Buyer's Guide

2018 Edition ERP System Buyer’s Guide

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A business needs many functions to run successfully. Some of these functions include human resources, marketing and accounting. Having separate solutions to handle each business function can be cumbersome, inefficient and expensive.

Enterprise resource planning (ERP) software is a single system to handle all areas of the business. However, it’s a huge market – and trying to find the right software for your needs can be daunting.

Here’s where our buyer’s guide comes in.

In this guide, we provide an overview of ERP solutions and then break down the features, benefits and challenges, as well as what to look for when making a purchase.

What is Enterprise Resource Planning (ERP) Software?

Enterprise resource planning (ERP) software is a solution designed to help companies manage all facets of the business within a single interface. The solution includes different modules that integrate with one another. Some of these modules include:

The enterprise resource planning field dates back to the early 1960s when ■ Accounting ■ Customer relationship management ■ Human resources ■ Supply chain management ■ Manufacturing ■ Business intelligence ■ Inventory management

1 Entire Contents © 2018 Better Buys the first materials requirements planning (MRP) software debuted to help the manufacturing industry track supplies. In the 1970s, business software vendor SAP got its start as an application solution provider with data-processing capabilities.

ERP software evolved over the years to include not only manufacturing/ supply chain management, but other business functions as well. The enterprise resource planning (ERP) acronym was first developed in the early 1990s by Gartner, as a reference to software that includes all integrated applications. ERP solutions was deployed mainly in on-premise servers until the early 2000s when the solution became available over the Internet.

Today, ERP software can be installed either on-premise (on a company’s server), in the cloud (also known as software-as-a-solution or SaaS) or in a hybrid environment. Companies with legacy on-premise ERP solutions can also integrate any cloud-based ERP modules to the system, therefore creating a hybrid environment.

The ERP software landscape continues to grow – in fact, Allied Market Research reports that the global ERP software market’s revenue is expected to increase to approximately $42 billion by 2020.

Some of the major players in the ERP software market include Microsoft, SAP, Oracle + Netsuite, Infor and Sage.

Who Uses ERP Software?

ERP software has traditionally been intended for large and enterprise businesses, as those companies have multiple business divisions with different data and different needs. However, ERP software vendors also target small- to-medium-sized businesses to help automate their business processes. For instance, the SAP Business One solution is intended specifically for small businesses and includes core modules such as finance, customer management, purchasing, production planning, business intelligence and analytics.

There are also vendors that provide industry-specific ERP solutions. The typical industries that these types of solutions target are manufacturing and distribution. However, there are other industry-specific solutions such as healthcare, retailers or professional services.

Using an ERP software has several benefits, including:

■ Business processes become more automated: With a single ERP system, there’s no need to work with multiple data in multiple systems. Users don’t need to manually enter data or build separate reports, and they won’t have to worry about errors with automated systems. Automated processes lead to improved productivity and efficiency in other areas as ERP frees up users’ time to focus on key parts of their job.

■ Reducing expense of purchasing and maintaining separate software: Having to purchase and maintain more than one software tends to be costly. Having an ERP reduces that expense, which can be allocated to something else in the business.

■ Improved compliance with legal and other regulatory mandates: There are many types of regulatory compliance in different areas that a company needs to adhere to, such as finance and HR. Having an ERP helps companies keep track of all compliance by monitoring data. The ERP can also automatically make updates to any compliance changes.

■ Total visibility into business data and processes: With an ERP, top managers, executives and decision-makers have access to all information. They can have a full picture of all processes within each department and how the process affects the entire company.

ERP software contains several modules that help automate business processes. Depending on the vendor, some modules may be available while others are not. Most ERP software vendors also offer customization so companies can use the modules that fit their business needs.

We’ve listed below the common ERP modules:

■ Accounting: The accounting module is designed for tracking all the company’s finances. Some features included in this module are budget and expense planning/tracking, a general ledger, accounts payable, accounts receivable, revenue management and tax management. Users can also run financial reports within this module.

■ Human resources: With the human resource module, organizations can manage their hiring cycles from recruitment to succession. Some of the features included are an employee database, applicant tracking, payroll, time and attendance, performance management and learning management.

■ Manufacturing: This module helps manufacturing and other production- oriented facilities manage their processes. It consists of the following features: work orders, bill of materials, quality control, engineering, manufacturing process and planning, and product lifecycle management.

■ Inventory management: The inventory management module lets businesses accurately track their materials and supplies in order to eliminate wasteful spending. Inventory management features may differ based on the type of business, but the common features are inventory control, purchase orders, automatic ordering and inventory scanning.

■ Customer relationship management (CRM): Businesses use the CRM module to manage their client-facing operations, such as sales, marketing and customer service. The sales staff can keep track of their prospects, such as contact information and status of sales pipeline. Users can also manage marketing tasks, including advertising and lead generation campaigns. And finally, the CRM module stores customer information and tracks the relationship between the business and the customer.

