September 20, 2021
ERP FAQs: In-Depth Answers to All Your ERP Questions
For more than 25 years, OST has worked on hundreds of ERP projects with customers, partners and colleagues. Along the way, we have noticed a lot of common themes and questions, so we got our experts together to provide some in-depth answers to all your ERP questions.
Not seeing information about your specific question? Let us know and we’ll get you an answer — and update this page!
The First of Many ERP FAQs: What Is ERP?
Enterprise resource planning (ERP) systems are an evolution of material and resource planning systems (MRP/MRP II) from the 1970s, 1980s and early 1990s. As companies realized the benefit of MRP/MRP II, they realized that additional functionality could be centralized into a single system allowing sales, full purchasing, inventory control, finance, and other functions to be performed. These processes being performed in a single system created better data integrity and consistency, reduced process redundancy, integration between the different areas of the business and a more holistic view of the enterprise.
Since then, ERP systems have added functionality across all areas of the business including processes like customer relationship management (CRM), aftermarket service, integrated quality management, workflow management, and just about anything else you can imagine. ERP user interfaces have also been modernized to use technologies like HTML5 instead of the legacy “green screens” of earlier days. ERP architecture has embraced modern integration platforms such as RESTful APIs to allow for much easier integration among disparate systems, customers and partners. ERP vendors have also embraced the cloud, with most vendors having their primary products available in a software-as-a-service (SaaS) model.
What Is a SaaS ERP?
Software-as-a-service, or SaaS (rhymes with “grass”), is a software delivery model based around subscription licensing and centrally hosted infrastructure. The hosting is typically done by the software vendor or a partner of the software OEM. That generally translates to “cloud software.”
Another common aspect of SaaS is that the software is multi-tenant, meaning that multiple customers are hosted on a single instance of the software with security measures in place to make sure that customers can only see their data and personalize the software for their users.
What Is Technical Debt?
Technical debt originally referred to the concept from software development about the rework required if you took an easy path in the short-term instead of building a more robust solution that would address long-term needs.
Today, the term is used more generally in IT and business to refer to the idea that out-of-date applications and technical infrastructure works against success in a business and will increasingly drive costs up, especially in areas where a company is trying to innovate and transform.
Why Should I Select an ERP System Over a Collection of “Best in Class” Tools?
This is not a simple question to answer. There are some instances where a best-in-class system may be a better option than the equivalent functionality in an ERP system. There are few (if any) instances where a collection of best-in-class systems will outperform an ERP system.
ERP is traditionally considered to be strong in manufacturing, planning, purchasing, sales, inventory control, warehousing and finance (although some accountants would argue that point). However, most ERP systems also have added functionality for project management, engineering management, service (for internal, company-owned equipment and aftermarket), quality, CRM and other specialties.
Since ERP core functionality is usually what a company is looking for, it typically doesn’t make sense to have completely separate systems for purchasing and sales and finance and — well, you get the idea. Strategically, most companies will seek a core system that covers most of their requirements and then select other software to perform functions that require more detail.
The question of whether to use a best-in-class system vs. ERP functionality usually comes down to answering the question, “is the ERP functionality good enough?” For an automotive, food or medical company that may live or die by quality, the functionality in an ERP system may not be enough. These companies may then look at a piece of software that completely meets all their needs — and then create an integration between the quality software and the ERP software.
For another company that simply needs to do a yes/no/reject at inbound material receiving or at the end of the production process, the ERP system may have perfect functionality to cover what the company needs. This same thought process can apply to any process that has dedicated software: CRM, engineering, product lifecycle management, financial consolidations, service, manufacturing execution systems (MES), warehouse management systems (WMS) and so on.
A crucial factor when looking at a best-in-class system to work with an ERP system is the integration capabilities and technologies each system uses. When choosing your ERP or other systems, consider if (and how) that system can integrate with other systems, particularly if you’re expecting to have multiple systems that need to share processes and data.
On-Premise or Cloud ERP?
There are a lot of considerations that go into deciding what is best for your organization: ERP on-premise or in the cloud. First, a little clarification: when referring to a cloud ERP, we mean software-as-a-service (SaaS), not virtual machines running in a cloud service such as Azure or AWS. Most ERP vendors consider a scenario with their software running in a cloud service with a virtual machine (that is not their SaaS) as “on-premise” from a licensing perspective (if they allow it at all). From the provider’s perspective, this cloud scenario is essentially the same as running their ERP software in an on-premise hypervisor.
Some of the questions that should be asked when determining on-prem vs cloud ERP are:
- What is your company’s general strategy for the cloud? How does moving an on-prem ERP solution to the cloud fit into that strategy?
