With computer technologies penetrating each and any aspect of the business world, both universal and specific ERP software market grows. In this post, we will make a brief overview of typical ERP systems present on the market, their components and functions, consider SaaS as a modern model to deliver such systems, and then provide some technical insights on how to develop an ERP SaaS solution.  

Written by:
Vitaly Plitchenko,
Market Research Specialist

 

One common characteristics of every modern business is its intrinsic complexity. Regardless of the size of an organization, there are always assets to track, workforce to manage and data to analyze. The way to make it more manageable and comprehensible is to use automation. There are many specialized solutions out there aimed to meet the needs of specific departments inside the company, but a more comprehensive and holistic approach would be to use an enterprise resource planning system or ERP.

Such systems allow to manage business processes on the scale of an organization with the ability to gather information from different departments and share it between them. Nowadays you will be hard pressed to find a large enterprise that does not use an ERP system, while adoption rates for small and mid-size companies are also on the rise.

As ERP is a large and complex system that affects almost every business process inside an organization, many companies are hesitant to upgrade and are still using their old on-premises solutions, purchased ten to fifteen years ago. However, the advent of cloud compelled many companies to switch their in-house IT infrastructure to a much cheaper IaaS and SaaS solutions, while traditional leaders of the ERP market are struggling to catch up to a demand for a cloud based systems. In turn, we see a rise of many new solutions in the field, which signifies that now is the best time to put money in an ERP SaaS development.

At Apriorit, we have a very extensive practical experience at developing various SaaS products. We created this article in order to share our knowledge and help you get on track to build an ERP SaaS of your own. We will try to give you some ideas as to what components and features a common ERP should include, how to go about building one, how to avoid common pitfalls, and also touch upon required expertise and potential technologies. Because of their sheer size and complexity, ERPs are one of the hardest systems out there to develop, but with the solid business plan and a properly qualified team on your hands, you undoubtedly will be able to turn this project to a success.

 

What is SaaS ERP system

Before we start discussing specifics of enterprise resource planning SaaS software development, we should define what an ERP system actually is.

ERP, or enterprise resource planning product is a software suit consisting of a number of integrated applications, designed to manage all end-to-end business processes inside an organization. ERP suits cover a variety of company processes, including manufacturing, distribution, sales, financing, and HR, and feature common, standardized data and operation models across the board. This allows to standardize operations inside an organization, facilitates cooperation and exchange of information between various departments and provides company leadership with centralized data source containing all the necessary information for easier decision making.

ERP suits are designed to universally work across different industries, which poses a problem of flexibility and ease of integration for such systems. This even prompted Gartner in 2013 to define a separate subset of ERPs – post modern ERPs. Such a system, according to Gartner, is more of a technology strategy than a unified standardized solution. They provide better integration and are better catered for specific industries, with a large divide into two subgroups – administrative, covering services, and operational, covering manufacturing.

As mentioned above, because of their complexity and deep integration into every core business process, companies are often hesitant at changing their ERP systems. However, most existing ERPs where adopted at the turn of the century to combat the famous year 2000 problem and are now showing their age. It creates a golden opportunity for ERP vendors to bring people to their new SaaS solutions. Moreover, many small and medium companies that previously never used ERPs because of their high cost, are now willing to try much cheaper SaaS options. However, not everybody sees the value in SaaS distribution model for ERP solutions. So, how viable SaaS ERPs are exactly?

 

Is SaaS model worth it?

In March of this year analysts from Gartner predicted that 90% of all SaaS ERP systems will fail by 2018. The reasons they give include increased complexity and cost of such systems, and a lack of cohesive integration strategy on the part of the vendor. With the fact that typical ERP integration requires 150 consultants and lasts for 14 month, it is easy to see where they are coming from. However, what Gartner analysts are not telling you in their typical lack of faith in cloud solutions, is that on-premises ERP systems have a rate of failure just as high, if not higher.

ERP as a whole is a very complex field where it can be very hard to deliver substantial measurable value to the client. ERPs are focused at increasing efficiency, but they take years and a fortune to integrate, often leaving clients questioning whether it was worth it.

