Sage answers the 101 on ERP.
Is an ERP system cost effective for small to medium sized enterprises (SMEs) in New Zealand?
Determining whether an ERP application will be effective for small to medium sized enterprises (SMEs) depends on what type of company it is and the operational nature of the business. If a business has more than 10 staff members, who are each spending more than 30% of their time maintaining and updating business information, then an ERP system should be considered.
An ERP system can reduce the administrative burden on staff and increase productivity. If staff members are earning on average $50,000 per year and an ERP system increases productivity by 20%, the business's return on investment from 10 staff members would be around $100,000 in gained productivity per annum. It would also help streamline processes, improve communication with customers and maintain efficient inventory levels. Investing in an ERP system could result in significant cost benefits for a SME, benefits that would justify the cost of installing such a system.
The actual cost of installing an ERP system will depend on the size of the business, its individual requirements, software licences, consulting and training. There are enough ERP vendors in New Zealand to ensure SMEs get a fair and competitive deal. The question SMEs should be asking themselves is not whether they can afford such technology, but how can they maximise it to ensure the business gains as much value from it as possible.
What type of ERP system would best suit a SME?
SMEs need systems that will enable and automate key business processes. IT managers will need to consider the best way to integrate all the systems together. An ERP system that has been designed especially for or with a SME in mind will be better suited than one with a 'one size fits all' policy.
Due to today's global market, businesses are no longer limited to physical borders. ERP systems can facilitate multiple languages, manage transactions using multiple currencies, calculate currency conversions and comply with local accounting standards. A software as a service (SaaS) ERP cloud could be relevant for a SME, as it offers cost effective and flexible access to basic business applications.
The start-up costs for SaaS are inexpensive and the roll-out is rapid. But IT managers need to be aware that the system will need to develop with the business and not hold it back. Businesses need to consider this carefully before making any decisions on SaaS and question what they need from an ERP system in the long-term – as it will become the foundation on which other business upgrades are built.
Are ERP systems the future?
ERP systems are evolving and becoming more cost effective for businesses of all shapes and sizes. In New Zealand, SMEs interact with a host of suppliers, distributors, outsourcers, contractors and consultants on a daily basis, as well as having to maintain employees, internal functions and processes. Together these internal and external constituents make up the business's value chain. All the parties have their own roles, priorities and interests, but they collaborate in various ways to get the product to the end user.
How can an ERP system develop and maximise a business's potential?
An ERP system can help increase a business's productivity and growth, and unite with its employees, customers and partners. It can also provide key financial indicators, which can sharpen a competitive edge for a business. ERP systems that offer streamlined integration across applications, advanced web and wireless access, multilingual capabilities, a scalable open architecture and a choice of database and operating systems, can significantly maximise a business's growth and potential. Businesses are looking for performance and reliability to increase profitability – ERP systems can deliver on this and improve financial, operational and customer service management capabilities.
How can ERP systems help IT managers?
IT systems can either help or hinder IT managers; the key is to ensuring and selecting solutions and configurations that best suit the business's requirements. This includes the application, the database, the operating system and the additional software for the system.
A good ERP system allows for fluid management, which in turn allows other staff members within the organisation to focus on its core business. IT managers are crucial in developing an ERP platform that best suits a business's needs. They will look at the scalability of the system, and the ease and cost effectiveness of upgrading it. It is also equally important to acknowledge that a best-practice ERP system is often only as good as the vendors who supply it. By working in partnership with local vendors, IT managers can extend or adapt ERP solutions to meet a business's specific requirements.