- Will your current infrastructure support an on-prem ERP for a reasonable timeframe? Or is the current ERP infrastructure new enough that significant depreciation still needs to occur?
- If looking at an upgrade, does the ERP vendor have a cloud offering?
- Do you have the personnel to handle the ongoing infrastructure needs of your on-prem ERP environment? If you go to the cloud, will there be other, more strategic functions they can perform?
- Does the cloud ERP support your current integrations with other systems? What will need to be done for those integrations?
- What kind of reporting is available in the cloud ERP? Does that fit with your current data analytics strategy? Can it integrate into your current BI solution?
What Are the Benefits of an On-Prem ERP?
Of course, there are also a variety of legitimate reasons to stay with an on-prem solution as well:
- A recent purchase of ERP infrastructure has been amortized over x number of years
- The ERP was recently upgraded on-prem (although this can still be a contender for moving to the cloud).
- You are happy with your current ERP (though technical debt, maintainability and other factors should be considered in this instance).
- Your current ERP solution is “too customized” (though this is not a good reason to stay on an old, on-premise ERP since the problem is only ever going to get worse).
Do I Need to Upgrade or Get a New ERP?
As the adage goes, “you can get used to hanging — if you hang long enough.”
You can almost always stay with a current ERP, but are you just getting used to hanging?
This question requires you to answer some questions about your current situation:
- How old is the version of your current ERP?
- How satisfied are you with the functionality, interface, integrations, and other features of your current ERP?
- Are your current licensing fees reasonable? Is the vendor easy to work with?
- Are there pending acquisitions or mergers that make a new ERP attractive? Or is your organization switching to a partner company’s ERP?
- Has your business changed significantly since the current ERP was implemented? Were the current ERP processes changed to align with the updated business processes?
- Is your current ERP overly customized? Are the customizations maintainable? Do customizations prevent upgrades to newer releases of your current ERP?
- Is there significant technical debt around your current ERP? Are you tied to specific hardware, operating systems, database versions or anything else that is a business continuity risk factor?
- Do you and your workforce understand the “why” of the ERP and not just the “how”?
The answers to these questions should get your team closer to deciding whether a new ERP is required. And you can always ask the experts at OST to help you determine what your best path forward looks like.
How Do I Choose the Right ERP System?
The short answer is that you can contact OST! But in all seriousness, as is the case with many questions around ERP, multiple factors need to be considered.
We often see companies simply choosing to move to the newest version of their current ERP. The justifications for this typically revolve around two points:
- The new version has enough similarity to the old version that the learning curve is not as steep as a change to a new system would be.
- Much of the data from the old ERP system may still be meaningful in the new ERP system.
If these are true and your company is not missing any crucial functionality that will enable greater business capabilities, then upgrading to a new version can make a lot of sense for your organization.
However, sometimes companies, as they grow, need to move from a homegrown system or smaller accounting systems. Other companies are unhappy with their current ERP. Some businesses are on such an old version of an ERP that it doesn’t matter if they “stay in the family” or move to a different ERP platform. When organizations are in these types of situations, they have an opportunity to choose from a wide variety of available ERP systems.
In those cases, OST suggests embarking on an ERP software selection study. Broadly, a company should:
- Review their current business processes.
- Outline the gaps between how they currently operate and how they want to operate.
- Determine technology requirements.
- Select ERP systems for demonstration and then score the demonstrations in a structured way.
- Select the final vendor and move on to implementation.
OST has a well-defined methodology for performing system selections. Please reach out if you’d like to know more!
Why Are ERP Solutions so Expensive?
The price tag for ERP software licenses can cause a severe case of sticker shock for many companies.
While there are justifiable reasons for the cost of ERP licenses or subscriptions, the key consideration when evaluating costs is the total value of what the ERP provides for your business. Regardless of price, if the benefits that the ERP provides for the business outweigh the cost, the ERP can deliver meaningful value.
So where do the costs come from? ERP solutions are very complex systems. They provide core functionality for businesses, and they often offer unique, industry-specific functionality for specific verticals.
From the ERP vendor’s standpoint, costs accumulate related to research and development, sales, direct costs, overhead costs and other standard operating costs need to be covered, as well as profit for the business. When you add in cloud and SAAS functionality, the cost of those additional operational and infrastructure needs are a part of the equation for each vendor’s internal costs as well.
Can I Upgrade and Implement a New ERP Solution Myself?
Should I Upgrade and Implement a New ERP Solution Myself?
Probably not. But, as with a lot of questions around ERP, it depends.
In general, the most successful ERP projects are done in partnership with a consulting team who has a greater depth of knowledge and experience related to ERP selection, implementation and management as well as a proven track record of success. Several factors play into this. Consultants have seen the software implemented in lots of different businesses. While some businesses may go through a small handful of ERP implementations over the course of decades, ERP consultants are doing them day after day. They have expertise and knowledge of the software being implemented. And consultants’ sole focus is your ERP project (although your internal team should have dedicated time as well).
