How to start a erp software business
Delowar Hossen
IT Support and Cyber Security Analyst | Project Management | Entrepreneur | Content Marketing
Enterprise Resource Planning is a term for business software that is used to manage all processes in an organization. An ERP connects every aspect of a business and makes for improved performance and project management. The ERP market is expanding rapidly with the ERP software market alone expected to be worth $18.91 billion by 2024.
For most growing businesses, it’s not a matter of if they need ERP, but when they need it. And with more businesses adding to the already-existing 32.5 million in the U.S., there is a huge market for ERP companies. The ERP business population can be split in two: consulting companies and software companies. If you are looking to tap into the market, here are some tips to get you started on your ERP business from scratch and decide what kind of business it will be.
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What is Enterprise Resource Planning?
Enterprise Resource Planning or ERP refers to a type of software that helps organizations manage day-to-day business processes from one place. It can include activities such as inventory management, logistics management, accounting, healthcare and more.
The primary goal of an ERP system is to optimize and automate the processes to boost operational efficiency and company profitability.
Modern ERP systems use the latest technologies such as machine learning and artificial intelligence to provide intelligence, visibility, and efficiency across every business unit.
Now that we have defined what an ERP system is, let’s have a look at a few interesting statistics indicating the growing popularity of ERP systems.
Enterprise Resource Planning Market Overview
As per the statistics, more than 53% of businesses believe ERP is one of the priority sectors for investments. The top most important reasons to implement an ERP are increasing efficiency (35%) followed by cost advantage (29%).
Another report by Allied Market Research indicates that the global ERP market will grow at a CAGR of 9.8% from 2020-2026 to hit a market value of over USD 86 billion by 2027. The key factors impacting the growth of the ERP market are the need for operational efficiency, the surge in adoption of cloud & mobile apps in enterprise digital transformation, and an increase in demand for data-driven decision-making.
Why does ERP matter to your organization?
Organizations employ ERP systems for various reasons, such as expanding business, reducing costs, and improving operations. It also helps in legacy system modernization also empowers businesses to be adaptive to customer needs and enhance the customer experience.
Here are a few key benefits of the ERP system that contribute to your organization’s overall success:
Improved productivity: ERP automates routine manual tasks and processes. This helps your business save a lot of time and remove instances of duplication, error, and rework. As a result, employees perform better and complete more tasks in less time. Also, integrating ERP systems allows your employees to spend less time on repetitive work and more on those tasks that generate revenue for your business.
Better collaboration: The unified system that contains all business-related data improves cooperation between enterprise branches or departments. ERP software reduces communication delays across the whole company. This is beneficial if your organization has a distributed network of affiliates in several states or even in different continents.
Faster decision making: ERP provides a real-time view of data, with easy-to-use reporting and analysis that empowers intelligent decision making. For example, with an ERP system, you can see which workflows are efficient and which ones are losing you money.
Better customer service: Another major benefit of ERP is that it helps in offering better customer services. A centralized data storage provides all necessary information on sales and clientele. This makes it easier for sales managers and customer support staff to communicate with clients and reduce delays in offering services to customers.
ERP also helps in faster access to customer histories. This, in turn, adds to other benefits such as accurately analyzing data on customer behavior patterns and more precise predictions of demand that must be satisfied accordingly and in proper time.
Built-in compliance: It’s important that your business maintains regulatory compliance. One of the most powerful advantages of ERP systems is that they help keep track of industry regulations and changes in compliance. This allows businesses to stay ahead and in compliance with guidelines, relevant laws, and specifications.
Scalability and flexibility: Another important benefit of ERP software is that it allows adjusting its scale according to current needs and situations. An ERP system easily adapts to the expansion or reduction of the company on every level. ERP systems can easily handle changes such as production increase, inventory extension, the addition of new functions, services, or users. In short, it helps in enterprise digital transformation.
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Better availability of information: Advanced ERP systems enable the effective and centralized collection, processing, and storage of information on the product, sales, or customers. Thus, a single data system is used instead of multiple databases that require regular checks and synchronization to remove duplicate or obsolete information.
The increased quality of internal data of all kinds leads to further performance optimization on all levels of the enterprise. Particularly, supply chain and inventory management are the activities that benefit the most from ERP implementation.
Enhanced reports: ERP software leads to reduced paperwork and improved communication among departments. It helps in the quick and easy submission of all kinds of reports such as financial, customer behavior, technical maintenance, etc.
Features of ERP software
There are a few prominent features that make ERP software stand out from other types of software. These include:
Common database: ERP systems’ advantages stem from a common database that allows organizations to centralize different departments’ information. This data from a single source eliminates the need to merge separate databases manually. A common database enables a cross-functional and consistent view of the company.
Automation: Another feature of ERP software is the ability to automate repetitive tasks like invoice, payroll, and order processing. This reduces duplicative data entry and manual work, thereby saving time and reducing errors.
Automation allows your staff to focus on value-added work that takes advantage of their special knowledge and skills.
Consistent UI/UX: Everyone uses the same user interface (UI) and has the same user experience (UI) with an ERP across different roles and departments. Modules for HR, finance, and inventory management have the same look and feel. This increases the software’s adoption rate and makes it easier for staff to move between departments.
