ERP: The buyers guide

ERP: The Buyer’s Guide

Introduction

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

ERP implementation.

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

know:

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

can promise.

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