Of course, the cost of the consultants can also cause some sticker shock, even with all the benefits they provide. This may lead you down the path of doing the ERP implementation internally. While potentially feasible, there are major challenges to consider that are essentially the opposite of the benefits ERP consultants provide:
- Does your internal team have enough general business knowledge to make intelligent decisions that will move your business forward?
- Does your team have deep knowledge about the specific ERP system being implemented?
- Will your team be able to dedicate the time to the ERP implementation project to get it done well in a timely manner?
One absolute advantage that an internal team has is knowledge of your company. Consultants come into a project with a respectable amount of industry knowledge. ERP consultants can also develop a good knowledge of the business as an ERP upgrade, migration or implementation project progresses, but it is difficult to get the same intimate knowledge as the people who live and breathe your business daily.
Ultimately, we feel the best solution is a partnership leveraging both the expertise and experience of the ERP consulting partner team as well as the intimate company knowledge of your internal team.
Why Does an ERP Implementation Take so Long?
Are you ready for another “it depends” answer? Here are some important factors to consider.
Does your company have 10 employees and a catalog of 10 items to sell? Then an out-of-the-box ERP implementation may not take long at all.
Is your business more complex than that? Then there are a lot of variables in play that determine how long an ERP implementation will take:
- What is the size of your company?
- How many employees and users will you need to incorporate into the ERP system?
- How many physical sites does your organization have?
- Is your company multinational? Does your ERP require multiple application and data languages?
- What is the goal of your ERP implementation? Is it simply to be on the new ERP with all your current data and processes? Or is the business looking at the new ERP as an opportunity to transform the business?
- What are the number and complexity of the products the company produces, distributes and manages? How many and what types of services does your company provide?
- Are there lots of customizations in your existing ERP? Do those customizations need to be re-developed or mapped to standard functionality in the new ERP?
- What types of integrations exist with the existing ERP? (Or what types of integrations will be required for the new ERP?) Does the new ERP have an effective integration platform and methodology?
- How well do your internal team’s skills align with the expertise needed for an ERP selection and implementation project? What kind of commitment can your core team make to an ERP implementation project?
These types of questions can help determine the complexity of an ERP system implementation and the associated timeframe.
OST’s preferred approach to helping clients with this question is investing in a discovery engagement prior to the full implementation to:
- Document current processes.
- Identify high-level gaps in how those processes are facilitated via your ERP system (both in the current system and what may pose a challenge for the future-state system).
- Develop a project plan and timeline for the expected ERP implementation.
Should I Worry About Change Management During an ERP Implementation?
It may seem obvious, but change can be scary for people. And if disruptive changes (like an ERP implementation) are not managed and communicated effectively, a homerun project can be brought to its knees.
Organizational change management should be put in place for any enterprise-level project to:
- Achieve alignment in the organization related to the reasons for the change.
- Define the what’s and how’s of the change.
- Provide people with an understanding of the reasons and benefits of the change.
- Allow people to learn and adapt at their own pace.
Organizational change management is not training (although training is often an essential component). It is not a tool or app. Change management comprises the methods used to manage and communicate expectations to the company in order to alleviate undue stress about the project, maintain a level of excitement and energy around the change and, ultimately, help drive enthusiastic user adoption of a major change, like a new ERP system.
How Do I Deal With ERP System Customizations?
If you ask an ERP OEM salesperson, their answer may often be, “You can make the software do whatever you want!”
If you ask an ERP OEM product manager, their answer may likely be, “No customizations are necessary! The software does everything you need!”
In our experience, the truth lies somewhere in between.
Of course, the standard ERP software and processes should be used as much as possible, but it’s unrealistic to think that every scenario at every company will be covered by that standard functionality. So, most ERPs provide some method of tailoring the software to a specific company’s needs.
Cloud ERP has complicated the process around this a bit, particularly in multitenant situations (where multiple customers utilize the same ERP software and infrastructure, usually provided by the ERP system vendor). Again, most vendors have provided a framework of some kind to allow “customizations” to an individual tenant, whether they call these “tailoring,” “personalization,” “extensions” or something else. However, the days of the vendor providing source code for the ERP and customers being able to make whatever changes they like are gone.
Most ERP customization frameworks now allow for “plug-in” type changes that don’t affect the standard software, so the changes made by the customer don’t affect the upgrade process. (This has been one major roadblock to upgrading for a lot of organizations running highly customized instances of older ERP systems.)
One other method to accomplish customized functionality is to have a 3rd party app (off the shelf or custom) perform customized functionality and then use the ERP’s integration framework to have those functions and data flow into the standard ERP process.