A consistent UX and UI increases efficiency because users can quickly find and understand information from all corners of the business.
Data analysis: With every area of your business working under a unified ERP software, data on day-to-day operations can be shared across multiple departments and entities. It also allows getting real-time feedback to make better decisions. Through data analysis, you can uncover areas that are performing exceptionally well and those failing to meet expectations. You can then analyze problems and take immediate action to resolve them.
Integration: ERP integration is where ERP software is connected with other applications or systems to share data across these systems to improve insights as well as productivity. ERP systems have the ability to communicate with every application in the same ecosystem or with other existing business software.
ERP integration is beneficial for companies that have a variety of departments that need to connect with each other to avoid data duplication or repetitive orders.
Financial management: Financial management modules help businesses to make better spending decisions, manage assets, and create accurate financial reports. Any financial information that is needed to monitor and maintain the business is accessible on a single tick in the finance module.
Customer relationship management?
CRM: The CRM module provides an integrated toolset for managing customer data and tracking customer interactions.
CRM capabilities give an integrated view of your prospects and customers, allowing you to get the most out of sales, marketing, and customer service efforts. A CRM module within an ERP software can lead to more effective identification of new prospects, reduce the time involved with managing customer information, and assist with customer upselling.?
Human Resources (HR): The Human Resource module automates tasks involving the people in your organization, such as recruitment and boosting employee productivity. HR features in ERP software allow managers to better allocate employee time and resources.
Human Resource module also encompasses payroll capabilities, which offer functionalities for all employee payment tasks such as payment processing and application of deductions.
Supply chain management: A supply chain management module within an ERP software helps manufacturers, logistic providers, retailers, and distributors manage the flow of goods and services as efficiently as possible.
SCM features can handle everything from beginning to end, including planning, controlling, and executing supply chain processes.
How does an ERP system work?
ERP systems work using a defined, standard data structure. The information available by one department is immediately available to authorized users across the organization. This uniform structure helps everybody to stay on the same page.
For instance, when the shipment takes place for the last item in stock, the information must be recorded by the inventory management and sent to relevant departments so that the inventory can be replenished. The sales team also needs to be informed so that it doesn’t make promises that it can’t deliver.
ERP systems can be a boon when a company has modules for each major business function. This ensures timely and accurate data entry.
What are the different types of ERP systems?
Modern ERP systems are deployed in a variety of ways – in a public or private cloud, on-premise, or in various hybrid scenarios. Here are some of the exceptional benefits of each to help you identify the best ERP deployment option for your business.
On-premise ERP: On-premise ERP allows you to control everything. This is the ERP solution you need to be in total control of your ERP system’s security. However, implementing this type of ERP would require you to have dedicated IT resources on your premises to handle application and server maintenance.
On-premise ERP comes with several advantages including:
Cloud-based ERP: Often referred to as Software as a Service (SaaS), cloud-based ERP is managed by a third-party provider. The flexible design allows your staff to surf and store any data via any gadget.
This ERP system comes with several advantages like you don’t need to make a substantial initial investment to get the system. You also don’t require any specialized skills to implement it.
Hybrid ERP: For companies that want benefits of both (on-premise and cloud-based ERP) to meet their business needs, there is the hybrid cloud ERP model. Under this model, you can use the expertise of ERP vendors without the need to allow them to access all your information. This is also referred to as two-tier ERP.
Open-source ERP: Open-source ERP is an inexpensive and sometimes free alternative that’s suitable for some organizations. Many open-source ERP providers offer businesses to download free software and charge a low annual fee only if the customer wants cloud access.
But using this ERP will mean that your business will get minimal support from the provider, and system improvements and configuration tend to fall on you.
Now that we have seen the different types of ERP systems, let’s see if your business is ready to implement an ERP system.
ERP software development company
This kind of company would be harder to start since it will require a lot of testing to get the ERP you developed to a standard where it can be approved for business. And to do this you will need a larger investment for the right equipment. It will also require more employees, as you need people to research the industry or business needs, research current trends, make and test the actual ERP, and market the software. If you choose to start this kind of company, you will first need to decide on whether it offers generic ERP or industry-specific ERP.
Generic ERP has the common features of the software without any customization. This is normally designed for all kinds of business niches, covering the basic functionalities that automate a company’s workflow, such as management of sales, purchases, accounting, inventory, and human resources. However, any customization of this ERP is often either impossible or inordinately expensive. Larger companies normally buy ERP software that has these functionalities. Then, there are also “Small Business ERPs” that are essentially ERP software systems that are created to meet the specific needs of small and medium-sized businesses.
On the other hand there are industry-specific ERPs that you can offer. These kinds of ERPs are designed by understanding the needs of a certain industry. For instance, healthcare will need an ERP system to help with regulations and costs regarding patient care, payroll, and supplies control. On the other hand the construction industry will need a system that will help streamline operations with automated workflows, such as cost control, construction deadlines, and inventory.
The ERP industry is huge, and it continues to grow annually. However, getting started from scratch will be a huge endeavor in itself. Make sure you prepare by doing proper research and drafting a solid business plan.