4 Entire Contents © 2018 Better Buys ■ Supply chain management: The supply chain management module tracks the product from manufacturing to warehouse and distribution to retailers to customers. Some of the features in this module include supplier scheduling, purchasing, inventory, claim processing, shipping, tracking and product returns.

■ Business intelligence: More vendors are offering business intelligence modules within the ERP software. Business intelligence refers to collecting and analyzing data from multiple sources and presenting data into dashboards and reports. The purpose of business intelligence is to help users make better business decisions with real-time data access. Some of the BI features offered include customizable dashboards and other visualization tools, ad-hoc and scheduled reporting, and ata drill-down capability.

Some of the other modules can include e-commerce, production planning, document management and project management.

Challenges of Using an ERP Solution

While an ERP software has its benefits, it also comes with challenges, including:

■ Getting buy-in from top executives, IT, managers and employees Getting buy-in from key players is critical to purchasing software. But these key players may have resistance or concerns about an ERP software. For instance, IT may have concerns about data security if a vendor hosts the solution. Or they may not want the responsibility of hosting and maintaining the software on company servers. Top executives could also be wary of spending the money on a solution if there’s no return on investment. And finally, employees may be resistant to an ERP software if they’re used to a specialized software or have their own processes. They may also consider an ERP difficult to use.

■ Only needing to use a few modules at most This can be a key challenge, especially for small businesses that may only need, at most, three or four ERP modules. However, there are ERP software vendors that offer scalability – the key is to figure out what modules are important for the business.

5 Entire Contents © 2018 Better Buys ■ Issues can arise during the implementation process Depending on the vendor and deployment option, ERP implementation can take anywhere from three months to a year or more. Any issues that come up can delay the go-live date and can be expensive. Issues that crop up can include unclear business goals, data transfer issues or software that isn’t adequately customized. It’s important to communicate clearly to the vendor your budget, goals and requirements for using the software. It’s also important to get a detailed timeline of the implementation process and what happens in each stage.

■ It can be costly to implement and maintain an ERP software ERP solutions can be expensive, especially for a smaller organization with limited resources. If a company chooses to deploy an ERP on premise, it’s responsible for purchasing servers or other infrastructure, as well as IT labor for maintaining the solution. Also, any implementation, training or support may cost extra. Note, however, that the cost of an ERP still can be cheaper than the cost of having to purchase and maintain separate best-of-breed software.

Pricing

One of the most important factors in selecting an ERP software is pricing. Prices can vary depending on company size, customization, implementation and deployment.

Here are a few questions you should consider regarding pricing:

■ Is there a clear plan to judge return on investment?

■ What is our budget for implementing/hosting/purchasing ERP software?

■ How many ERP modules do we really need?

■ How many users will need to access the software? ERP software vendors use two popular pricing models: perpetual licensing (on-premise) or subscription hosting plans (cloud). We take a look at each model.

6 Entire Contents © 2018 Better Buys Perpetual licensing (on-premise) Businesses that prefer to host their own data can purchase licenses that last for the life of the software. On-premise deployment requires the business purchase hardware, servers and other infrastructure, as well as use IT resources to host and maintain the solution.

Perpetual licenses can be an attractive option for larger businesses, businesses with complex systems or businesses that are concerned with data security. Even though you pay for any licenses and infrastructure up front, maintenance and product upgrades aren’t free – you’ll have to consider IT labor costs, vendor support and any system breakdown in your price factors.

One example of a perpetual license is Oracle’s JD Edwards ERP software: its EnterpriseOne solution is broken out into specific components, so companies can pick and choose the modules they want to implement. For example, the EnterpriseOne CRM module’s license cost $2,295 for a minimum of five users. Adding additional modules and features increases the cost.

Subscription hosting (cloud) Businesses that don’t have the time or resources to host their own solution can consider deploying ERP in the cloud. More and more vendors are offering cloud- based solutions. Businesses will only need to pay a monthly subscription cost.

Subscription costs can include the number of modules the company needs, as well as any support and maintenance. Cloud-based deployment can be an attractive option for a smaller business as it typically costs less than an on- premise solution.

Microsoft offers a variety of pricing plans for its Dynamic 365 ERP. For example, its Dynamic 365 Plan for enterprises is priced starting at $210 per user per month and includes finance, retail, talent, sales, customer service, project automation and field service modules.

Regardless of deployment, you’ll need to consider implementation, training, data migration, customization and support. Depending on the vendor, each of these factors may require additional fees. Some vendors have a staff of implementation specialists while others rely on third-party consultants.

7 Entire Contents © 2018 Better Buys There is also the hybrid deployment, which combines both on-premise and cloud implementation. Companies that have an existing on-premise ERP system but want to stay with the same vendor may want to look at hybrid deployment. Businesses can still keep traditional systems but add in flexible, integrated ERP applications via the cloud. The costs of hybrid systems tend to be lower than on-premise solutions. Examples of vendors that offer hybrid ERP includes SAP, Oracle and Epicor. Finally, once you’ve compared price quotes, you’ll want to see a copy of the contract from the vendor (also known as a Service Level Agreement). Here are the questions to ask the vendor as you look over the agreement:

■ What is the total cost of the solution (TCO), including all implementation, training and other fees?