How Do I Manage All the Other Systems That Need to Integrate With My ERP System?
Most ERP systems can integrate with other tools in a variety of ways.
Long-standing methods such as electronic data interchange (EDI) are still very much in use. Depending on your industry, this may be your primary avenue for information integrations.
Regardless, most ERP systems have a well-defined methodology and framework for integrating with outside systems. This may be an integral part of the ERP, part of a suite of products from the ERP vendor or even a third-party integration software package that the ERP vendor has partnered with. The integration tools may use XML, JSON, RESTful APIs, SOAP, flat file or other methods, depending on what the ERP integration platform or application supports. In most cases, these processes involve the ERP (or related integration software) providing an API of some kind that the integrating application will receive data from or send data to.
Traditional development or customization approaches to writing integrations can also be pursued, depending on your business’s particular situation.
What Do People Use for Reporting out of an ERP?
Surprisingly, not the ERP!
Traditionally, the reporting functionality out of an ERP system is not considered highly usable. An ERP may be able to facilitate the creation of documents like packing slips, purchase orders, sales order acknowledgments and invoices. But even then, the standard report from an ERP system typically needs to be transformed in certain ways to meet the organization’s needs.
Beyond that, ERP reporting systems are typically related to specific transactions. They do not approach what most people would call business intelligence (BI) or data analytics, which allows the business to make real-time decisions based on actionable data from the system.
However, some ERP vendors are learning from their customers and moving toward an integrated solution for business intelligence needs. For example, in Infor’s Cloudsuite products, data from the ERP is fed into an Amazon Web Services (AWS) data lake. Then Infor Birst is used as the data analytics platform for producing true BI and data analytics dashboarding and reporting. Infor even has an AI platform that can interface with the data lake to make automated decisions based on certain criteria.
Outside of vendor-supported solutions, many organizations develop their own in-house platform for data analytics, or they use third-party tools to support their business intelligence needs. For example, Azure Data Factory can be used to extract data from an on-premise ERP system. Then, in Azure, that data can be leveraged to organize the specific analytics required for the company. Lastly, Power BI can be used as the presentation platform.
Many other data analytics vendors could be viable options for your organization as well, such as Tableau, Qlik, Oracle, Teradata and others.
How Do I Access My Data When My ERP Is in the Cloud?
Once again, it depends. The answer varies from ERP vendor to ERP vendor.
For example, Infor collects data from their cloud applications in an Amazon Web Services data lake for customers. From there, Infor has Birst as their analytics software, which is part of their cloud offering. However, there are Java Database Connectivity (JDBC) drivers available so you can pull data directly from the data lake for purposes outside of Infor Cloudsuite. Infor’s roadmap also indicates there will be additional methods to pull that data in the future.
In general, the vendor will want you to use their analytics platform and tools, but most vendors provide alternative methods of getting to data for customers — but it may not always be easy. That’s one of the reasons data access and integrations are excellent points to consider during ERP selection.
What Is the Average Airspeed Velocity of an Unladen Swallow?
African or European?
Set It and Forget It: That Works for ERP Systems, Right?
Yes and no.
Your ERP software should not just stop working out of the blue if you “set it and forget it” (although there is a nonzero chance that it will crash).
That said, if you don’t do proper care and feeding of your ERP system, a multitude of issues may happen. Some of the most important problems with not maintaining your ERP system include:
Technical Debt Will Increase
As technology progresses, if you haven’t been keeping up, you may find yourself locked into old versions of operating systems, databases, ERP software and other tools that can’t provide the benefits of up-to-date versions.
You Will Become Exposed to Greater Security Risks
As bugs are found in software, if you are not patching your ERP (or you are stuck on old OS and DB versions) you will expose yourself to security threats that can’t be easily mitigated
Business May Stagnate
If you accomplish your initial ERP implementation and then forget about your ERP system, you lose opportunities for business process improvement, both from updates to the ERP software as well as from insights you can glean from your ERP system data.
So, while you can “set it and forget it” with your ERP, OST does not recommend it. Your ERP system should be the beating heart of your enterprise that grows stronger the more it is used.
Investing in an ERP System Sounds Like a Lot of Work — Do I Have to Run It?
There is definitely a lot of work involved in running an ERP system. Common examples include:
- User and device setup
- Batch job management
- Operating system, database and hardware monitoring
- Resolving user issues and questions
- Custom development
OST can help in all of these areas — and more. Our Application Managed Services team will take care of the daily stuff for you so you can focus on the things important to moving your business forward (although we’re glad to help you with that, too).
Where Can I Get Help With My ERP System? What If I Have More ERP Questions?
Contact OST! We look forward to hearing from you!