What is cloud based ERP?
Cloud based ERP for cloud enterprise resource planning is a platform that enables its users to not only access critical information related to finances and resource planning and automate the processes using the internet.
Enterprise resource planning systems integrate important business functionalities such as inventory accounting order management customer relationship management for CRM and human resources for each or for short in one singular system.
How does the cloud based ERP accomplish this?
The core of any cloud based ERP system is a shared database that allows multiple groups in a company to access the same that are created to their specific needs.
This provides a singular solution for entire business processes hence making it more efficient by reducing the chance of communication and Manual errors.
This also increases and improves the collaboration of different departments across the entire organization.
Enterprise resource management systems are a great way to avoid upfront cost for all software licenses and computing infrastructure; it minimizes the cost of maintaining an ERP application.
It accelerates the implementation of cloud based ERP applications and gives the freedom to access business data anywhere at any time.
The biggest advantage of using cloud based ERP solutions is that you no longer have to worry about the costly subscription of numerous applications.
ERP solutions provide you with a singular solution for all the needs and requirements of your business.
A brief history of ERPs
ERP originally morphed from MRP ( material resource planning)software.
MRPs were formed due to businesses having trouble managing their operations.
ERPs on the other hand enable their users to track parts and supplies required to fulfil customer demands, customer orders, tracking demands, managing shop floors to prioritize orders and ensure all demands are being met by the company.
The creation of ERPs was a great step towards lean manufacturing and maximizing manufacturing efficiency as much as possible.
ERPs provide a more holistic solution as compared to MRPs which incorporates everything from warehouse management, accounting, HR, Customer Relationship Management or CRM for short and human capital management along with material resource planning.
In summary, ERPs provide a unique singular solution that can tie together the entire organization.
Leading ERP vendors
There are numerous ERP solutions available in the market.
The most commonly used solutions are the ones provided by SAP, Oracle and Microsoft ERP solutions.
These are called the tier1 ERP systems.
They are specifically designed for large organizations like multinational and multilocation companies.
The aim of Tier1 ERP solutions is to provide a breadth of functionalities that can meet the needs and demands of such large scale organizations.
Tier 2 solutions are also available extensively in the market.
These are more niche-focused solutions that focus on either one industry completely or on one particular set of capabilities.
These are usually not used by financial services or professional services organizations.
Their main focus is on manufacturing and distribution only.
Tier 3 or industry niche solutions on the other hand are smaller, simpler solutions as compared to Tier 1 and 2.
Tier 3 solutions are designed to either provide only certain capabilities to certain industries or certain functionalities with-in ERPs.
There are numerous solutions available specifically in Tier 3 systems.
In short, given the number of ERP solutions available in the market, its safe to say that there is an ERP solution available for every problem.
Best Breed of ERPs
Ideally, you would require one ERP system that can provide you with all the solutions that technology possibly can.
However, there are various limitations to the ERP system.
Since each organization has its unique needs and challenges it is not possible to have a singular solution to meet each and every need of every organization and to tie everything together.
No need to worry because this void in ERP systems is bridged by the best of breed ERP systems.
These systems rather than providing a holistic solution focuses on different functionalities of your business.
In a sales organization, for example, you can use Customer Relationship Management software or CRM for short.
In the HR department, you can use completely different and unrelated software.
Human capital management is one example.
Workday ERP is a perfect example of a system providing HCM capabilities only.
Similarly, your business might use completely different financial and accounting software.
So, the question arises; won’t that cause difficulty in ensuring the same information is being circulated across the organization. What about the chances of errors? ERPs were originally made to provide a singular holistic solution?
To ensure everything runs smoothly businesses use a core back-office ERP system.
It is true that the best of breed ERP systems are more complex since you have to tie in so many systems together but on the flip side of the argument, it also provides your company with more flexibility and a precise fit to the specific need of your business.
ERP systems, in summary, are a whole spectrum ranging with a variety of functions to suit your needs.
Common reasons why ERP systems fail
It is true that most ERP implementations fail.
According to statistics the failure rate of ERPs is above 80% be it tier1, 2 or 3 ERP system, be it a singular ERP or best of breed ERP.
The question that arises of the technology is top-notch which provides such great solutions and there is a high demand for them, how is the failure rate so high?
The sole reasons why many ERP implementations fail is because of operations management and the people using the ERP.
The technology used in ERPs is extremely robust and innovative which rarely creates problems during implementation.
Reasons for failure include people not addressing their business process improvements, being unable to manage organizational change management and difficulty face by people to adapt to new technology.
What is the right way to implement ERP software?
The first step is to find the right ERP software that fulfils the needs of your industry.
