Building an Enterprise Resource Planning (ERP) system empowers companies to manage multiple business processes from a single, unified platform. ERP solutions are designed to optimise and standardise processes that are critical to enterprise performance, whether it’s accounting, logistics, inventory management, or human resources.

However, successfully implementing an ERP system can be challenging without the right technical expertise. At DataForge, with over a decade of experience in delivering cutting-edge enterprise solutions, we are here to share our insights. This guide will walk you through the essentials of building an ERP system from the ground up, exploring its benefits and the investment required.

What Is an ERP System, and Why Does Your Business Need One?

Consider the functions within your organisation: Do you have a Sales department? An ERP system can seamlessly integrate it, improving efficiency and visibility. Struggling with HR tasks like hiring and onboarding? A custom ERP solution can streamline these processes, making them more manageable and effective.

An ERP system is dedicated software—whether web-based or mobile—that encapsulates all the tools necessary for managing various business components and departments. By simplifying interactions between core business processes, ERP systems allow companies to operate more smoothly, enhance productivity, and reduce operational costs.

Approaches to Developing an ERP Solution

When it comes to developing an Enterprise Resource Planning (ERP) system, businesses generally have two paths to choose from: out-of-the-box solutions and custom-built systems.

Out-of-the-box ERP solutions are designed for the mass market, offering standardised features with limited customisation options. While these solutions can be implemented quickly, they often require companies to adapt their processes to fit the software, which can lead to additional training costs and inefficiencies.

On the other hand, a custom ERP solution is tailored by your organisation’s software engineers to align perfectly with your specific business processes. This approach ensures that the system is as convenient and efficient as possible, fully supporting the unique ways your business operates.

Many organisations choose to develop custom ERP systems because they offer a significant advantage: the ability to seamlessly integrate various processes, resulting in enhanced overall efficiency. For instance, a well-designed ERP can track the entire revenue cycle (from invoicing to cash receipts) giving you comprehensive control and insight into your financial operations.

Why Your Business Needs an ERP System

Implementing an ERP system is a strategic move that enables companies to streamline their workflows, ultimately saving time and reducing costs. At DataForge, we understand the transformative power of ERP integration and how it can make your business operations more efficient and customer-focused.

Here are some of the key benefits that an ERP system can bring to your business:

• Automation of Business Processes
  ERP systems allow you to automate critical business functions such as human resources, finance, and operations. By putting these processes on autopilot, you can reduce manual effort and focus on strategic initiatives.
• Data-Driven Decision Making
  With real-time access to data, ERP systems empower your teams to make informed decisions. Whether it’s precise lead analysis for your sales department or financial forecasting, ERP provides the insights needed to act quickly and effectively.
• Enhanced Collaboration
  An ERP system centralises your business data, making it accessible to all departments. This eliminates the inefficiencies of siloed data, enabling your teams to collaborate seamlessly and work towards common goals.
• Regulatory Compliance
  Staying compliant with industry regulations is crucial. ERP systems help you track and manage compliance requirements, ensuring that your business stays ahead of legal and regulatory changes.
• Data Security
  Protecting your customers' data is paramount. ERP systems, whether on-premise or cloud-based, offer robust security features, with centralised data management that reduces the risk of breaches and data loss.
• Improved Customer Service
  By centralising customer and sales data, ERP systems enable your team to respond to client needs faster and more effectively, reducing service delays and enhancing customer satisfaction.

As you consider your options, it's important to determine whether an out-of-the-box solution or a custom-built ERP system will best meet your business needs. At DataForge, we're here to guide you every step of the way, ensuring that you choose the solution that will drive the greatest value for your organisation.

Designing Your ERP: Out-of-the-Box Solutions

For small businesses or startups, pre-built ERP solutions might seem like a good fit initially, offering a quick and cost-effective way to manage basic operations. However, as your business grows, you'll likely find that these solutions lack the flexibility to scale with your needs, requiring some level of customisation to truly align with your workflow.

Software as a Service (SaaS) providers offer a variety of ERP systems tailored to businesses of different sizes. Before you dive into building a custom solution, it’s worth considering the ready-made options available. Systems like Ostendo, Acumatica, Sage Intacct, and SAP Business One are well-suited for small to medium-sized businesses, while platforms such as Oracle NetSuite, SAP S/4 HANA, and Microsoft Dynamics 365 cater to larger enterprises.

However, it's important to note that out-of-the-box ERP solutions often fall short when it comes to addressing the unique needs of your business. These solutions can be difficult—or sometimes impossible—to integrate with existing systems, leading to inefficiencies when trying to manage business operations separately. For these reasons, developing a custom ERP from scratch may be the best approach to fully leverage your investment.

Benefits of Out-of-the-Box Solutions:

• Budget-Friendly
  Third-party ERP systems generally offer a subscription model with monthly or yearly fees. For instance, SAP ERP charges around $94 per user per month, with an additional $3,000 for the license. For a company with 100 employees, this would cost approximately $12,400 per month.
• Proven Quality
  SaaS providers consistently focus on product quality and regularly update their offerings, ensuring that the software remains reliable and up-to-date.
• Faster Deployment
  For small and mid-sized companies, pre-built ERP systems can be implemented relatively quickly. However, larger enterprises might encounter integration challenges due to the complexity of their existing systems. Customisation of these systems, often involving source code and APIs, can be time-consuming.

