Enterprise resource planning (ERP) is a process that helps businesses to manage their financial situation as well as their potential to invest resources into new challenges. Digital ERP solutions include business data analytics, internal process automation, and enterprise infrastructure management. The system is based on integrated database processing.
However, the idea behind ERP isn’t new, since the approach has long been used by enterprises big and small in a form of manual calculations and human management. Modern ERP software could be tailored to any industry and decreases business operating costs almost automatically. In addition, ERP developers can help you to create custom software that will not only optimize resources and make your enterprise cost-effective, but also mitigate risks.
According to Gartner’s research conducted in 2016, 65% of ERP projects failed. Although the percentage of successful ERPs has increased since then, there are still numerous difficulties you may face when applying your custom ERP application. Learn how to avoid common mistakes with LANARS experts!
What is ERP software?
So, once again, ERP (enterprise resource planning) software is a tool for managing business components such as human resources, inventory and hardware, marketing, sales, and, of course, business planning itself. ERP design might be standardized or custom and it should match your enterprise business area, operating specifics, business scale, and strategic commercial aims.
Integrated ERP solutions facilitate interaction between the various business components and optimize internal processes. ERPs can be created in various forms. Some of them have machine learning modules and are AI-based, so they can execute management tasks without deep human involvement. Others just track business process information, store and analyze it, and then present it to C-level managers in an easily understandable format. This can provide them with valuable information when making critical business decisions.
As each business has its own specifics, ERP customization is usually required. Small service industry businesses (local shops, cafes, cleaning companies, taxi or delivery) usually prefer off-the-shelf solutions, as their business structure and processes are typical. Mid-sized and large scale enterprises opt for custom solutions, as it is cost-effective for them to tailor all their needs to a single custom ERP without having to adapt a huge enterprise to comply with a standardized tool.
Who Needs a Custom ERP Development
It’s not only mid-sized and large businesses that need custom ERP development. The more unique your enterprise and business goals are, the more difficult it is for you to benefit from ready-made solutions. Check if you need a custom ERP by reading about the issues your business is usually dealing with:
- No quick access to essential business data
ERP development unites all databases and provides you with a tool to check ongoing business efficiency at various levels, as well as checking the productivity level of departments and employees. Without keeping abreast of your resources you can’t keep your business flexible. While ready-made solutions can’t take into account business factors and require manual interaction, a holistic automated custom ERP provides you with a real-time picture of what’s going on.
There is also a common negative feature of most off-the-shelf solutions: they provide users with false analytics since they do not take into account all of the factors regarding your business processes.
- Confusing software diversity
Your enterprise is already working with software to run internal processes, however, different departments and employees use different software tools for their own needs. As a result, they face difficulties trying to integrate their working databases and enhance each others’ efficiency.
Another related problem — you workers can’t substitute each other, as not everyone is familiar with the tools their colleagues use. In this case, scaling means loss of productivity due to extra training, which decreases departmental performance and may require dedicated training staff.
- Problems with accounting
Account management is an essential business component that helps enterprises to stay afloat. If it takes too much time for your accountants to process invoices and sales orders, and you haven't found an off-the-shelf automated tool that meets your needs, we highly recommend that you opt for custom ERP software development. You’ll be able to maintain financial data including project budgets and corporate assets and make your accounting staff significantly more productive.
- Poor customer experience due to regular inventory management failures
No matter what sort of industry segment your enterprise is working in, you will have customers that want their orders to be executed on schedule. If your selling, production, supply, storage, and delivery departments do not use a single database where they can track orders, you may face order deadline violations, due to departments being overloaded as well as insufficient products to meet customer needs.
With a custom ERP, your reputation will not suffer, as you will be able to monitor order processing and each manager will be aware of what’s going on. In addition, you will have a chance to automate material maintenance contracts between you and your suppliers.
Benefits of ERP Customization
Custom ERP development evolves business opportunities regardless of your business operating field and product specifics. This holistic system unites your departments and turns them into a strong efficient unit, which allows the customer support manager to provide clients the best possible service.
ERP customization also helps optimize business resource consumption and facilitate distribution and supply. However, the benefits you get out of using a custom-tailored ERP depends on the structure and logic of your system. Let us define the most common benefits of a custom solution into several groups:
- Relevant instruments included, you only pay for what you really need
ERP as a service which means you are using an out-of-the-box solution with limited customization features. At the same time, you have to pay for the whole functionality of the package — whether you use it or not. With a custom ERP, only the required integrations and features are included.
- Test, add features and keep control of your budget
A custom ERP approach allows you to develop an ERP step-by-step and conduct thoughtful testing at every stage. If you need something extra in the future, you can add new functionality anytime. Also, you choose the design, languages, software structure, programming environment and can use internal analytics to ensure that everything works as it should.
- Scale your ERP, scale your business
Custom ERP software development makes the final tool flexible and easy to scale. That gives you a chance to stay ahead of competitors if a crisis occurs, or to save time and budget costs on moving to another offshore ERP if the current one no longer meets your expectations.