However, the clear benefits of SaaS distribution model, namely low cost and scalability, will be enough to turn people around. It’s much safer and much more cost-effective to invest into half a year of service that may not deliver, than to invest in a huge and very costly software suit that may fail. Sure, the problem of integration is the real one and it’s definitely should be tackled by ERP vendors, but the fact that even smaller companies are adopting SaaS ERP solutions now is a testament to how effective this delivery model really is at this point.

 

ERP components

So, if a decision of building an ERP solution using SaaS delivery model is already made, the next question is – what are the typical components of such a system? All ERP systems have a similar structure – an underlying common database with a set of business process-specific applications or modules on top. All modules use a common data structure, which allows them to easily share data between each other, facilitating communication and cooperation between departments.

As mentioned above, ERPs cover huge amounts of ground when it comes to business processes and ultimately, the modules that you include will depend on the particular audience that you target. Below you will find the most typical modules, included in a majority of enterprise resource planning software examples, such as SAP, Microsoft Dynamics, NetSuite, Epicor, and others.

Materials Management – this module covers inventory at hand an everything that goes with it from procurement to warehousing. It allows to manage, control and track the inventory from the moment it arrives until it’s being used in production, and usually contains extensive budgeting capabilities to go with it. Mobile integration is essential for this module with the ability to control procurement and warehousing remotely commonly included in most ERPs.

Sales Management – the biggest and most important part of this module is the point of sale system that allows companies to manage retail transactions, including order processing, packaging, and shipping. Such a module often allows to process orders automatically, gather and analyze the necessary statistics, and has a set of additional features to facilitate marketing.

Financial Management – this module deals with all the financial assets of the company and any related transactions. The most important parts of the module is the ability to have a full financial overview of the company usually in the form of a general ledger. Such ledger is often accompanied by analytics and reporting tools, allowing for easier searching and better visibility into company finances. Payroll and billing tools are also essential parts of this module.

Production Management – this module governs manufacturing and everything that goes with it from scheduling and job management, to cost tracking, to quality control. Common important parts of such a module are material planning, project management, manufacturing management, and reporting. This module can also include an R&D management feature.

Supply Chain Management – demand planning, supplier, and shipping management are the big parts of this module. It allows for efficient replenishment planning and inventory procurement and often includes ability to manage warehousing and track individual suppliers by prices and quality.

Customer Relationship Management – common module featuring CRM capabilities, including marketing and sales management. It allows companies to manage partner and customer contacts, as well as services provided to them, and track individual cases. Essential element of this module is the customer list with the ability to track opportunities and get a detailed overview of relationships with a particular customer or partner.

HR module – another very common module that covers the needs of an HR department. It usually includes such feature as employee management, ability to track attendance and conduct recruitment campaigns. Benefit administration, payroll and ability to manage employee training are also often included.

Read more about how to outsource SaaS platform development (HR management tools).

As mentioned, the list above is not exhaustive and the actual modules you should include depend on requirements of your target audience and the industries you’re going to be working with. For example, other common modules to think about are support, security and a separate e-commerce module. However, feature creep is the real thing in an ERP world, and it’s important to find a good balance between simplicity and usability on one side, and a reach feature set aimed at appeasing every potential customer on the other. This brings us back to Gartner forecast and the discussion of common pitfalls that ERP solution usually face.

 

Common ERP pitfalls

Despite the doom and gloom of Gartner forecast, it is worth remembering, that ERP is a huge market with high demand. Ultimately, every problem could be solved, it’s just a matter of correctly identifying it. In our opinion, the most common pitfalls of ERP solutions are:

