The enterprise resource planning (ERP) software market is large and complex. There are hundreds of vendors offering best-of-breed (i.e. stand alone) ERP applications or integrated ERP software suites. Additionally, many ERP software companies offer vertical market solutions to meet the unique requirements of specific industries, such as manufacturing, distribution, retail and others. We wrote this buyer’s guide to help organizations better understand how to select the best ERP software to suite their business needs.
Here’s what we’ll cover:
- What is ERP Software?
- Application Categories
- What Type of Buyer Are You?
- Market Trends You Should Understand
What is ERP Software?
An enterprise resource planning system helps organizations track information across all departments and business functions, from accounting to human resources to sales and beyond. The term took root in the US around 1990 as a growing number of organizations required integration outside of - but not exclusive of - their manufacturing applications. They needed to share data from their MRP system with say, their financial accounting, customer relationship, supply chain or other applications. Enterprise planning software was introduced to describe a broader system that integrated each of these applications. The top ERP software packages will cover the following application categories.
|Accounting||Accounting systems help organizations manage their financial transactions. At its core, it will have a general ledger, accounts receivable, accounts payable, and payroll. Vendors often develop additional features and functionality to meet unique business and industry needs (e.g. Sage Nonprofit with fund accounting). Example vendors include Sage accounting software and Microsoft Dynamics.|
|Business Intelligence||Business intelligence, as a term, gained widespread adoption in the late 90’s. However, the technology has existed in some shape or form since the 60’s. It is used to analyze and report business data to help companies make smarter business decisions. Core functions include analytics, data mining, reporting, and more. An example vendor is SAP.|
|Customer Relationship Management||A CRM application is used to manage interactions with prospects, customers, clients, and/or partners. It tracks activity across all departments: marketing, sales and service. Core applications closely align with these departments. They include sales force automation, marketing automation, and service and support. CRM aims to increase customers, revenue, and customer satisfaction. An example vendors is Oracle.|
|Human Resources||Modern HR systems help organizations manage traditional HR activities such as personnel tracking and benefits administration, as well as new strategic HR initiatives like talent management, employee evaluation, and learning management. Example vendors include Epicor and Lawson software.|
|Inventory Management||An inventory management program helps companies track up-to-date information about their product supply. Its aim is to maintain optimum stock levels so that companies avoid depreciation of inventory and overspending, and ultimately maximize profits. There are different types of inventory programs to meet the unique requirements of different industries and companies. For example, a food distributor will have different inventory management needs than say, an apparel retailer. Sample products include MAS 90 and 200 Software.|
|Manufacturing||We wouldn’t have enterprise resource software if it wasn’t for manufacturing resource planning software. Today, it’s at the core of many well-known ERP systems. Other manufacturing applications and/or modules include manufacturing execution systems (MES), bill of materials (BOM), product lifecycle management and more. Example vendors include NetSuite, Infor and Sage.|
|Supply Chain Management||The supply chain management (SCM) application tracks goods as they move from manufacturing facilities to distribution centers to retail stores. Common applications include: supply chain planning to adjust inventory as demand changes; supplier management to monitor performance of suppliers; warehouse management to track placement of goods within a warehouse, and others.|
What Type of Buyer Are You?
Before evaluating options and performing an ERP software comparison, you’ll need to determine what type of buyer you are. Over 90% of buyers fall into one of these three groups:
- Enterprise resource planning systems buyer. These buyers require integration of data across all departments. They want to have everything in one system and avoid the technical challenges of integrating disparate applications. These buyers favor complete ERP software solutions like SAP, Microsoft Dynamics, Infor, Epicor, Oracle, and others.
- Best-of-breed buyers. These buyers require a single component like a standalone CRM system or a HR system. They often need greater functionality and more features than what is offered in an integrated suite. Because of the functional depth these buyers require, it's important that they spend time evaluating ERP software reviews for specialized systems instead of integrated suites.
- Small business buyers. A year ago analysts predicted that the average company would have 18 employees before adopting an ERP system. Five years ago the average number was 29. Statistics aside, more and more small businesses want to leverage ERP technology for better business performance. In the past, high upfront costs and technical challenges kept many small businesses out of the market. But with a growing number of Cloud options, small business buyers have a new opportunity to implement enterprise-level technology. Of course there are still on-premise or client/server options still available for small businesses.
Market Trends You Should Understand
There are several trends playing out in the market. ERP software vendors are consolidating, adoption of SaaS is growing, and more. Here we’ll highlight a few you should know about.
- Vendor consolidation. The consolidation of ERP products isn’t necessarily a new trend. Mergers and acquisitions have always been a part of this market's history. However, the rate at which it’s taking place and the implications it has for buyers are worth mentioning. Large vendors continue to acquire niche vendors to round out their product lines, acquire excellent technology, or to expand into new geographic markets. Buyers need to consider this when evaluating systems. In a worst-case scenario, their provider gets acquired, the product gets sunsetted and support and updates are no longer available. Avoid this situation by considering a vendor’s financial and strategic viability.
- Adoption of software as a service. SaaS or web-based ERP is an appealing alternative to traditional on-premise systems. The initial investment is lower, the implementation can be quicker, the user interface is familiar (it runs in a web browser), and companies don’t need full-time IT staff to maintain servers and hardware. Most ERP vendors now offer - or have plans to offer - some kind of Web-based option.
- Mobile app development. Vendors have responded to rapid growth in smartphone adoption by developing mobile interfaces for their ERP software systems. For example, Oracle already has a mobile client, so do SAP and Epicor. Customers are just as active. Surveys by Forester report that companies have already implemented some type of mobile application: 18% of companies polled have used sales force apps; 22% use inventory management applications; 15% use logistics app.
- Social media integration. Although very much in its infancy, many ERP companies are developing social media tools to keep abreast of the bigger trend playing out. Internal tools are being developed to foster greater collaboration among employees, while integration betwen ERP programs and outside networks such as Facebook and Twitter is also taking place.