■ Are there any hidden costs?

■ Are there any “evergreen” (subscription automatically renews without client approval) clauses?

■ Do you offer partial licenses?

Be prepared to negotiate for better pricing with the vendor.

Market Trends

Like other software, ERP solutions experience change. We’ve listed a few new market trends below:

Cloud deployment and mobile functionality Within the last few years, more ERP software vendors have aggressively been marketing cloud-based deployment options. Cloud-based deployment provides several benefits, including shorter implementation time, and IT resource re- allocation and affordability, since the business would only need to pay a monthly fee for vendor hosting (and no not hardware purchase). And as workforces evolve, mobile functionality becomes more common. Users can access reports, analytics and other information from their mobile devices. Mobile ERP features are available via apps or within a device’s web browser.

8 Entire Contents © 2018 Better Buys Social media are becoming integrated within ERP solutions Businesses rely on social media in many ways, from monitoring comments from customers to posting job ads. Having social media features in ERP systems benefits businesses. For example, companies may want to promote their brand and reach out to new customers via social media, while still monitoring social media data – ERP software can integrate with social media channels such as Facebook, Twitter, Instagram, Snapchat and YouTube. Or a large company may want to increase better collaboration between employees in separate divisions or locations.

Big data and predictive analytics will become standard features Within an ERP, companies work with several modules, therefore creating large amounts of data. Companies need a way to work with these large datasets – and this will be possible thanks to business intelligence modules. Business users will be able to analyze large amounts of data (also known as big data) in real time without having to rely on IT or dedicated BI software. Big data functionality will benefit businesses in different ways. For example, big data brings faster access to information for users, more accurate forecasting, the ability to track customers and improved quality control. Predictive analytics features will also come into play – businesses will be able to spot new market trends and future opportunities.

Internet of Things will become prevalent in ERP applications Internet of Things (IoT) is a growing market, especially in the manufacturing sector, as more devices (such as smart watches, smart TVs and refrigerators) become connected wirelessly. MarketandMarket reports that the IoT field will grow to $561 billion by 2022. IoT can help ERP software users improve their inventory management, stay on top of equipment maintenance, or offer new products or services to their customers. A few vendors that currently offer IoT solutions include SAP, Oracle and Infor.

Before purchasing any enterprise resource planning software, it’s important to figure out what modules you’ll need. Perhaps you only require a few specific modules, or maybe you need a full-featured solution. It’s possible you’d rather deploy the solution in the cloud than on-premise. It’s also important to conduct an internal audit of your company’s processes to see how an ERP can be a best fit. It’s a good idea to have a checklist with requirements and questions to ask before looking at vendors.

We talk about pricing factors in our Pricing section above. Here, consider these additional key factors before making a purchasing decision:

Scalability – Are you planning to expand your business or do you anticipate that multiple users will need to access the software? If so, you’ll need a solution that can scale up or down to fit your needs. You’ll also want to ensure that the software can accept as many users as possible (or even an unlimited number of users).

Ability to work with existing systems – ERP software is designed to help automate all business processes without the need to purchase multiple software. However, you may have existing legacy software that you’d like to continue using. It’s important to find out whether the ERP software can easily integrate with any existing legacy software, hardware or server, especially for an on- premise solution. If you’re looking to replace your current ERP software, you’ll want to make sure the vendor offers data migration services.

Input from users – All affected parties need to buy-in to the new solution, including top executives and IT. One way to bring them on board is to get them involved in choosing the system – for example, have them participate in software demonstrations.

Demo of the solution – Getting a demonstration of the solution can help you see how it works – and how it can fit into your company’s operations. As another way to test the software, some vendors offer a free trial before purchase (typically 30 days).

10 Entire Contents © 2018 Better Buys Training and support during and after software implementation – Know all the details about training options during implementation. Can the solution be easily used by non-technical employees? If not, does the vendor offer additional training? Choose a vendor that can provide training at your convenience, if possible – for example, having a rep conduct any training sessions for multiple users onsite. Also, make sure the vendor provides support after the software is deployed, such as 24/7 tech or customer service support via phone or online. Along with investigating training and support options, be sure to ask about any security procedures (e.g., how the information is kept secure), especially if the solution is based in the cloud.

Request to speak with a vendor’s current or past customers – It’s important to get references from a vendor’s existing or previous clients. The vendor will give you the names of clients with good experiences, but ask for companies that have similar needs (e.g., companies with similar size or within the same industry) as yours. When contacting the reference, ask if there have been any issues with the vendor or the solution. You’ll want to hear about not just the positive experiences, but any issues as well.

No solution will be completely perfect, but if you’re thorough in your evaluation process and ensure the vendor can deliver what you’re looking for, you’ll make the right choice.