Articles 13/05/2020

6 main myths of ERP systems

Nowadays, it's hard to imagine a business without an ERP system. This abbreviation is firmly integrated into the entrepreneurs' vocabulary. The application controls all business processes, maintain accurate accounting and manage the company as a whole. In this article, we will look into the benefits of these solutions as well as how to approach the issue of implementation properly and where to deploy your ERP system.

Why are some companies still afraid of implementing ERP?

Any business needs accurate accounting and monitoring of all aspects of its activity to be profitable and grow. It is a matter of convenience — knowing your income and expenses, financial flows, tax payments, sales volumes, facilities of production and sales helps you plan further steps.

However, some misconceptions about ERP systems and their implementation are still widespread. Despite the positive experience in the market, some companies are wary of accounting systems. These fears often come from popular myths, which we will look into and approach critically.

CRM is a tool for specific tasks, while ERP is a stack of various applications

Myth 1: «I don’t need ERP, I’ve got CRM»

This myth is among the most widespread ones. However, CRM and ERP are not identical. They have different purposes, tasks, and functionality. ERP (Enterprise Resource Planning system) is an application pack for enterprise process management, resource accounting, strategic planning, and development of the entire organization. CRM (Customer Relationship Management System) is a system that facilitates control over customer interactions. It is often used as an additional tool to manage a supply chain. CRM is one of the modules of ERP systems, but it also can be used as a standalone product. It is vital to understand that CRM is a tool for specific tasks which overlap with ERP, but cannot be used interchangeably.

There are no businesses too small to use an ERP

Myth 2: «My enterprise is too small, and I easily manage it without an ERP»

Even if you are a single entrepreneur, you still have to keep financial and tax records. You may not need an ERP if you’re working alone, but business growth always increases the amount processes and operations. For example, you add a recipe for eclairs with mashed blackberry to the menu of your family-owned mini-bakery. This also comes with:

  • a new production process;
  • the need for ingredients (flour, milk, butter, sugar, starch, blackberry);
  • increase of utility consumption and production means (gas, electricity, water, dishes, time, labor);
  • new suppliers to get the berries;
  • new customers who love eclairs, blackberries, and mashed berries;
  • marketing and logistics costs. Even if your mother is your accountant, and the nephew works the dough, keeping records and calculating all processes on a piece of paper is inefficient. You need at least a reduced ERP system, with an emphasis on the financial module. In the modern world, there's no business too small to use an ERP system.

ERP systems are modular; you don't need to use all features

Myth 3: «ERPs are too massive for my company, I don’t need all of their features»

ERP systems are very convenient due to their modular design — several independent modules are integrated into a single system and access a single database. The modular structure of the system allows compose it to meet any needs and wishes. In other words, you can install only the modules that you need at the current stage of your enterprise development. For example, you can start with an accounting system and CRM, and then, as your business grows, you can add other modules. Many companies use only the basic system, which is sufficient for accounting, business process management, planning, and reporting to the authoritires. The ERP market is very rich in offers, and choosing the most suitable one for your company will not be difficult.

ERP systems are easily adaptable to various industries and jurisdictions

Myth 4: «ERPs are not adapted to my type of business»

This myth sometimes takes on another form: «ERP is not adapted to the legislation of my country». This is a widespread misconception. Meanwhile, the fundamental principles of ERP are:

  • any ERP system has mandatory basic functions that can be used by any company, regardless of its size, form of ownership, industry, or country;
  • any ERP supports specified industry features depending on the business profile;
  • any ERP supports multiple languages and currencies, and it can be easily adapted to the legislation and regulatory rules of various countries.

There are also industry-specific modules for various companies. ERP vendors that work on the global market, such as SAP, Oracle, Microsoft, OneBox, have developed local versions of their products for countries that they work with. Still there are plenty of local software developers that create solutions for their countries and regulatory rules. Finding an ERP that fits your business won’t be difficult task.

