The implementation of ERP Systems evokes many controversial opinions. Should the ERP system adapt to the processes and needs of the company, or is it more sensible to align the approach of the company with the standard processes of the ERP system? Is the acquisition of a new system or the adaptation of the existing solution the best choice? Cloud or on Premise? Questions after questions…
ERP – Enterprise Resource Planning has been a prominent topic for almost 30 years now, evoking a wide variety of opinions. Whether it’s the way of implementation or personalization – expert opinions differ widely.
In order for an ERP solution to satisfy the needs of the company, personalization and adaptations are necessary, even if the word “changes” has a negative connotation.
Adaptation of existing systems or acquisition of a new solution?
Whether the existing system should be adapted or a new solution acquired is a frequently discussed topic.
An adaptation of the existing ERP software is the preferred approach, especially when working with employees who are not fond of change and the hassle it involves. The time required to learn the changes is considerably less and established processes and working methods do not have to be changed. Best practices and skills that result from the long-term use of a system are an argument for maintaining and modifying the ERP solution. Decision makers often tend to modify existing ERP software because it is assumed, that the firm-specific requirements will be met and the exactly desired system will be created. Off-the-shelf solutions still have the reputation of being too general and not specific enough to ideally support complex company-specific processes. Adaptation of the ERP system is costly due to its recurring nature and can lead to complications and errors due to multiple interventions in the software code.
The acquisition of a new ERP software has the advantage that the business processes are reevaluated and assessed during a requirements analysis. Since processes are reorganized and adapted to the system in the event of a new acquisition, productivity will most certainly increase Eventhough the initial costs of acquisition are regarded as high, the long-term investment is smaller. Industry-specific systems respond to the shared needs within an industry and offer additional flexibility for adapting specific functionalities.
Possible types of adaptation of ERP systems:
When it comes to adapting ERP systems, there are several options, but in general you can choose between three options.
- 1. Customizing:
- 2. Modification:
- 3. Industry Specific Software Packages:
With this method of customization, the standard ERP software is adapted with parameter settings. This is described as the safest and easiest way, whereby only customizations offered by the software can be made. Complexity and security are strongly dependent on the software.
Here the code of the ERP standard software is processed, which is riskier and more expensive. By changes in the code, new functions and interfaces can be incorporated, whereby these may have to be reprogrammed with software updates.For this reason, many companies do not install updates and therefore work with outdated systems.
Software packages are the third form with which ERP systems can be adapted. Software, which is aligned to the basic needs of an industry, can be extended and adapted by Add-ons. Often, the manufacturer provides additional best practices, which makes process optimization even easier.
Modular ERP systems:
ERP systems, which are built according to the modularity scheme, are becoming more and more popular with companies of all sizes.
Tom Miller explains in his blog “Modular ERP: advantages and disadvantages“, that only 20% of the functions of an ERP system are responsible for 80% of the added value for the company. Companies that have special requirements, such as cross-industry market offerings, can only purchase the modules they need and thus avoid unnecessary expenses. Individual modules can be added at a later point in time, optimally supporting growth and allowing acquisition costs to be spread over longer periods of time. The disadvantages of modular ERP solutions are variations in user interfaces and redundant data.
Cloud based or on-premise ERP systems?
In recent years, cloud solutions have become more and more popular. The implementation of these systems is usually faster than on-premise solutions because fewer adjustments are made. Customizing is simple in theory, but restricted in some cases. A big advantage of cloud-based solutions is the easy access to systems, which can also be achieved on mobile devices. This accessibility, however, raises unjustified questions regarding security, which are in the hands of the manufacturer. By now, security standards of manufactuers are most commonly higher than the firms standards. Costs for cloud-based systems are usually charged monthly, which is due to the fact, that no hardware has to be purchased, resulting in lower initial procurement costs.
The functionalities of cloud-based ERP systems are typically also found in on-premise solutions. It can generally be said that on-premise solutions are easier to modify and can therefore be better adapted to the individual needs of the company, which is particularly important in niche markets. On-premise software usually includes the purchase cost of hardware that needs to be purchased before use. For this reason, especially large companies with a bigger budget margin benefit from on-premise solutions. Through intensive customization implementation takes longer, and may need to be repeated for updates (see above). Here the responsibility for data and system security lies with the company itself.1
Change to a new system:
Once the decision has been made to purchase a new ERP system, companies must ask themselves a few questions to ensure the ideal selection and smooth implementation. The first step is a requirements analysis that evaluates existing industry practices and identifies those where no process changes are possible. An independent consultant who knows the industry as well as the different solutions is often a valuable help. He has the ability to evaluate the company and its requirements without influencing it, thereby finding the ideal solution. 2
You want to find the optimal ERP solution for your company to optimize work processes and save time, effort and costs? Our team of specialists will gladly support you in all steps leading to the ideal solution for your company.