Understanding the ERP Industry

Enterprise resource planning (ERP) software provides your organization with an all-in-one solution for managing business processes and optimizing operational efficiency. As a single source of truth, cloud-based ERP tech includes a wealth of tools and functionalities that give you a competitive edge and empower you to better serve your customers. 

In this deep dive into the ERP industry, explore everything from the ERP software market size to implementation costs and more. Using this knowledge, you’ll be equipped to identify which ERP software solutions are the best fit for your organization. 

What Is ERP Software?

Enterprise resource planning systems are a suite of integrated applications that manage and automate many business functions across an organization. Think of it as the central nervous system of your business operations, linking different departments—whether finance to HR or supply chain management to customer service—to create a cohesive, interconnected unit.

ERP technology supports your business decisions by providing real-time data about customer relationship management, inventory management, and other processes. By merging this data, ERP technology provides a holistic view of your organization. 

ERP Industry Insights and Statistics

According to Grandview Research, the global ERP market share was $54.76 billion in 2022. Traditionally, the manufacturing sector and other entities involved in supply chain management have composed a large chunk of ERP users. 

However, researchers found that HR, finance, and other verticals now compose the majority of ERP users. This should lead to a 9.2% compound annual growth rate (CAGR) over the next seven years. 

Who Does the ERP Industry Serve?

Modern ERP software has a modular design. Virtually every ERP solution out there has basic modules, like accounting software, HR management functionality, and inventory management. However, the best solutions also include modules designed for specific industries, making them versatile platforms that appeal to a wider array of sectors.

That said, some ERPs are still industry-specific. For instance, Epicor focuses primarily on manufacturing and distributors. Conversely, platforms like Microsoft Dynamics and Oracle NetSuite are highly configurable, allowing them to meet the needs of a broader audience. Let’s explore a few industries that can benefit from ERP technology. 

Manufacturing

For manufacturers, ERP systems are vital for managing complex production processes, supply chain logistics, inventory control, and quality assurance. They provide real-time visibility into operations, helping manufacturers optimize production schedules and reduce costs. 

Technology

The tech sector has also embraced ERP systems because they aid in project management, asset maintenance, and other key processes. Larger organizations also rely on ERP systems to aid in resource allocation and R&D. ERPs support tech firms in managing their long-term growth and delivering viable products for their clients. 

Finance

Finance organizations find ERP accounting software valuable for managing complex revenue cycles. The top solutions also use consolidated business data for budgeting and risk management applications, allowing organizations to protect their long-term futures. 

Retail

Retailers use ERP systems for inventory management, sales tracking, customer relationship management, and eCommerce integration. This leads to improved stock management, fewer shortages, and a more nimble business. 

Healthcare 

ERP in healthcare helps manage patient records, billing, regulatory compliance, and supply chain operations. Multi-entity organizations, such as large health systems with several facilities, find ERP especially useful. They can ensure data security and compliance while maximizing efficiency. 

Distribution

For distribution companies, ERP systems optimize logistics and inventory management. Distributors also leverage ERP technology to streamline communication with other members of the supply chain.

Project Management Firms

Project management firms rely on ERP for resource planning, project scheduling, budget management, and collaboration. ERP tools help these firms deliver projects on time and within budget while maintaining quality standards. 

Key Players in the ERP Industry

There are dozens of enterprise resource planning software providers out there. Some providers focus on a few key industries, whereas others deliver highly customizable solutions that can be configured to meet the needs of most businesses. 

If you are in the market for an ERP system, it’s wise to start your search by focusing on the big three before moving on to a niche provider. Typically, one of these three providers will be able to meet your needs. It’s just a matter of deciding which one offers the best value and support.

Microsoft

Microsoft Dynamics 365 stands out in the ERP landscape for its seamless integration with other Microsoft products like Office 365, SharePoint, and Azure. If your team is already using Microsoft solutions, Dynamics 365 will feel very familiar. This means you’ll enjoy a shallower learning curve and may be able to condense your time to value.

Dynamics 365 is best suited for small to medium-sized businesses. It offers plenty of out-of-the-box interactions and exceptional flexibility. However, it is not as difficult to implement or as complex as enterprise-grade solutions like Oracle NetSuite. If you need a no-frills ERP with a few industry-specific modules, Microsoft Dynamics 365 can be a great choice.

With its cloud-based deployment, Dynamics 365 gives you real-time insights and ensures you can respond quickly to market changes. Additionally, its AI-driven insights help your business anticipate market trends and customer needs.

As an added benefit, the platform is supported by a huge network of third-party providers and developers. For instance, Cavallo offers a robust suite of solutions for Microsoft Dynamics GP and Business Central. These applications vastly improve the functionality of each ERP, allowing users to work more efficiently, enjoy full visibility of real-time data, and unlock hidden profits. Talk to an expert to learn more about the value Cavallo can add to your business.

