have the skills necessary to handle those chemicals are there to receive and store them.
That’s just one example out of myriad possibilities. What’s possible for your organization is entirely dependent on the capabilities of the ERP platform and how well you understand how your business really runs.
Lose Some, Gain Some
In our initial review of the software suites, we looked at the financial side, concentrating on the general ledger and examining overall usability, navigation, and workflow. In this cycle, we went back to each vendor’s offering and examined it for overall ERP functionality and the availability of modules that enhance the financial management aspects of the system (and extend it into other areas of enterprise operations).
In doing so, we made some changes in the vendors and products covered. In the initial set of financial accounting reviews, we included both Intacct and Intuit QuickBooks Online Plus. Neither of these has a true ERP edition so we excluded them from this round of reviews.
ERP Pricing and the Cloud
ERP has been around as a software category since the late 1990s. In that time, it’s evolved in a number of important ways, most notably that many have become cloud-enabled. The benefit to customers here boils down primarily to cost and scalability.
Because ERP systems are modular, traditional ERP systems often required multiple servers to fully function. There may be one server for the financial module, one for the back-end database, one for the inventory management system, and so on. Now tack on redundant servers for reliability and increased performance and you’re soon looking at a hardware and infrastructure price tag that can exceed the cost of the software. To market this technology effectively to SME customers, vendors are using the cloud to power their solutions and theSoftware-as-a-Service (SaaS) model to deploy it.
That means customers have very little (often zero) upfront hardware costs—all of the servers are in the cloud. That can be a huge reduction in overall total cost of ownership (TCO) of an ERP solution. But, as an added bonus, this deployment model also allows for immediate and highly cost-effective scalability. If your business runs a web retail operation, it might opt for an e-commerce module in its ERP solution. But during the holiday season, traffic through the e-commerce system might spike. In a traditional infrastructure setup, that company would need to purchase extra servers and configure them as redundant clusters to handle that increased traffic. Then, when the holidays are over, those servers would simply be shut off and the company would have to eat the cost of an unused hardware investment. Via the cloud, customers can simply spin up new servers in the cloud to handle this increased load, pay for use only during the holiday period, and then dissolve them once the holidays are over (thus paying only for what they need when they need it).
A final cloud benefit is licensing cost. In an on-premises model, your company would pay for an initial setup fee and the “X” dollars (usually between $1,000 and $5,000) per user or seat. That license would extend and generally last until the software was significantly upgraded. In a cloud model, the initial setup fee either doesn’t exist or is typically much smaller, and the licensing costs are assessed at “X” dollars per user per month (typically anywhere from $90 per user per month up to $500 per user per month). For those who carefully do their math, this type of subscription-based licensing can be significantly cheaper than a traditional on-premises, per-seat scheme.
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