The essential guide to ERP for small and medium-sized businesses

Last updated:November 2016

Editor's note

The processes needed to run a business are much like those needed to conduct an orchestra. A conductor needs the full score and the ability to direct each musician and each musician needs the sheet music for his part. In the same way, small and medium-sized businesses that want a competitive edge must have business processes that work seamlessly together, where each "player" is triggered to the right action at the right time with the right information. This is where ERP comes in. It is both conductor and sheet music, triggering and automating action, holding the master data and making available pertinent information as needed.

In more concrete terms, ERP is a technology system that integrates business processes -- such as customer relationship management, inventory order management, accounting and human resources -- so they all come in at the right time and use the right information.

ERP stands for enterprise resource planning and, given the historical complexity and expense of ERP implementations, the "E" was traditionally a key letter in the acronym. Today, things are changing. Particularly with the advent of cloud ERP technology, easier and less expensive implementation options are available, and small and medium-sized businesses, or SMBs, are now able to take advantage of the business process automation and integration that was once only available to large enterprises.

That all sounds straightforward, but if you've spent any time researching ERP for your business, you know that there is an overwhelming amount of information out there, with seemingly countless ERP functions and definitions (not to mention vendors). But part of that information overload has to do with ERP's flexibility. Although many companies do want what are thought of as core components -- finance and procurement fit into these categories -- different companies will need to add functions based on their particular needs. For example, product-oriented companies will have different requirements, such as supply chain and inventory needs, than those of service providers or companies with a project focus.

To this end, you can buy ERP as a comprehensive suite or as one with a narrower focus, such as material requirements planning, production planning or procurement, or software that focuses on a particular industry, such as retail or financial services. Another very important factor is how the ERP software will be implemented. You can choose on-premises ERP, where the system is installed on your company's hardware and managed by corporate IT. This is the traditional choice, and usually has an associated higher cost. Another option is to choose cloud ERP, which is run as a service in the vendor's cloud or which the vendor or a partner hosts and can be less expensive than on-premises. A third option is the "hybrid" approach, where some systems are in-house and others are in the cloud.

1ERP systems need executive buy-in and effective change management

The extent to which an ERP system can affect your business is potentially a great thing, but because of that, there are many human factors that come into play. Implementing ERP software is not just a technological change for your company. Business leaders need to know that an ERP system is justified, and this requires creating a solid business case that will show the benefits. In addition, ERP software, even if it has a narrow focus, will require all but a few employees to change their behavior, which will be difficult unless it is managed well. Remember: User behavior will make or break the success of new ERP technology (or virtually any system, for that matter). That's why it's best to address the change management issues that you might encounter sooner rather than later. Don't leave these issues until post-implementation; start planning an effective change management strategy as early as possible.

2What SMBs should know about buying and implementing ERP

The ERP vendor landscape is vast and navigating it can be overwhelming. But there is no one-size-fits-all solution. You should start first with the particular needs of your company. What is your wish list of features? What business processes are most in need of automation? How much time can you spend training? Are you interested in a cloud or on-premises platform or a hybrid option? What is the budget? What customization needs might you have or expect to have)? These are just a few questions you'll need to address, since the list of considerations is long. It's important to do extensive research upfront. Below are a few articles that will provide some essential information to get you started.

3Thoughts on SMB ERP

This section tackles two important subjects: Why change management is key to ERP success and how ERP can help small and medium-sized businesses improve and gain insights that are not possible without it.