When should you consider upgrading your mid-market solution for an enterprise-level ERP system?
In the last issue we talked about at what point should a growing business decide to swap its basic accounting software for a dedicated mid-market ERP system. So why not look to the next step after that? When should you consider upgrading your mid-market solution for an enterprise-level ERP system?
When is the right time to switch?
The fact is you’re likely to think about investing in an enterprise ERP system as your company becomes larger, faster and more complex. This is when the entry level capabilities of a mid-market ERP will often start to creak, says Phil Lewis, VP of solution consulting at Infor.
“As complexity within operations increases, organisations may outstrip what the mid-market ERP has to offer, and a decision will have to be made about whether to use a best-in-class approach for the areas of weakness, or to take the step towards enterprise ERP. Enterprise ERP will still provide the same departmental coverage, but at enterprise level rather than entry level,” he says.
The decision, ultimately, can be down to any number of factors: turnover, complexity, or expansion into new geographies, for example. But also key is that many companies are looking to offer a differentiated level of customer service and experience in the form of new sales channels, advanced configuration, or services.
“They will also be looking to digitise their businesses,” says Lewis, who explains this could be IoT, prescriptive working, or harnessing data to improve business insight. “All these desires and changes will require the right functional and technical systems to be in place…the technical foundation is key. Bolting on new capabilities will result in sub-optimal outcomes if the core ERP engine is not comprehensive from a capability and data completeness perspective.”
“It’s time to think about the future and explore solutions that offer future-proofed, end-to-end integrated capabilities and technical platforms at the advanced level”, Phil Lewis / Infor
What’s the difference?
The support for core business functions may be comparable between mid-market and enterprise ERP, although enterprise may include some specialist components as well, such as human capital management. However, the main difference is the depth and breadth of functionality, where enterprises will have capabilities to support large organisations, says Lewis.
“As an example, there is a big difference between a system required to support three people in the finance department versus the requirements of a finance department with 50 people. A company that has outgrown its mid-market ERP will become inefficient due to finding ways to plug the gaps that appear due to inadequate capabilities. Those that quickly acknowledge these limitations and explore enterprise alternatives will gain competitive advantage faster.”
Another important differentiator between mid-market and enterprise, will be the capabilities of the underlying technology, he adds.
“Most enterprise offerings will be delivered in harmony with a fully loaded technology platform, allowing customers to realise their digital vision, through built-in capabilities, including Big Data, AI, machine learning, IoT, extensibility, predictive and prescriptive analytics, and mobility. Mid-market ERP offerings tend to have limited platform capabilities, resulting in more bolted on tools to compensate for the lack of breadth.”
Obviously the decision depends on the specific needs and growth ambitions of your individual business. And it’s not a simple decision-making process as you need to consider your circumstances today and balance that against your anticipated future needs, points out Nick Jackson, finance transformation leader at Oracle.
“What’s key is having a solution that can support today and adapt to the future; both in terms of scale, but, more importantly, coverage of the full range of capabilities needed in the future,” he says. “For example, being able to have a single view across HR, operations and finance, providing a core with which to integrate those elements that are unique to the business.”
That’s not to say many companies won’t look for workarounds to substitute the limitations of the mid-market ERP before they start shopping for a new system.
“Spreadsheets become rife!” says Lewis. “When these workarounds start to become inefficient, error-prone and difficult to align, it’s time to think about the future and explore solutions that offer future-proofed, end-to-end integrated capabilities and technical platforms at the advanced level required by the organisation at that point and beyond.”
When it comes to choosing an enterprise ERP solution that will scale to meet your future needs, more companies are today turning to the cloud.
A recent study by Epicor notes that 82 percent of ERP users were operating in a hybrid cloud environment, with 46 percent either primarily or entirely in the cloud. Ninety percent of decision makers indicated their move to the cloud was worth the effort, having realised a variety of transformational benefits including improved flexibility and adaptability, better security, simple regulatory compliance and enhanced business resilience.
“The beauty of cloud based solutions is that they can readily scale up and down to meet your needs; so the decision about ‘mid-market’ vs ‘enterprise’ really does come down to the capabilities you need now as compared to what you need for future growth – and how the provider of your cloud solutions support that growth,” says Jackson.
Elsewhere, Bert Schulze, VP S/4HANA product success and cloud co-innovation at SAP says a SaaS cloud ERP is surrounded by a complete enterprise value chain. It runs as an intelligent suite with a core that supports the managerial processes such as planning, execution and control of enterprise resources to satisfy customer demand at optimal financial performance.
“Cloud ERP is the enterprise management platform in the cloud, tasked to enable integrated business management from planning to execution across all core end-to-end processes at scale. The system is designed to support the managerial process, i.e. the planning and control of enterprise resources to satisfy customer demand at optimal financial performance along core end to end business processes,” he says.
“The new NRP expands traditional ERP resource optimisation and transaction processing, allowing visualising and executing unlimited complexity and individuality.”
External factors driving enterprise ERP
Additionally, Schulze says for mid-market clients, the difference between a mid-market and ERP solution is not necessarily the degree of complexity, nor a significantly different demand of business, but more external factors. These include the cost of licence and of implementation and/or run rate of the solution, as well as the differentiation of roles.
“The larger companies are, the more we observe a trend of individualisation to better serve evolving roles in growing organisations. The ERP needs to allow for this higher degree of differentiation,” he says.
Additionally, startups that raise funds for the next round of growth often get requirements from financial investors to increase the transparency of operations and consider an auditable ERP with enough capacity and scalability for growth and compliance.
And those start ups and other fast-growing companies reach scalability limits regarding transactional volume, leading them to consider a next level ERP.
“Larger ERP solutions often provide a broader business ecosystem with much higher scalability and flexibility for skills, services and partnerships, a better scaling labour market. This became even more relevant in the post-COVID era, where expertise in almost all areas becomes a bottleneck for growth,” he says.
NRP – the new enterprise ERP?
Interestingly, Schulze goes further. While ERP systems have focussed originally on automating back office functions, he suggests it’s time for the next iteration of ERP: networked resource planning (NRP).
NRP describes a Software-as-a-Service that provides intelligent processing and real-time access to relevant planning, processing and steering information to employees and partners including internal resources, suppliers and customers, says Schulze.
“The new NRP expands traditional ERP resource optimisation and transaction processing,” he explains.
“Classical enterprise solutions are designed to keep the enterprise integer and ensure consistency and execution of critical processes. The architecture, as well as tools to describe processes, do allow high complexity and strong, tailored individual processes. This process-centric approach allows visualising and executing unlimited complexity and individuality. It helps enterprise organisations to execute processes with highest efficiency for the corporate organisation.”
Ultimately however, it is important not to view any decision about ERP in isolation.
Says Jackson: “Businesses need to determine the entirety of their data structure requirements, the complete IT architecture and how these will evolve over time – then ensure the ERP solution that best aligns.”