Let’s start out with a visualization exercise: You’re at the orchestra.
The violin harmonies are beautifully complementing the oboe’s rhythmic bass; the singing saxophones rise and fall with the hypnotic percussion; everything is flowing together perfectly to bring moving music to your ears… but how? What’s directing the instruments? How are all of these varied components able to work in such harmony?
Enter: the conductor, aka the ERP of the orchestra.
Just like an orchestra conductor, who manages various instruments and musicians to create harmonious music, an ERP system manages various departments and operations of a company to create a seamless workflow.
Maybe you believe your company needs to be more organized and could benefit from easier inter-department communication.
Maybe you just want something that will streamline operations so you don’t have to learn, maintain, update, and manage multiple software systems to do your job.
You know you need an enterprise resource planning system but, before you pull the trigger on one, you should know about the types of ERP systems available.
I’ve broken down the various types of systems below to make sure you’re selecting the best ERP solution for your company.
What is an ERP System?
If you want to start from the start, you can view my What is ERP article, previously published on this site.
An enterprise resource planning system is a form of business process management software that can help streamline processes, support simpler communication, increase productivity, and more.
An ERP does this by providing a system of integrated centralized applications that includes everything your company’s departments require to run, manage, and automate processes - all from a single system. Although your whole company can benefit from implementing one of these systems, the departments that will see the most benefit from ERP implementation include:
- Accounting & Finance
- Human Resources
- Customer Support
- Inventory Control
With a comprehensive ERP system, you can get rid of isolated software, such as your standalone customer relationship management (CRM) system, financial management system, or inventory management system. All of these systems are found within the ERP but with the added benefit of being connected to one another and centralized into a single platform.
ERP Systems Overview
Using an ERP system can help every business on multiple levels. But, not all ERP systems are created equally. If you’ve ever shopped for organizational or operational software for your business, you know these things tend to come in several variations to suit the needs of different businesses. In terms of ERP systems, there are four primary system types you could choose from:
- Out-of-the-box ERPs: These systems are very easy to use, making them beginner-friendly. They’re also easy to install, but they lack the customizations and configuration options of more complex systems. They're considered out-of-the-box because they’re pre-built and ready to use. All you have to do to get started is download and input your company’s information.
- Customizable ERPs: Also known as Tier 1 ERPs (SAP, Microsoft Dynamics 365, and Oracle), these systems are developed from a framework designed or identified by your company. This makes them one of those most customizable options, but the trade-off is that these are pricey and might take some training to use. To create your customized business functions, large-scale ERPs require many hours of development and consultation.
- Intermediate ERPs: Also known as Tier 2 ERPs, these systems fall somewhere between the first two options. While your company can use intermediate ERPs out of the box, they also offer a lot of customization and configuration options. If you’re looking for something that will fit your exact needs without breaking the bank, this is a solid system-type choice. This is generally the best option for small businesses.
- Industry-specific ERP: Our last system type is those built for specific industries. To use this type of ERP system, you’ll need to be familiar with industry terms, standards, policies, and procedures.
It’s important to note you won’t always see enterprise resource planning systems marketed as one of these system types. However, the brief explanations above should help you clearly identify the types of available systems and which type is best for your company.
Types of ERP
Of course, when you’re determining the type of enterprise resource planning software that will work best for your company, you need to look at more than the system; you’ll also want to identify your ideal hosting type.
While system types are more nuanced and not often advertised, hosting types are commonly understood and marketed by ERP providers. The most prevalent hosting types are:
A cloud-based ERP is hosted on your ERP vendor’s servers, which you then access via the internet. Generally, these are software-as-a-service (SaaS) solutions that have a subscription-based price point, where you pay a flat pre-determined rate every month, quarter, or year.
The benefits of using a cloud-based ERP include:
- Relative affordability
- An easy-to-calculate comprehensive price
- Quicker implementation
- No need for in-house IT specialists to maintain the system
The downsides of using a cloud-based ERP include:
- Restricted system control
- Limited customization compared to on-premises ERP options
- Data security out of your direct control
An on-premises ERP is hosted on your organization’s computers and servers. It can be accessed through any connected computer and can sometimes be accessed remotely, depending on how the ERP is set up.
The benefits of using an on-premises ERP include:
- Full system control
- Full customization and configuration options
- Data security in your direct control
The downsides of using an on-premises ERP include:
- Very large upfront cost
- Higher ongoing costs, as you’ll need in-house IT professionals to perform your own maintenance
- Not every company has the technology or bandwidth to host an on-premises ERP
Finding a hybrid ERP may be harder than the other two options. But, as the name suggests, this hosting type combines aspects of a cloud-based ERP and an on-premises ERP. The benefits and downsides of these systems can vary based on which aspects are taken from the other two primary hosting types.
Once you’ve determined what will work best for you in terms of both system and hosting types, you can look for the software that provides the perfect combination for you. For example, you may look for an on-premises, industry-specific ERP. Or, maybe you end up deciding that an intermediate, cloud-based ERP is your best option.
Real-World Uses of ERP Systems
Any company of any size can benefit from the centralization and improved organization that an ERP system offers. But, it may help you to see some real-world uses of how these systems can help your business. For this reason, we’ve created two real-world situations where introducing an ERP system provides clear benefits.
Situation 1: Small business wants to grow and expand
Here we have a small business that wants to grow and expand. However, its lack of organization and poor internal infrastructure are hindrances to these goals. By implementing a cloud-based ERP in a box with basic (but essential) ERP modules, this small business sees significant improvement in its internal infrastructure. With a more solid infrastructure, the business becomes more organized at every stage of the lifecycle. This gives the small business the scalability it needs to grow and expand, whether that means opening a new location or growing its employee base.
