When Enterprise Resource Planning (ERP) software was first developed, only larger companies were able to access this new, innovative software. At the time, ERP was expensive and was seen as a capital investment. Nowadays, ERP is much more widely available for smaller businesses.
Below you will find some of the reasons why many SMEs are now choosing to invest in and implement ERP software.
- The Cloud: ERP software is constantly evolving. One of the biggest advances in ERP, was the shift from on-site hardware to the cloud. Many businesses still take advantage of on-site ERP systems. However, smaller businesses have been able to utilise the move to the cloud to benefit them. Cloud based ERP solutions are popular with SMEs because they are Software as a Service (SaaS) as opposed to an on-site asset. This has a knock on effect of the cost for SMEs. On-site ERP systems require a large upfront payment, while cloud based solutions are paid for as either a monthly or yearly subscription fee. Cloud solutions are also managed on the vendors own hardware, meaning that smaller businesses do not have to worry about storing bulky hardware.
- Cost: As mentioned above, the cost of ERP is now much more feasible for SMEs, thanks to the subscription based cloud model, in place of one big payment for the hardware as well as the software. It is also possible to buy licences outright but spread the cost over time via leasing finance.
In the long run, ERP can help cut down on operating costs. Instead of paying a number of different licensing fees, as well as maintenance and support, the business only pays one vendor who deals with the system as a whole. This reduction in operational costs can help offset the cost of ERP implementation. - Flexibility: An ERP system is extremely flexible. Some SMEs are able to use the software as an ‘off the shelf’ product, or some SMEs may have customisations to their ERP software. This means that smaller businesses do not have to subscribe to a ‘one size fits all’ piece of software.
Also, ERP systems are flexible in terms of how the software can adapt as the business changes. This could be a change in workflow, management or even regulatory change. ERP systems can now scale to meet business needs as the business grows and changes. This benefits SMEs as the software can scale with the business, the business will not be restricted by the software. - Improved Productivity: ERP software is an integrated system, operating using centralised data. This gives users a much more thorough view of the business. An ERP system allows users to access accurate and real time data, such as production levels, scheduling orders and stock issuing, without having to go searching across the business. This can increase business productivity, meaning that in the long run SMEs can be more competitive.
- Better Decision Making: With an ERP system, all data for the business is in one centralised location, cutting down on data duplication and possible mistakes. An ERP system can use this centralised, real time data to put together a variety of different reports, providing an overall view of the business and how the business is performing. These reports can help to give the business better decision making capabilities as the reports and the data are correct using up to date data.
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