Customer’s Guide to ERP System Development
A custom ERP development has a lot in common with any other software development (check our articles Cloud-Based Application Development and I Have an App Idea, Now What). Any successful development process has a deep understanding of future product functionality, a strong tech team, and an excellent software development tool awareness background. Considering ERP specifics, we recommend you take the following steps:
Step #1 Why do you need ERP software? Who will use it?
Decide on whether you need to build a custom tool or an off-the-shelf solution. Sometimes, it is possible to opt for ready-made integrated ERP solutions and combine them with custom corporate software. Think of how much money you can spend on development and what you’ll get out of it.
To answer all these questions, you need to know why you need a custom ERP in the first place. Then, define the target audience (departments and employees who will be using ERP). There are lots of options including HR, Sales, Purchasing, Stock control, Financial, and Distribution departments. ERP can also be integrated with your CRM.
Speak to the head of department to collect insights. More on this topic (software product targeting) — Mobile App Development Process: From Idea to App Maintenance.
Step #2 Decide on functionality and general design features
Considering your project budget and team potential, you need to choose between in-house development, and outsourcing (or a hybrid approach). Find the benefits of each approach in our blog article Advantages and Disadvantages of IT Outsourcing. In any case, you will need a development team to execute your task (developers, designers, project manager, QA managers, etc.; a detailed team description is given here — How to Start a Startup.
Having target departments’ insights at hand, gather your development team and work on custom ERP functionality and UX design. Start with creating a list of requirements and then proceed with project documentation. Your basic tech document should include features description, platforms, programming languages, required integrations, projected future product capabilities, project timelines, and other significant details. Present the tech development document to a specialist (a business analyst is the best choice) who’s got a deep understanding of your business processes.
At this stage, you’ve got two options of how to proceed with development:
In-house development
It’s a good option for you, if you’ve got in-house developers with the relevant skills and opportunity to spend time on ERP development instead of ongoing tech tasks.
Development outsourcing
Choose this option if you’ve got a small or no in-house development team or it is not skilled enough to handle ERP development. In this case, you’ll not be required to micromanage task execution and receive a ready-to-use tool in the end.
ERP hosting is one more option to be discussed at this stage. You can use a cloud-based third-party service or your corporate hosting. The first option is more flexible and up-to-date, while the second is believed to be less vulnerable and independent. Read the detailed comparison here — Cloud-Based Application Development: All You Need to Know.
Step #3 ERP software development
Start the development process and track that everything is going according to the project timelines and budget. Be attentive to developers and encourage them to provide you with feedback regularly. If there are any difficulties within the project, it’s better to resolve them as soon as possible.
A good idea of how to optimize the development budget is to develop a custom ERP as an MVP (a minimum viable product). Learn about the MVP approach from our other blog article How to Build an MVP. In brief, the idea behind an MVP is to build a product with only the essential features and test the software hypothesis, spending less than on full-scale software development. Then, you can add other features.
Step #4 Integration, testing, and improvement
ERP development is about making business management more efficient and improving customer experience. At the same time, ERP should be secured and reliable in terms of its capabilities and operations with data. Compared to common app development, ERP requires more time for quality assurance, as it needs integrations with the business digital ecosystem as well as any third-party services your enterprise works with.
That is also important to create a focus group to test your product in a real working environment.
Step #5 Deploy, use and collect feedback
After ERP software development is complete, deploy the solution and try to collect employee feedback. That will help to plan tool updates and evaluate the benefits you are getting from ERP.
Who Will Use ERP in Your Team?
Сustomized ERP software development is a long-term investment. Traditional ‘manual’ business management models might seem convenient until the moment you realize that your enterprise departments aren’t working together as a strong unit and you are also unable to scale.
However, a data-driven custom ERP does not necessarily mean flawless scaling or advanced centralized management. To build a great product for internal use you need to decide for whom — or, rather for which purpose — it is designed. The answer will influence product features and platform solutions. Here are the main reasons:
Human resource management (HCM)
For — HR managers, C-level executives, staff
Evaluation of employees’ performance, work time compensation management, talent acquisition, payroll, general working control (workplace control, work time tracking, access to online office space, storing employee documents and profiles, etc.) could take a lot of an HR managers’ time. A custom ERP can have them as the target audience. Employees may also have access to it — for communication with an HR manager and work issue clarification.
Inventory management
For — supply managers, tech team, HR managers, C-level executives
Flexible inventory management is a top priority for companies dealing with logistics, retail, or production where hardware, transport, and equipment is expensive. Most have their own manual or automated systems for inventory management, however, custom ERP system development makes it possible for owners to monitor resources and evaluate the profitability of their business.
Automated and integrated inventory systems also saves the time of production workers, as it allows them to request resupply or find hardware items easily.
Business and work planning
For — C-level executives and staff
What is ERP software? Basically, it is a tool that evolves your business by optimizing its resources and monitoring the department's activities. An advanced ERP may include tools for scheduling meetings and calls, setting tasks and deadlines, analyzing corporate and department efficiency, communicating online, and the reporting of various metrics.