Situation 2: Large corporation needs to be more centralized
Did you know that the average organization was already using 110 SaaS applications to help run their business, back in 2021? With so many fractured systems, it’s easy for data to fall through the cracks.
Here we have a large corporation that has already implemented multiple systems to help with their normal daily operations. They have accounting software, a customer relationship management system, an HR program, and so on. However, this is getting tedious and the corporation needs a more centralized option to streamline processes and create more cohesion between departments. Implementing a new ERP solves this problem while providing additional benefits.
Big or small, ERP answers the call.
Now that you’ve seen examples of real-world uses of ERP systems, we’ll look at industries that can most benefit from using them. We’ll also look at some of the most common features and use cases of ERPs.
Industries That Most Benefit From Using ERP Software
Many industries can benefit from using an ERP - and operators are quickly learning that. The proof? Allied Marketing Research predicts that the global ERP market is going to be worth more than $117 billion by 2030.
However, while virtually all companies in all industries can benefit, there are a few industries that benefit the most. Thanks to this, these are also the industries that you’ll most often find using an enterprise resource planning system. These industries include:
- Technology & SaaS
- Food & Beverage
Common Features of ERP Software
Although the features and capabilities of ERP software can vary significantly from one option to the next, there are a set of common features (called modules) that all the best options have. These include:
- Accounting: Some believe accounting to be the true core of ERP software because it benefits most from centralization due to the ability to create high-level, detailed company-wide reports. A few accounting features found on ERP software include invoicing, financial report generation, budgeting, data aggregation (goodbye rogue spreadsheets), and general finance capabilities.
- Website/E-Commerce: Most ERP software has features that allow you to design, configure, and host your website directly from your system. This makes things like online payments, order processing, and designing or maintaining a customer portal simpler.
- Project management: Although most ERP systems have project management capabilities, the features for this can vary widely. Most systems include timesheets and task management; however, more robust systems might also include procurement, resource management, order management, cost estimations, and project reports or overviews.
- Customer service: An ERP should provide all the fundamental features of a customer relationship management system (CRM). For example, ERPs generally offer live chat, customizable surveys, customer data tracking, and a help desk. Together, these features can streamline customer service business operations, reduce call waiting times, and generally optimize the customer experience.
- Human resources: This module is designed with features to handle all of the most important tasks of HR. For example, an ERP may include performance reviews, payroll, recruitment features, expense reports, and leave or time-off tracking.
- General operations: One of the most significant benefits of ERP software is that it allows you to centralize all your operations into a single platform. Due to this, it allows you to track and manage general operations you wouldn’t normally find in other collaborative software solutions. For example, an E-Commerce business could find features that assist with procurement, supply chain management, profitability tracking, inventory management, and more (based on your business needs).
- Automation for various workflows: Automation features for various workflows across departments can decrease time spent on tedious or routine tasks, such as data aggregation for financial report preparation. This is a significant feature to look for in an ERP.
- Analytics and reporting features: The analytics and reporting features available in an ERP are more powerful because they encompass the company as a whole, versus being department or project-specific. This can help improve decision-making capabilities and provide a clear definition of necessary business requirements moving forward. If possible, look for real-time data options for even more powerful decision-making abilities.
Use Cases of ERP Software
There are many uses for ERP software, but you may find it helpful to have it broken down to see how each modular is best used. We’ve broken down the primary use cases of ERP software below so you can ensure the one you choose addresses your company’s specific needs.
- Inventory management: Track, update, and troubleshoot your inventory. You can also make this process less time-consuming by looking for an ERP that integrates purchasing capabilities, too.
- Software licensing: Level up your procurement capabilities by centralizing everything from vendors to accounts payable in a single platform.
- Sales and marketing: Sales reps can use an ERP to turn quotes into sales orders within minutes. By integrating sales and marketing together, you get a more comprehensive picture of what works (and perhaps more importantly, what doesn’t).
- Financial management: Manage all financial aspects from one platform to increase productivity and receive a more comprehensive overview of your company’s financial health.
- Customer relationship management: Use an ERP to track customer information and customize marketing efforts. Plus, tie your customer service options directly into customer portals for increased efficiency.
- Supply chain management: Better organize your purchase orders and monitor current production efforts. An ERP can help you decrease the risks of running out of what you need, so you always have what your customers want.
- Human resources management: Effectively manage all your human resources, manage company policies, and help uphold the company culture within the ERP.
- Project management: Manage projects by assigning tasks, tracking expenses, and overseeing progress within the ERP. Plus, run detailed data reports at every stage of your project to ensure efficiency - and address problem areas quickly.
Need expert help selecting the right ERP Software?
We’ve joined up with Crozdesk.com to give all our readers (yes, you!) access to Crozdesk’s software advisors. Just use the form below to share your needs, and they will contact you at no cost or commitment. You will then be matched and connected to a shortlist of vendors that best fit your company, and you can access exclusive software discounts!
Now that you have an in-depth understanding of the types of ERP systems your company could use, you can make an informed decision on the best type for your company. Do you think your company would most benefit from an out-of-the-box, cloud-based ERP system? Or maybe you run a larger organization and have decided that a Type 1, on-premises ERP system is your best option. More importantly, are you still debating between two or more options?
I can help. Comment your questions, debates, and experiences with ERP software below, and I can help you get your hands on a system that works best for your business.