Drawbacks of Out-of-the-Box Solutions:

• Functionality Gaps
  Out-of-the-box ERPs are designed for the mass market and often fail to meet all specific business requirements. This can result in gaps in functionality that may hinder business processes.
• Licensing Fees
  Using third-party ERP systems typically involves purchasing a license, which can be costly. For example, a base license for NetSuite starts at $1,000 per month, adding to the ongoing expenses.

Designing Your ERP: Custom-built Solutions

As businesses strive to enhance their key performance indicators (KPIs) or objectives and key results (OKRs), many are choosing to build ERP systems from scratch. A custom ERP solution offers unparalleled adaptability, aligning perfectly with your company’s unique business logic, processes, and departmental needs. Unlike out-of-the-box solutions, which are often limited to short-term fixes, custom applications are designed to evolve with your business objectives and requirements.

By developing your own ERP software, you gain the advantage of creating a system tailored specifically to your organisation. This eliminates the need to compromise by adapting your workflows to fit vendor-provided software. Whether it’s finance management, supply chain operations, or any other critical area, a custom ERP allows you to incorporate precisely the features you need. Moreover, these bespoke solutions are built to integrate seamlessly with your existing programs, databases, and even legacy systems. Another key benefit is enhanced security, as custom ERP development gives you complete control over implementing the security features necessary to protect your business.

Benefits of Custom ERP Solutions:

• Customisation
  Unlike third-party solutions that come with unnecessary features, custom ERP development allows you to include only the functionalities that are essential to your business, ensuring a more streamlined and effective system.
• Department-Specific Features
  Custom ERP solutions enable the development of features tailored to the specific needs of each department. For instance, you can create a precise lead analysis tool for your sales department, ensuring that your team has the exact tools they need to succeed.

Drawbacks of Custom ERP Solutions:

• High Cost
  Custom ERP development can be a significant investment. The final cost is often difficult to estimate upfront as it depends on the specific requirements and the overall complexity of the project.
• Extended Development Time
  Given the comprehensive nature of ERP systems, the development process can be lengthy. Additionally, ongoing support and maintenance are essential to ensure the system continues to meet your business’s needs over time.

Key ERP Features: What Should an ERP Do?

When discussing the capabilities of Enterprise Resource Planning (ERP) systems, it's crucial to understand the modules that compose these solutions. Building an ERP involves creating various modules, each designed to automate and support specific business processes.

Essential ERP Modules

We’ve compiled a list of the core modules that every ERP should include, along with their key functions:

• Financial Management
  This module automates financial transactions and ensures compliance with financial regulations.
• Sales and Distribution
  Tracks order management, contracts, invoicing, and customer communication to boost sales productivity.
• Research, Development, and Engineering (R&D&E)
  Collects and manages information for product design and development.
• Inventory and Warehouse Management
  Manages the supply chain and controls materials used in manufacturing.
• Asset Management
  Stores and manages information about company assets, devices, and infrastructure in use.
• Manufacturing Operations
  Ensures that production meets current demand using the latest technology and insights.
• Sourcing and Procurement
  Handles all operations related to ordering and purchasing materials for efficient manufacturing.
• Service Management
  Monitors all business aspects, supporting asset maintenance and resolving customer issues.
• Human Resources Management
  Compiles employee information and manages functions such as time recording, payroll, performance evaluations, and feedback.

These modules represent the foundational functions of an ERP system, which can be expanded depending on your business's specific needs. Working with a skilled software development partner, like DataForge, ensures that your ERP is designed to meet those needs comprehensively.

How to Build Your Own ERP: Step-by-Step Guide

Building a custom ERP system can be a significant investment, but it’s often the best choice for businesses looking to address their specific needs effectively. While out-of-the-box solutions may lack the necessary features, custom ERP systems can be designed to provide long-term value.

Step 1. Define Your Company’s Goals and Requirements

To create a valuable ERP system, start by clearly defining your goals and requirements. Engage with employees across different departments to identify their challenges and determine how the ERP can solve these issues. A custom ERP system should be capable of managing data flows across various activities, such as sales and planning, while automating routine processes.

Step 2. Choose the Right ERP Solution Type

Select the appropriate ERP solution type with the guidance of your development partner. The main types to consider include:

• On-premise ERP
  Offers complete system security but requires dedicated IT staff for maintenance.
• Cloud ERP
  Administered by third-party providers, this SaaS solution allows data access on any device, offering flexible architecture.
• Hybrid Cloud ERP
  Combines on-premise and cloud-based ERP, enabling the use of vendor expertise without compromising data security.
• Open-source ERP
  A cost-effective option, but it comes with minimal vendor support, leaving system improvements and setup largely up to your team.

