ERP: The Buyer’s Guide
Companies looking to implement an up-to-date, innovative ERP system must be prepared
to sift through a complicated vendor landscape. ERP works by integrating all of a company’s
processes and data into a single unified system. Automating and uniting disparate business
processes, from managing inventory records to parsing financial data, can drive significant
improvements in productivity, customer service and interdepartmental collaboration.
At the same time, today’s executives must choose from a staggering number of ERP
solutions, ranging from on-premise, feature-rich systems to newer, lesser-known cloud-based
alternatives. The trick is making a purchasing decision that meets an organization’s budgetary,
operational and business processing requirements. After all, ERP implementations are known
for carrying a seven-figure price tag and requiring painful multi-year deployments, not to
mention scores of high-priced consultants to keep systems up and running. The wrong move
can easily spell financial disaster.
The right move, though, can deliver a number of key benefits. All the more reason for
organizations to carefully weigh their options when it comes to selecting an ERP system. For
starters, the right ERP solution can deliver:
• Better alignment of corporate strategies and business processes
• Improved customer service
• Streamlined supply chain processes
• Better targeted marketing campaigns
• The ability to share data across various departments in an organization
• Enhanced financial tracking and forecasting
• Huge cost savings
• Enhanced productivity with self-service capabilities
These benefits apply to a wide range of industries including manufacturing, financial
management, human capital management, supply chain management, project management
and customer relationship management.
So how can a company in the market for an ERP solution make a proper purchasing decision?
This white paper outlines the pros and cons of various delivery models, advises on how to
select a solution for the future and discusses some lesser-known roadblocks to a successful
Weigh the pros and cons of ERP delivery models
Controversy continues to swirl around whether the cost benefits of cloud-based ERP tools
trump on-premise solutions’ robust feature sets. Here’s a breakdown of what you need to
The case for on-premise:
On-premise ERP tools are often a perfect fit for large enterprises with heavily manned IT
departments. With the right on-staff skills, on-premise ERP grants companies enormous
control over their data, immediately eliminating questions of data ownership and control. What’s
more, companies that own their data and manage it on in-house servers often have fewer
concerns about data breaches and security threats. And unlike cloud-based ERP systems
from startups, companies need not worry about what might become of their data if a vendor
goes under, or becomes part of a merger or acquisition.
Another appealing aspect of on-premise ERP is vendor hand-holding. Step-by-step
implementation, employee training, customization – they’re all services that are often bundled
with the purchase of an ERP system.
From a specifications standpoint, on-premise ERP systems also tend to be less cookie-cutter
than their cloud-based counterparts, allowing for rich feature sets and plenty of customization
to suit a business’s unique requirements.
The case against on-premise:
Costly and time-consuming deployments and aggravating monthly fees are among the chief
complaints regarding on-premise ERP systems. A modest-sized IT staff simply won’t be able to
oversee a hefty ERP deployment, nor will it be able to manage weekly maintenance tasks and
repairs. In fact, tackling ERP with limited staff is likely to negatively impact other IT projects
and create an enormous backlog of IT activities.
Organizations should also expect a substantial capital outlay when investing in an on-premise
ERP system. Upfront costs include servers and additional infrastructure. As well, because
on-premise ERP requires upfront investment, it’s not uncommon for capacity to go unused for
long stretches of time.
The case for cloud:
There’s a strong continuing trend toward more cloud and SaaS ERP solutions. In fact, research
firm Gartner reports that 47% of firms surveyed planned to switch from core ERP systems to
cloud-based alternatives within 5 years, while only 30% said they’d keep their on-premise ERP
systems for the foreseeable future.
By offering organizations access to business services such as HR, payroll and procurement
using an on-demand platform, cloud ERP provides a number of perks. For one, many experts
argue that third-party providers such as cloud and SaaS vendors tend to offer solutions that
are more secure and reliable than any in-house or proprietary system. In fact, many vendors
stake their very reputation on providing fool-proof ERP tools – more than any internal IT group
Another advantage is cost. A recent IDC white paper, sponsored by Amazon, reveals that
the primary benefit of switching from on-premise to cloud was reduced costs. The report
demonstrates that migrating from on-premise to cloud replaced $3.66 of capital costs with
$1.00 of operational costs.
Cloud ERP’s ability to eliminate pain-staking maintenance tasks is another upside for busy
IT staff. Backup, hardware fixes, system upgrades – they’re all feats performed by the cloud
provider, thereby alleviating the burden on in-house IT staff.
And thanks to cloud’s utility model, organizations need only purchase the licensing and IT
infrastructure they need to support current needs with the option of scaling up or down as
requirements change over time.
The case against cloud:
Not everyone is singing the praises of cloud ERP. For some, today’s newer and untested cloud
offerings lack the experience and best practice knowledge built into time-tested on-premise
systems. Less scalability and flexibility are also common complaints of cloud solutions. And
then there’s the issue of security. A recent Panorama study reveals the reasons companies
are holding off on the cloud include risk of security breaches (32%), lack of information or
knowledge about market offerings (32%), and risk of data loss (17%).
However, if cost is a primary motivating factor, as it often is, then it’s easy to understand
why some organizations might be reluctant to embrace the cloud. Despite widespread
marketing buzz and industry hype, some experts argue that the cloud simply isn’t delivering
cost savings as advertised. What’s more, even cheaper options are arising with open source
software. Codeless and model-driven, today’s open source ERP solutions promise to integrate
accounting, sales, procurement and project management at a fraction of the cost of traditional
and cloud-based ERP systems. Again, in-house expertise will be needed to manage and
monitor an open source ERP system.
Select a Future-proof Solution
Trend 1: Mobile
Because ERP solutions tend to be pricey, it’s important that organizations purchase solutions
that are relatively future-proof. One trend ushering in a new generation of ERP tools is mobile
technology. Studies suggest that enterprise mobile workers already make up 73 percent of the
workforce. That’s all the more reason to select an ERP solution that provides remote access to
its database and processes.
By granting this remote access, employees such as field salespeople can enjoy up-to-the minute
information on everything from product pricing to shipping updates – details that can
significantly enhance customer service and generate on-the-spot upsell opportunities.
But that’s not all. Because ERP systems can be integrated with human capital management
modules, employees can update their work schedules, manage benefits packages and submit
expense reports with the push of a button, all from a remote location.
The Internet of Things is also driving a greater need for mobile ERP. These days, a growing
number of manufacturers rely on sensors to send r