ERP for Growing Businesses: What It Is and Why It Matters

“Is ERP software a worthwhile investment for my small and midsize business?”

This one question pops up at least once in every conversation I have with business leaders from small and midsize companies – and personally, I don’t blame them. After years of being dismissed as large enterprise technology, ERP software is looking more attractive as it addresses the unique needs of growing firms at a price that is easier on their budget.

The arrival of this new generation of ERP software comes at a critical moment for most small and midsize companies. Now that competitors come in various sizes, industries, and business models, they want technology that allows them to run more efficiently, innovatively, and opportunistically than anyone else, especially their most prominent and established rivals.

What is ERP software?

ERP, which stands for enterprise resource planning, is a type of business management software. ERP software is an integrated suite of business management applications and tools that inform and run core processes. From finance, HR, marketing, and sales to manufacturing, supply chain, services, and procurement, every process is integrated into a single system of intelligence.

ERP software also allows companies to collect, store, manage, and analyze data. This information may be captured by a wide variety of business activities and functions, as well as external pressures such as customer demand, market dynamics, and competitor movements. Decision-makers can use this information to, for example, monitor operational performance, predict future risk and opportunities, and pivot production to respond to demand fluctuations.

As ERP software evolves, a level of intelligence, visibility, and efficiency once reserved for large enterprises becomes available across every aspect of a small or midsize business. Machine learning and artificial intelligence embedded in ERP software, for example, are simplifying routine tasks, eliminating human errors, and supporting seamless information sharing across the company. In return, processes and decision-making become more impactful and data-driven, time to value is realized faster, cash flow improves, and growth becomes more efficient and profitable.

How does ERP software work with existing and future business systems?

ERP software can serve as a flexible framework for existing and future digital investments. Businesses can choose to build up their software landscape gradually by adding new capabilities, applications, and intelligent technologies (such as artificial intelligence and machine learning), as needed.

The ability to “turn on” new modules within the ERP software, as companies grow and their needs change, delivers capabilities when the time is right – without delay. According to IDC, this benefit is key to future-proofing any investment in ERP for first-time users.

For example, the business can adopt new customer relationship management (CRM) capabilities when it decides to split marketing and sales functions into two separate organizations. By improving coordination between the two areas with CRM technology, the company can maintain buying experiences that are personalized and, most importantly, can respond proactively to customer needs.

What benefits could small and midsize businesses expect from ERP software?

Every business reaches a point in its growth where the day-to-day pressures of running operations are more administrative than strategic. The same data may be entered many times into different systems and spreadsheets. Knowing the quantity of a specific product in inventory becomes more challenging. Receiving good reports on sales performance and other core aspects of the business can take hours, if not days.

ERP software alleviates this stress by encouraging businesses to rethink their use of management and reporting resources with six fundamental strategies:

  1. Increase productivity – Streamline and automate core business processes to help everyone in the organization do more with fewer resources.
  2. Create a single point of truth – Produce fast, accurate answers to business questions by connecting information siloes to a digital core of relevant, real-time intelligence.
  3. Fast-track business reporting – Accelerate the process of generating reports – to the point where they are available on demand – to share corporate and financial results easily and act on insights immediately to improve performance.
  4. Reduce business risk – Predict and prevent risk by maximizing visibility and control, as well as compliance with regulatory requirements.
  5. Keep IT systems simple without limiting insight – Give employees the capabilities they need to work strategically, promptly, and productively by using integrated ERP applications that share the same database.
  6. Respond to opportunities quickly – Monitor large-scale and incremental business changes in real time to identify new opportunities and pivot operations swiftly and efficiently to take advantage of them before the competition.

What should small and midsize businesses consider when selecting ERP software?

The ERP software market is one of the most diverse in the technology industry when it comes to providers, deployment options, and capabilities. For small and midsize businesses, the challenge of deciphering which ERP best matches their needs and growth trajectory is an opportunity to shape their future.

Fundamental considerations for selecting ERP software include:

  1. Type of implementation – Three different types of ERP implementations are viable options for small and midsize companies – on premise, cloud, and a hybrid of the two environments:On-premise ERP: Run all integrated applications in the business’s data center or server room. Doing so maximizes the flexibility and control of managing data; adopting future technology; and extending capabilities to new business areas, partners, subsidiaries, and regions as needed. Often, this approach can keep costs low when an existing hardware server can be used without requiring an additional purchase and the system can be managed by an already-established IT staff.Cloud-based ERP: Host the software on a platform managed and operated by a third-party provider. This approach allows the business to take advantage of the latest technologies to grow and innovate while optimizing the value of its resources.Hybrid ERP: Combine the best capabilities of on-premise and cloud deployment options to create a landscape that delivers the advantages the business wants, when and where they are needed.
  2. Partnership trust – One of the most valuable aspects of an ERP implementation is leveraging the services and expertise of a knowledgeable partner that can be trusted. Partners can offer local knowledge, language, and industry-specific customizations to help ensure your implementation meets your unique needs. From the initial planning meeting to the deployment and a series of upgrades and integrations, small and midsize businesses should consider the level of support they want from partners when implementing and maintaining the ERP software.

What benefits does ERP software from SAP bring to small and midsize companies?

SAP recognizes that every small and midsize business is unique, which is a key part of their success. For this reason, we continuously develop our portfolio of ERP solutions with flexibility in mind. Whether the software is deployed on premise, in the cloud, or within a hybrid environment, our customers have the freedom to access the capabilities they need anytime, anywhere, and through any mobile device.

We have helped businesses expand their regional footprint by supporting 28 languages and offering 44 country-specific versions, delivered and supported locally by our extensive partner network. As a result, many of our customers have seen their business evolve from a small startup to a multinational conglomerate – all with SAP by their side.

Discover what specific digital technologies mean to small and midsize companies. Bookmark the Getting Started series page to keep up with the basics of analytics, HR and people engagement solutions, digital platforms, procurement and expense management tools, and ERP and CRM applications.

Explore which SAP solution might address your needs. Answer a few questions, and our solution finder tool will provide a suggestion with resources to help you learn more. 

Finn Backer is global vice president of SAP Business One at SAP