Step 3. Dive into UI/UX Design

The design phase is crucial for developing an ERP system that is user-friendly and intuitive. UI/UX design services should focus on creating an interface that accommodates different user roles and navigation needs without overwhelming the user with unnecessary information. Simplicity is key to ensuring effective user adoption.

Step 4. Product Development and Review

Your development team will begin building the ERP system in stages, often using an agile approach with two-week sprints. Each sprint delivers a part of the functionality for review. Thorough testing is essential, and it's beneficial to involve your employees as beta testers to identify any weaknesses early on.

The tech stack for your ERP will depend on the chosen platform. For instance, desktop applications might use C++ or C# for Windows, while web versions might use Angular, JavaScript, and Node.js. Integration with third-party services like G Suite, Office 365, and others will also be a critical component of development.

Step 5. Integrate Third-Party Services

Before launching your ERP system, it’s essential to integrate all established business processes and third-party services to centralise your tools and prevent data duplication and loss. Common services to integrate include G Suite, Office 365, FreshBooks, Jira, Salesforce, and SAP.

Step 6. Collect and Analyse User Feedback

The development of your ERP system doesn’t end with its launch. Continuous feedback collection is necessary to understand how the system is performing and where improvements are needed. This can be done through interviews, focus groups, surveys, emails, and social media.

Step 7. Ongoing Support and Maintenance

ERP systems require constant updates and maintenance even after deployment. Your development partner will help with upgrading functionality based on user feedback and addressing any bugs to ensure seamless data processing and optimal performance.

How Much Does It Cost to Build Your Own ERP?

The cost of developing an ERP system can vary significantly, ranging from NZD$84,000 to over NZD$420,000, depending on the complexity and specific requirements of your project. If you have an in-house development team, it may be easier to estimate the cost. However, it's often beneficial to consult with an IT service provider to get a more precise quote tailored to your needs.

The investment in ERP is substantial, so it's important to understand what drives these costs. Here are some of the most common factors that influence the price:

Project Complexity

The more complex the project, the higher the cost. Complex projects require more development time, a broader range of features, and often, a higher level of expertise.

Development Team

You have three main options when it comes to development: hiring freelance developers, creating an in-house team, or partnering with a reliable vendor. Based on our experience, in-house teams or outsourcing to reputable software development companies are the most reliable options for building an ERP system. Freelancers may struggle with deadlines and code quality, particularly without strong technical oversight.

Region

The cost of software development varies greatly depending on the region. For example, North American companies typically charge the highest rates, while companies in Asia may offer lower rates, though this can sometimes come at the expense of product quality and customer service.

Seniority Level

Developers are usually classified into three levels based on their experience: junior, middle, and senior. For ERP development, it’s advisable to hire middle or senior developers, as they bring the necessary expertise and experience with various technologies.

Tips for Implementing ERP in Your Business

Successfully implementing an ERP system requires careful planning and execution. Based on our experience, we’ve compiled some key tips to help you integrate ERP smoothly into your business operations:

Tip 1: Choose a Reliable Tech Partner

It's crucial to select an experienced partner who can support you throughout the process and beyond. Ask them how they plan to solve your specific business challenges, and inquire about their methodology and expectations. A good partner should provide a clear roadmap, including:

• Strategies for overcoming potential obstacles
• Defined internal responsibilities during ERP development
• Time commitments and milestones

If your prospective partner cannot clearly articulate their approach, address your challenges, or provide relevant references, they may not be the right fit for your project.

Tip 2: Review and Refine Your Workflows

An ERP system won't fix inefficient workflows on its own. During the planning phase, it’s essential to identify and address process inefficiencies that could persist regardless of the new technology. Resolving these issues before implementing an ERP system will enhance its performance.

Gather input from employees, stakeholders, and customers to assess the effectiveness of your current processes. Determine where technology can improve operations, and identify any existing procedures that may need to be adapted or restructured to fit the new system. Addressing these scenarios in advance helps ensure that your ERP solution meets your business needs effectively.

Tip 3: Plan for Data Migration and Process Alignment

Understanding which processes and data need to be migrated to the new ERP system is crucial. You’ll also need to consider any setups or changes required for successful migration.

Remember, data migration is often one of the most time-consuming aspects of an ERP project. If your existing systems are outdated or vastly different from one another, expect the data migration process to be more complex and time-intensive, especially if you're working with a small, time-constrained team.

Tip 4: Clearly Define Your Business Objectives

If your current ERP system is draining resources and hindering growth, it's time for a change. Start by identifying the issues you’re trying to resolve and consider how you can expand your ERP integration to meet these challenges. The clearer your business drivers, the more successful your ERP deployment will be.

By clearly outlining your goals and assessing how the project will impact your company as a whole, you’re more likely to develop a system that not only meets but exceeds your expectations. Having a strategy to measure success will allow you to see how ERP adoption has positively affected your business, backed by data and results.

These tips are essential to keep in mind when working on ERP implementation. If you need more guidance or support, DataForge is always here to provide expert consultations and help you develop an ERP system that drives your business forward.