Oracle

Provided by NetSuite, Oracle ERP is designed to cater to the complex needs of large enterprises and fast-growing businesses. Its comprehensive suite includes capabilities in financial management, project management, procurement, risk management, and supply chain management, among others. 

What sets Oracle ERP apart is its strong emphasis on scalability and comprehensive functionality, allowing your business to expand and adapt the ERP system as it grows. Oracle is also committed to innovation, publishing regular updates that include cutting-edge features like IoT, blockchain, and AI. 

Oracle ERP is additionally recognized for its robust security features, which ensure that your sensitive business data is protected in the cloud environment. The platform is suitable for large businesses looking for a highly scalable and feature-rich ERP solution with strong analytical capabilities. 

However, it can be too complex and expensive for most small to mid-sized businesses. It also takes months to implement and configure, which means you won’t see any returns on your investment for quite some time. 

SAP

SAP S/4HANA is renowned for its powerful functionality and ability to handle complex business processes at scale. This next-generation ERP solution is built on SAP’s advanced in-memory platform, SAP HANA, which allows for real-time processing of massive amounts of data.

If you require immediate insights for decision-making, SAP S/4HANA offers the functionalities you need. It can support finance, sales, procurement, manufacturing, and supply chain management processes. The platform is also equipped with machine learning capabilities that enable predictive analytics. 

Additionally, SAP’s global presence and strong support network make it a reliable choice for multinational corporations. Like Oracle, SAP may not be the best fit for small to mid-sized companies due to its cost and complexity. In other words, it offers a high level of functionality that smaller businesses don’t want or need.  

ERP Deployment Options

There are two ERP deployment options: cloud-based and on-premise. Many enterprise resource planning providers are moving away from on-premise offerings in favor of the cloud-based approach. However, some still give you a choice.

The on-premise approach means you’ll have to invest in hardware and computing infrastructure to run your ERP. This represents a huge upfront expense. Most providers also charge a larger licensing fee for on-premise deployments, as the software gets downloaded on your servers. 

On the flip side, an on-premise deployment gives you more control over your platform, which can be both good and bad. If you want to hold the fate of your data in your hands, on-premise is appealing. However, you’ll also need to be diligent about uploading patches, bug fixes, and updates to address system vulnerabilities. 

The cloud-based approach is far more popular. Under this method, the provider will manage the application on the cloud and store all your data there as well. As a result, you won’t incur any major one-time expenses. Instead, you’ll pay a recurring monthly or annual fee for the software. 

Going the cloud route offers exceptional scalability. When you need more resources, your cloud provider can simply allocate the requisite computing power and storage capacity to your organization. They will also handle all the updates, allowing you to focus on running your business. 

Counting the Costs of ERP Technology

There are numerous expenses associated with rolling out ERP technology. Understanding each of these costs and the cumulative expenses that you’ll incur is vital for a successful implementation. We’ve highlighted a few of the major expenses below.

Software Costs

The price you pay for the ERP software itself will represent a significant expense. Under the cloud-based deployment model, you’ll pay a recurring fee for the software. Still, this fee can range from a few thousand dollars to tens of thousands, depending on several factors.

When calculating your costs, providers will consider which modules you are implementing, how many users you are enrolling, and your consumption or usage. Many providers charge by the user and module, so the more people you enroll, the higher your costs. A few ERP providers only charge based on usage and module configuration, which means you can enroll as many users as you want. 

Implementation Costs

Implementation costs include the expenses associated with setting up the ERP system, such as installation, customization, and data migration. This will often be your largest cost, especially if you are bringing in outside help. 

Custom Integrations

Most ERPs include some out-of-the-box integrations that allow the system to communicate with your existing applications. However, if you need to create any custom integrations, the expenses will be significant. Keep that in mind when evaluating different ERP solutions, and choose one that offers the integrations you need whenever possible. 

Training Expenses 

Training your staff to use the new ERP system effectively is crucial. A well-trained staff will embrace the new technology and condense your time to value. In contrast, if they aren’t confident in their abilities, they may experience hesitation and frustration. 

Cost of Ownership 

The ongoing cost of ownership includes licensing fees, maintenance, training, and purchasing upgrades. The lower the cost of ownership, the better your return on investment. 

Navigating the ERP Industry

Understanding the ERP industry and the many software options out there will help you embrace this technology and transform your business. Regardless of what vertical you operate within, there is an ERP out there designed to meet your needs and fuel the growth of your business. 

As you navigate the journey of selecting an ERP solution, prioritize your company’s short and long-term needs while remaining mindful of immediate and ongoing expenses. In doing so, you can find the solutions and supplements that propel your business forward. 

Ready to learn more about the ERP industry, emerging trends, and its evolution over time? Download our free eBook on Composable ERP, and take your understanding to the next level so you can make the best decisions possible for your business.