Implementing an ERP software when your business is going through turmoil or misalignment with where you want to be is a recipe for disaster.
Overlying new technology when the organization is not on the same page as the direction or when it lacks a clear vision is bound for failure.
When implementation it is advised not to focus too much on the technology of the ERP but to work on the people and processes side of implementation.
What is the future of ERP software?
ERP systems are introducing advanced technologies and capabilities to ERPs.
The increased use of artificial intelligence has played a wide role in automating the workflow.
From learning patterns and processing invoices and accounts payable.
From outlining the potential problems the company might face in the future to the increasing use of blockchains by for example food companies and pharmaceuticals are all examples of extensive use of new technology in ERP softwares.
Root causes of ERP failure
One of the most common reasons for ERP failure is too much time and money spent on projects.
Furthermore, companies receiving a low ROI can also cause problems.
The biggest cause is the cost of operational distribution.
This is because many people don’t adequately address operational distribution and the factors that will lead to it.
The events that leadup to ERP implementation failure include resistance to change.
Perhaps the company does not want to adapt to the new norm.
Maybe the ERP is not working for your team as it was expected to, the possibilities are endless.
This leads the company to spend time and money implementing the solution and in turn, will lead to operational disruption.
Project delays are another reason for ERP failure.
Unclear requirements are another challenge many companies face.
Companies don’t really know what they want from an ERP system.
This lack of clarity around the business requirements the ERP software needs to support is a stepping stop for failure.
Slow decision making is another reason.
The most common cause, however, is broken software.
Broken software can in simple terms be defined as software in which functionalities are missing or the software works differently than it was expected to.
In many cases, the employees are so are extremely resistant to change.
They think they have broken software, which is not the case.
It should be noted that there are numerous cases where the software doesn’t work so due to a particular reason.
One of the reasons can be the vendor rushing to get the cloud quickly. While doing so he may omit some of the basic functionalities a business requires.
Lastly, we have the resource gaps a business faces.
The resource gaps can be around the knowledge of the new software, finding resources about how the software works and how it can be deployed by your company.
Resource gaps can be internal like not having the right team or staff that can understand the business and bridge the gap between people, process technology.
Other than this we need data experts, project management experts, organizational change experts and people who can provide quality assurance to oversee the project, just to name a few.
Misalignment be it internal (team not being on the same page as to where you want to see your business in the future, how much of the processes you are going to standardize, and the flexibility given to different business units or locations just to name a few) or external.
External misalignment includes the difference in the vision you have for a particular project and what the system integrator and other third party consultants have to bring to the table.
If both parties are not aligned it may lead to the challenges that are discussed briefly in the paragraphs above.
These challenges may in turn cause your ERP implementation to fail.
Biases such as vendor first bias may also lead your ERP implementation to collapse.
Companies naturally want you to purchase and use the solution they have to offer.
This can result in a number of problems for your business as the consultant companies are vendor first biased rather than putting their clients first.
These can lead to one of the challenges mentioned above which can lead to ERP implementation failure if they are not fixed.
Another reason why most companies face ERP implementation failure is that they are leading with technology.
They are too fixated on the software and the functionalities it has to offer.
To avoid this problem companies should lead to what’s best for their company..
Which companies use the most ERPs?
According to statistics, the companies that use the most ERPs can be divided into two:
- The manufacturing types of ERP systems
- The non-manufacturing type of ERP systems
The manufacturing types of ERP systems refer to businesses that produce each one function in their own separate ways. Therefore, ERP software for manufacturing industry use is often specialized for a variety of fields.
These include the construction industry, metalworking, paper and packaging, automotive manufacturing, food and beverage manufacturing, electronics and technology, plastics and petrochemicals, home improvement and furnishing, aerospace and defence and pharmaceuticals manufacturing.
The non-manufacturing types are industries that are not directly related to the supply chain.
Examples include the healthcare industry, the education industry and hospitality.
Why Folio3 is your custom cloud based ERP solution partner
To help you get the best out of your ERP system Folio3 is providing you with the best solutions in the market.
With Folio3 you no longer have to worry about broken software or other biases.
Folio3 has a number of solutions. Some of them are listed below.
Agri ERP software by Folio3 is a great solution you can use to automate business processes, save your precious time and resources while improving your business performance.
AgriERP also provides you with top-notch Agriculture ERP Software.
Other than this you can also know the ON Premise Vs Cloud key differences.
ERP are surely one of the best holistic solutions available in the market right now.
However, one should keep in mind all the problems that can lead to your cloud based ERP implementation fails. The problems that only occur on the surface are caused by deep-rooted underlying reasons.