Cheat Sheet: ERP

Enterprise resource planning could be a huge benefit to your business – or a huge expense. Steve Cassidy explores the costs and rewards

We reveal how these three little letters can help businesses

Ah, the dreaded TLA. Let me guess – another IT fad of no real-world value?

Enterprise resource planning (ERP) is serious business: it’s a planning and management approach based on custom software that reflects the specifics of your business. It’s been with us for many years – but you’re right to be dubious, as there’s an element of hype around ERP.

My business hardly qualifies as an “enterprise”, so we’ll give this one a miss, thanks.

Here, the term “enterprise” isn’t to do with headcount or turnover. It’s more about being a producer. If your company makes things, which people turn up more or less at random to buy from you, then ERP can help keep your wheels turning smoothly across all your industry-specific disciplines – plus the more general ones that apply to all businesses.

A single piece of software to automate our whole business?

That’s the promise. If you can explain your workflow to an ERP chap – with some airy title like “consultant” or “business integrator” – then, after a bit of a delay for coding and other sundry bits of work, you should in principle end up with an integrated system that handles your stock, manages your finances, keeps track of raw materials and so on.

But of course, it’s one heck of a stretch. The few people I’ve seen who have tried to implement each part of an ERP system like that have nearly bankrupted themselves doing it. Representing every last procedure, quirk and cheat of a business is a gargantuan task. Even defining the requirements in sufficient detail is a huge challenge.

So how is anyone ever supposed to take advantage of ERP?

Rather than trying to feed your entire business into ERP in one go, it’s usual to take a modular approach. You start out with some forwardorder modelling, then add a bit of stock control, which then gets hooked up to the order book… and a roadmap begins to emerge, in which you add further modules as the years go by.

If it’s going to take that long, is it a smart investment? I’ve heard that Internet of Things-based stock control is the future.

IoT in enterprises is largely about monitoring the widgets in your warehouse, and in the wider world. This does feed into the same areas of interest as ERP – but while IoT is great for inventory tracking, you still need to analyse and respond to that data. Most IoT deployments are an addendum to an existing ERP data model.

In these days of cloud computing, this ERP stuff all sounds rather old-fashioned.

It is. ERP was earning IT specialists good money long before the cloud came along, and you could argue that the two philosophies are antithetical: ERP emphasises forward planning, while the cloud supports a flexible, reactive approach.

That doesn’t mean the two worlds can’t coexist. Large software houses such as SAP, Logica and Lakeview will happily provide cloud-resident apps on which you can run your business. This might not make sense for highvolume businesses, but it’s well suited to product types where value-per-item is high and orders are infrequent but pricey.

So it’s possible to combine the benefits of cloud and ERP?

It is, but spreading across on-premise and off, and managing the different lifecycles of all those systems, isn’t a simple undertaking. Expect increased demand for IT resources in making ERP in the cloud actually work, and think very carefully about scale. It’s all too easy to set such ambitious targets for ERP systems that you blow through far more money than you’ll ever save, either in licensing and consulting time, or in business time lost to computer work instead of actually building widgets.

This is sounding like a can of worms. Are the benefits really worth it?

By design, everyone’s ERP experience is different. Some projects are almost invisible: others drive a root-and-branch overhaul of every other system in the company, from servers to telephones, and even lead to the restructuring of workforces and premises. That’s arguably the biggest vote of confidence you could ask for – allowing the IT system to define the entirety of the business, right down to the bricks and mortar.

“It’s very possible to set such ambitious targets for ERP systems that you blow through far more money than you’ll ever save”