Going Digital: Transitioning to an ERP for the Modern Business

An ERP is a must-have tool for the modern business. Not only does it simplify the process of managing your business, it also provides a robust platform to store and handle critical business data.

A Little Background into the World of ERPs

I first encountered ERPs in the beginning of 2017 while working for a business client who operated out of Papua New Guinea. They had recently expanded from a small business which was serving local clients to more businesses internationally, which not only opened countless opportunities for them, but also increased the demand for data accuracy and management efficiency.

Until then, most of their work was carried out using spreadsheets, and a lot of their transactions were evidenced manually on pre-printed templates. They had some experience using MYOB to manage some aspects of their business accounting, but implementing a fully featured ERP solution was becoming imperative.

Before I could begin recommending solutions to them, I had to gain an in-depth understanding of their corporate needs and some of the challenges they face with more manual work. This, of course, was besides the fact that I was new to the world of ERPs myself.

Recognising the Challenges

A few software implementation specialists I have had the privilege of working with over the years would agree that there is unfortunately no software capable of addressing all the needs of a business – no matter its size. What this also means is that a gap is created between the capabilities of different software applications and implementations which needs to be addressed individually.

It is important to note that ERPs come with their own set of challenges, which are typically:

The Pain of Implementation

Implementing a fully featured ERP is one of the biggest challenges many businesses face. The options are countless (commercial solutions combined), which make it harder to decide which features to compromise for a more stable ERP environment.

Although the number of qualified ERP implementation specialists is quite impressive, the recommendations received from an offshore specialist is not always fit for the market where the client is operating in. This includes things such as tax laws and regulations, legal implications, data handling and storage regulations, resource availability, etc.

Furthermore, planning an ERP implementation will also have to consider, the numerous factors surrounding the availability and effectiveness of training sessions. It is important to note, especially for a business that is just transitioning to an ERP, has for the most of its life, performed business activities manually. Although most employees within a modern-day business are quite skilled with using a computer, using an ERP, especially one that is out-of-the-box, or with minimal customisation, can be a challenge which hits the hardest during implementation.

Costs

A common misconception among business owners is that open-source ERPs cost nothing to run and maintain. What they often do not consider is that even for an open-source ERP, the business must avail some required resources such as a web server, domain name, database server, and SSL certificate to successfully implement and it.

In the long-term, there are significant cost savings when using open-source ERP, but it is not zero.

Consultation Costs

Before implementing an ERP for a business (regardless of size), a specialist must be consulted who can assess the needs, challenges, and available resources of the business.

A typical ERP consultant will have at least 3 years' experience in the field and must be able to work with the requirements local to the business for a successful and satisfactory ERP experience. Unfortunately, charges of an ERP consultant vary over this factor which makes it harder to rely on a indicative figure when budgeting.

In my experience, a reasonably-experience ERP consultant working with a client that has around one hundred end-users should cost anything more than $5,0001¹ in total, but it is important to note that consultants often charge by the number of hours worked, so numerous factors can influence the final payable amount.

Customisation Costs

Once an ERP solution has been finalised, developers are often brought into the play that will work on the custom requirements of the business. This includes things such as customising workflows, editing and redesigning templates and print formats, integrating existing third-party apps, integrating communications, and enhancing security of the ERP application.

Developers who work on these customisations are chosen depending on the extent of the customisations desired. For example, while it is typical to hire a developer who has reputable experience with the ERP being implemented, a multi-faceted developer may also be considered if the client wishes to integrate a fairly substantial number of existing third-party apps and workflows.

Many businesses I have worked with are inclined towards hiring a freelancer for customising their ERP workflows and defining integrations with existing apps. While this can be considered a good option, in my opinion, a professional firm with a dedicated team of developers are known to perform a better standard of work and meet any deadlines the business may have. It is important to note that this opinion is not based on the assumption that freelancers do not perform up to standard – I truly support all the freelancers out there who are doing an amazing job with honesty, but it is only because it is typical for a freelancer to be working a full-time job and freelancing during their free hours. I believe it is also important to note that a team of dedicated developers have more input-power when compared to a freelancer who single-handedly works on multiple projects

Hardware Costs

A typical business that isn’t using an ERP system already will most likely have a shared web hosting plan for their website and emails. While most basic ERPs can do with shared resources, ones with more features and customisations will require dedicated resources.