The idea behind ERP focused on planning is to keep work data secure and instantly available. In addition, it helps to establish a corporate communication policy and keep the same message across the enterprise.
Reporting
For — staff and heads of departments
Manual reporting in a written form takes time. Instead, your team could use data-driven ERP solutions that are used to track their professional activities, count work hours, evaluate workplace visibility, and make the reporting process automated. Also, such type of report is easy to check for managers.
Custom ERP Development: Cost and Features
It is almost impossible to estimate the final cost of a custom ERP development as it depends significantly on the features you’ve decided to include and required integrations. The form of cooperation with your team (in-house or dedicated development) as well as the region where you’ve decided to place your development and host the product database is also important.
Below, find 6 groups of the most common ERP software features and the average number of hour required to develop them:
ERP integrations
from 40 to 160 hours per API integration
ERP development differs from any other software development due to the special requirements for its integration. Your custom software should become a part (usually, the central one) of your internal digital business ecosystem. ERP should integrate with other existing systems and work with them to help you with monitoring and executing business management tasks. ERP unites departments: sales, inventory, marketing, HR, accounting strategic management, logistics, analytics, and office maintenance.
Management task automation
from 120 to 180 hours
Invoicing, payroll, entry, reporting, accounting, inventory calculations — there is always room for thoughtful automation across any department. A well-designed ERP saves staff time greatly, automating tasks that could be described in clear algorithms that makes human-factor mistakes impossible.
Advanced analytics
from 60 to 120 hours
Up-to-date ERP solutions are data-driven. They collect large amounts of data and process it. With the help of AI (artificial intelligence) and ML (machine learning), the system becomes capable enough to monitor patterns in complex business processes and offers solutions that may lead to bigger profits. Marketing and strategic planning departments are mostly interested in this ERP feature. Detailed reporting is included.
CRM (customer relationship management) features
from 120 to 240 hours
ERP developers should also think of CRM development. This tool is extremely helpful for companies with a large customer base. A CRM is an interactive database that helps managers to store client information and have quick access to it whenever and wherever they need it. A CRM may be interconnected with other systems such as delivery tracking, customer billing, emailing, etc.
Financial management
from 90 to 180 hours
Accounting is a basic area within the enterprise that needs your attention. ERP systems usually include accounting tools: for billing, receiving payments, asset fixing, tax payment, revenue calculations, and risk management. Most of the features are supposed to be automated and easy to customize for accountants. Also, the accounting ERP section should meet banking and Financial reporting standards, (GAAP, IFRS etc).
Process and performance tracking
from 100 to 160 hours
Client support managers can monitor payments and delivery, HR and senior managers might be interested in an employee’s performance and department productivity, and marketing specialists will be always wondering if their marketing hypotheses and actual efforts are not wasted.
Other significant factors — UX and UI design (from 140 hours), QA (from 160 hours), hosting, maintenance costs, and tech support.
ERP makes business processes clear and visible across departments. Analytics, statistics, and detailed reports are all forms of how the data can be presented.
As you can see, we’ve got from 600 hours (from $30,000 at LANARS) in total and everything depends on the set of features you need in your custom ERP. There are no two identical ERP systems, but you should be able to receive a realistic budget estimation after having listed your product requirements
Platforms also can change your bill: mobile plus a desktop solution is 40% more expensive than desktop-only.
How to Choose Your Technology Partner for ERP Software Development
Custom software development is an expensive task. Please note that your investment will not bear fruit immediately. Referrals, thematic resources like Clutch.co, LinkedIn, and Goodfirms.co, or dedicated events? All options work for you if you know what you are looking for. There are a number of tips that will help your company reduce the costs regarding ERP software development:
#1 Outsourcing in Eastern Europe instead of in-house development in Norway or the USA
Dedicated development is a way to optimize costs without compromising the quality of the final product. The hourly rates of programmers and designers in developed countries are two or even three times higher than in developing countries. In 2020, we advise you to choose the countries of Eastern Europe where the average cost per hour of a developer of the right qualification is $50. More about this — How to Hire Dedicated Developers.
#2 Look for a vendor with similar ERP customization projects in their portfolio
ERP is a specific product. You can opt for a company with extremely positive feedback from customers, but with a complete lack of experience in developing ERP. At the same time, if your potential partner has already worked on ERP design and programming for business in your market area, give preference to this company.
#3 Evaluate soft skills, cultural background, and English speaking skills
ERP customization requires constant communication between developers, representatives of different departments and top management. Poor knowledge of English within your remote team, its inability to understand you perfectly and synchronize working schedules (because of a time zone gap) — all this slows down production and increases risks. Choose a team whose mentality and working rhythm is close to your company.
#4 Give preference to technology partners of your scale
If you maintain a small business, it will be more comfortable for you to work with a small outsourcing company with ERP specialization. Large companies are not interested in preparing custom solutions for small businesses. A company like LANARS works with small and medium-sized businesses. Find more tips on How to Minimize Risks in App Development Offshoring in our article (shortlisting, cooperation model and many more).
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