ERP systems don't affect security, the hardware platform does

Myth 5: «ERP systems are dangerous because they collect my data»

Enterprise management system are nothing more than a set of applications. However, the location of the database server with critical business information is relevant to security. If the server is located on-premises, in your office, or the loft of a neighboring house, your company’s data is not safe. But if you arrange a virtual workspace for your company in the cloud, and your ERP system is also deployed in the cloud, it significantly reduces any risks of unauthorized access or data loss. In the second case, your employees have secure access to a remote office via RDP at any time of the day from anywhere in the world. This way, you can control business processes on business trips or while on leave. And if you decide to transform your company's working process to a remote model, it will be quick and easy. This way working with an ERP system in the cloud is more secure and convenient.

The vital data of ERP should be placed in a stable and high-performing environment

Myth 6: «ERP will overload my server and I don’t want to buy a new one»

Firstly, if your business runs on an outdated server, you will have to replace it anyway, especially if the business is growing rapidly. Secondly, the quality of hardware plays a huge role. You should use Enterprise-class equipment to ensure fault-tolerant and reliable operating of your processes. But powerful high-end servers for round-the-clock work under high loads is too expensive. For the best fault-tolerance, your server and network equipment must be redundant. Thirdly, a server is not a one-time purchase: it needs support, maintenance and upgrades, which will affect your budget. This issue can be solved by renting a dedicated server from an infrastructure provider. This way, you won’t have to buy the equipment or support it. However, if your business is growing rapidly, it’s advisable to deploy your ERP in cloud infrastructure. Many of our clients use SIM-Cloud IaaS for ERP systems. For such cases, we offer «Power» instances that are designed for working with high-load apps.

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How do I choose and implement an ERP correctly?

When thinking about implementing an ERP system, remember that this is an important strategic step, an investment in the development of any enterprise. In addition to the cost of equipment and software licenses, the company will have to pay for user training, obtaining service packs, maintenance, and technical support for the system developer.

The implementation of a corporate ERP system should not be based on the question of money. Free ERP software will not solve the issue of high costs — quite the opposite. No one is responsible for the work of a free app, it cannot be adapted to changes — an increase in the volume of processed data, changes in legislation and regulatory documents, etc. Sooner or later, you will have to start using a commercial ERP system that is developed and supported by professionals.

Before switching to another ERP, you will need to extract and move all data from existing systems that your company uses. Sometimes it is impossible because this feature was not provided by the developers, or it will require a lot of work due to the mismatch of data formats, the need for training employees, and the search for integration tools. This is why we recommend choosing proprietary software for your ERP system right from the start. When choosing a vendor of ERP products, you should analyze its project portfolio, learn best practices, find customer reviews, so on. Operating experience of ERP shows that the best solution for each enterprise is always individual, and needs to be selected based on the business specifics, scaling, organizational structure, periods of peak loads, localization, and many other factors.

It is much easier to save your budget on the computing platform for your ERP system. In the current environment, investing in on-premises infrastructure is not a cost-efficient option. The concept of viable corporate IT costs is moving from CapEx to OpEx, which is enabled by renting an infrastructure solution from a provider. Moreover, the provider has enough capabilities to offer you the best quality equipment and experienced support engineers.

You can learn more about ERP system components and architecture, its basic principles, and why the cloud is the best place to deploy an ERP, by reading our article «Why is the cloud the best environment for an ERP system?».

What kind of infrastructural solution is better for deploying an ERP — a dedicated server, VDS, or a cloud? The answer always depends on the individual case. In some cases, it is reasonable to rent a scalable cloud infrastructure; in others, it is enough to rent a dedicated server (either VDS or physical) in a remote data center. You can also use colocation to place your ERP server in the provider’s remote data center.

When choosing the best platform to deploy your ERP system, keep in mind the data presented in a study by AMI-Partners: after moving ERP from on-premises servers to the cloud, businesses reduced their spending by an average of 30%, while its income increased by 35%. Whatever your choice, it is better to delegate non-core maintenance tasks to the provider's experts. This way, your employees can focus on achieving the strategic goals of the business.

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