Choosing a hardware set-up for an ERP depends on its requirements. At the very least², businesses must invest in a dedicated VPS that has:

• At least 2 GB RAM
• At least 20 GB disk space
• Unmetered bandwidth
• At least 4 vCPUs

Most online VPS retailers will have the above specifications available as default for their lower-end packages and these can be a good way to start the implementation bit of an ERP system.

It is important to note that hardware costs are recurring. It can be a challenge to project hardware costs accurately over a period as businesses often scale, which means the appetite for hardware resources also increase over time.

A good practice is to establish an in-house hardware set-up. The only reasonable caveat to this is that it mostly suits business that are well-established and often have a dedicated budget and manpower to install, maintain, and upgrade in-house hardware. This is primarily because acquiring an in-house hardware infrastructure can quickly add costs to the business’ operational budget.

Training Costs

Once an ERP solution has been provisioned, it is important to train existing employees to effectively use it. Sufficiently training the team ensures maximum ROI for the business and opens the opportunities for future growth and fine-tuning of the ERP system.

Training existing staff can be quite a challenge and depends on the level of experience each employee has with digital systems. It is important to note that most businesses that are transitioning to ERP systems have mostly used spreadsheets to keep track of their business transactions and data, and this can be a significant factor in determining the success-rate of efficient and effective ERP training.

Usually, the consultant hired to provision the ERP system will include training costs. If this is not the case, a specialist training firm may be engaged to train existing staff. It is important to bear in mind that at least one of the existing employees will need to be trained at the administrative level of the ERP so they can train new employees who join the business once the ERP system is fully deployed.

As the business and the ERP systems scale, a business may need to re-engage the services of trainers to ensure their team is updated with the knowledge to properly use the new features. This can be added as a recurring cost and can include refresher trainings for the existing team members.

Maintenance Costs (Software)

It is also important to note that an existing ERP system will have updates from time to time. These updates can be fundamentally broken down into two main categories: vendor updates, and plugin updates³.

Vendor updates are updates and security patches issued by the developers of the ERP system. This can also be grouped with the updates issued by the vendor or developer of the operating system your hardware uses to host and run the ERP system.

These are important updates to ensure the smooth operation of the ERP system and must be applied promptly.

Plugin updates are updates that may be issued by developers of the plugins your ERP system is using to enhance its features. They may be issued to improve existing features, add new ones, or ensure compatibility with the vendor updates above.

Both of these updates are important and if the business has invested in an in-house hardware infrastructure, all of these updates will have to be applied internally. This is because most cloud providers have additional support and maintenance packages that can, at least, apply updates to the operating system and other core software that ensure the functionality of your ERP is maintained.

Known Issues

A common misconception among businesses starting with ERP solutions is that it will address every aspect of managing and doing business. At the very basic, an ERP will address most of the business’ needs, but is usually far from solving each and every problem.

Compatibility

Existing processes and workflows within the business could be very different from most of the automated workflows within a traditional ERP system. This is one of the challenges that is faced when fine-tuning the ERP system to blend-in with the existing business operations.

One fine example of this is that in a manual setting, a business may be processing credit card payments directly using the portal of their payment services provider, such as Stripe. Introducing an ERP in the picture would mean customers would be able to pay their invoices directly via a link from the invoice email or a portal if the business sets one up. Then, webhooks and other configurations are made at both the payment services provider’s and the ERP’s ends to automatically charge and post the payment to the company’s accounting books.

Ironing out compatibility issues also extends to the various third-party apps and services the business is using. Not all service providers allow easy integration with other software. While some do offer APIs, most others may need to be linked via a third-party service such as Zapier.

End of Life

If the business is investing in an open-source project that is not regularly maintained, the chances of the software reaching its EOL are higher. One of the most important things to remember is that open-source ERP systems often depend on a community of contributors who are usually developers and code enthusiasts, and the availability of these valuable resources can significantly endanger the life of the system.