  • Complexity – not every company is ready to invest in an expensive employee training in order to conquer extensive feature set of their new ERP. As a result, many features are left unused, which diminishes the value a product brings to the business. When developing ERP solution, it is paramount to find the right balance between ease of use and extensive set of features.
  • Integration – as ERPs are universal tools that span multiple industries, they also require companies to adjust their business processes and infrastructure in order to integrate them. This process is very long and costly and companies are often hesitant to go with it. As Gartner says, it is a mistake to put the burden of integration solely on the customer. Vendors need to have their own integration strategy designed to help ease the process for the client and help them get desired results quicker and cheaper.
  • Data migration – the process of data migration from one ERP system to the other is often very inefficient and may take more than a year. It is important to address this problem on a per-client basis and provide all the help you can in order to get your clients data into your system as fast as possible.
  • Lack of customization – SaaS ERP systems often lack the customization and flexibility of on-premises ERP systems. Customer’s own programmers can easily write scripts or tweak the code in order to make the system that much more convenient to them. Careful requirement gathering and extensive support are the best ways to combat this customization problem and deliver exactly what they want to your customers.

By being aware of all of these problems, you will be able to recognize them as they arise during product development and adjust your project accordingly in order to effectively solve them.

 

Common steps for ERP system development

The complexity of ERP SaaS product development is hard to understate. They are huge systems that can have widely different architecture depending on the feature set and technology stack behind. This is why it is hard to give a concrete general advice on technical aspects of the research and development involved, or answer how much does it cost, considering that every project is unique and what applies to one may not apply to the other. However, we can distinguish a set of common steps that every ERP system goes through in its development.

Gather business requirements. Requirement gathering is the first and most crucial step in developing every ERP system. It will help you establish a scope of the project and define a budged and resources needed to bring it to completion. It can be done in a variety of ways, for example, studying the competition, but nothing beats actually meeting your target audience and talking to them. As different industries have vastly different business processes, you need to make an effort to gather as much information as possible in order to get a clear and cohesive vision for a comprehensive product.

Establish scope and budged of a project. It is much simpler and safer to start with a smaller scope development and later grow the project through iterations. Ultimately, the scope of the project will depend on your vision and the amount of investment you will manage to secure, but we would recommend you to start with developing and polishing only one module that would be immediately marketable and then go from there.

Establish a team and choose a technology stack. This is the most crucial part of ERP development. ERP is a very complex system that requires a huge amount of experience and dedication from a development team in order to bring it to completion. Your team needs to be able to deliver the scalability, security and performance that customers are grown to expect. SaaS deployment also brings an additional challenge. At this stage, you also need to choose the technology stack according to your company expertise. It may be tempting to go with open source and programming languages for fast prototyping in order to deliver quicker results, but selecting something well documented and well supported will pay off in the long run. ASP.NET is a good starting point for ERP development. Forming the right team in-house can be quite a challenge, and at this stage it is a good decision to outsource development to experienced companies, such as Apriorit.

Design solution architecture. Underlying systems behind your ERP should be designed as a framework that can be easily extended as needed. The most important part is the basic workflow engine, that should support task definition, role-based tasks access and rule-based switching. It is also important to identify all reusable parts at this point and start with developing them. Your choices at this point will depend on capabilities and terms of service of your chosen SaaS service provider, so make sure to carefully evaluate all available options.

Build a prototype. Start by building a prototype or MVP consisting of a single module for a single department. Make sure to get this module in the hands of people actually working in said department and carefully gather all the feedback. Use it to adjust your specifications, budgeting and scope of the project as needed. You can then turn your polished prototype into an MVP and bring it to the market.

Iterate and keep going. Keep building your system by adding new modules via an iterative development process. Focus on usability and create a deployment strategy that will allow you to help smoothly deploy your system to the customer. Cloud ERP software development is a gradual process that requires a substantial investment and the best way to succeed is to have a solid technical and marketing foundation and keep building upon it.

 

Conclusion

In this article we defined what an ERP is, covered the benefits of SaaS delivery model, looked at the structure of a typical ERP solution and given you a basic tips on how to develop enterprise resource planning SaaS.

ERP systems are a hard market to get into but a very lucrative one once you’re in. However, actually developing such a system requires a very experienced, dedicated and stable team that are really hard to assemble manually. If you have such a team or willing to invest into an external dedicated team, then it is more than worth it to take such a project on, but make sure that you are aware of the risks involved.

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