Development of ERP Systems: Is It Worth It?

Are you interested in development of ERP from scratch? Read our latest blog post about the cost of a custom ERP development project with a detailed breakdown of the budget, timeline, and resources needed for such a project.

Most business organizations today are quickly adopting the use of customized ERP services because, as opposed to the common use of manual procedures and legacy applications, these programs are cost-effective and efficient. The Enterprise Resource Planning program is a system of integrated applications that are designed to automate different department/office operations (product planning, development, manufacturing, sales, and marketing) to a single database.

List of Contents:

• Why apply for ERP solutions development services
• Cost of ERP software development services
• Custom ERP development risks
• ERP customization examples
• Advantages of custom ERP software
• Conclusion

Nevertheless, not all kinds of software will meet every requirement of your organization. Therefore, when deciding on the system to adopt, you need to choose the most reliable one as far as your business needs and processes are concerned. In turn, here are the two types of custom ERP systems:

Off-the-shelf solutions

These are systems easy to implement due to the fact that they are developed out of the experience of other organizations (user groups) other than yours. From the discussions on how each of those companies best uses the system, you acquire information on how best to adopt the system for your business.

Custom ERP software

Each system is developed based on your company’s experience. Programmers focus on ERP customization & development in accordance with what exactly you want the software to be able to do and, ideally, the process it should follow in order to perform and facilitate your operations.

WHY DO COMPANIES CHOOSE THE DEVELOPMENT OF ERP SYSTEMS

A company is more likely to meet its user requirements when it goes for ERP customization other than a generic system. This is so despite the high upfront costs and time consumption to get the system started. You can always start small and add the essential layers as you go by and, in the end, meet the target software for your business. Plus, it is also a way of spreading the initial expenses throughout.

The software is also designed to fit your business processes instead of the business fitting into it. This is somehow relieving since as far as training of the company’s staff is concerned, there will be less of it. All they have to do is make little adjustments to coordinate with the system.

An excellent example of such an approach is Tesla, which carefully evaluated all pros, cons, and risks and decided on custom development of ERP having the above-mentioned benefits in mind. Tesla CIO Jay Vijayan calculated the costs of SAP implementation in “millions of dollars” and a year to perform all the required integrations. Tesla achieved the same functionality within four months and with a much lower budget. As a result, they’ve got independence from third-party vendors and Enterprise Resource Planning System that is tailor-made for their established internal business and manufacturing processes. 

An ERP system can automate various business processes such as finance, HR, marketing, procurement, and others. With the help of the development of ERP, businesses can streamline their operations, increase efficiency, and make better decisions. Companies choose to develop custom ERP solutions for several reasons, including

Tailored solution: One of the primary reasons companies choose the development of ERP systems is the need for a tailored solution that meets their specific needs. Off-the-shelf ERP solutions often come with many features that are not required by a company, which can lead to increased costs and decreased efficiency. The development of ERP allows companies to choose only the features they need, resulting in a more streamlined solution. Additionally, custom ERP solutions can be designed to fit the company’s existing processes and systems, making the transition to a new system smoother and more efficient.

Improved data management: Custom development of ERP also enables companies to improve their data management processes. An ERP system can centralize a company’s data, allowing for better control and access to information. Custom ERP solutions can be designed to integrate with existing systems and databases, ensuring that data is consistent and up-to-date across all departments. With improved data management, companies can make better decisions and improve their overall operations.

Increased productivity: Custom ERP solutions can also increase a company’s productivity by automating repetitive tasks and reducing manual processes. This can free up employees’ time, allowing them to focus on more important tasks. Custom solutions can also provide real-time data, allowing for faster decision-making and improved efficiency. The improved productivity resulting from a custom ERP solution can have a significant impact on a company’s bottom line.

Competitive advantage: Finally, the development of ERP can give companies a competitive advantage. With a tailored solution, a company can differentiate itself from its competitors and provide a better service to its customers. Additionally, a custom ERP solution can provide a company with a unique edge in terms of technology and innovation. By using a custom solution, a company can stay ahead of its competitors and remain competitive in the market.

Custom ERP solutions provide companies with a tailored solution that meets their specific needs, improves data management, increases productivity, and competitive advantage. By choosing development of ERP, companies can improve their operations and achieve their business goals. The development of an ERP system is a complex process, but the benefits can be substantial for companies that choose to invest in it.

HOW MUCH WOULD IT COST TO BUILD CUSTOM ERP SOFTWARE

The cost of development would depend on what you require, the number of users, and its complexity. For instance, if you are going for a sophisticated system, you might not find complete designs that fulfill your needs. Therefore, you need to incur extra costs for complementary products to ensure the software fully functions. 

While off-the-shelf ERP solutions may cater to a company’s basic needs, many organizations opt for custom development of ERP to meet their specific requirements and improve their operational efficiency. The development of ERP software remains a complex and time-consuming process, and the cost of building a custom ERP solution can vary widely based on various factors. Let’s explore the factors determining the ERP development cost and estimate the average cost of building a custom ERP solution.

Project scope: The ERP development cost is primarily influenced by the project scope, which refers to the size and complexity of the solution. Factors such as the number of modules, functionalities, integrations, and customizations required can significantly impact the project’s cost.

Development team: Another significant factor affecting the development costs is the development team. The cost of developing an ERP can vary based on the size and experience of the development team, as well as the location of the team and the cost of labor in that region.

Technology stack: The technology stack used for the development of ERP can also impact the project’s cost. The choice of programming languages, databases, and development tools can affect the speed and efficiency of the development process and, therefore, the project’s overall cost.

Third-party integrations: Organizations often require integrating their custom ERP solution with third-party systems, such as e-commerce platforms, payment gateways, or shipping providers. These integrations can add complexity to the project and increase the cost of custom ERP system development.

Project timeline: The project timeline, or the length of time it takes to complete the development of the custom ERP solution, can also affect the project’s cost. A longer timeline means more time and resources required, which can increase the overall development costs.

The cost of ERP systems can vary widely based on the factors discussed above. On average, the cost of building a custom ERP solution ranges from $100,000 to $200,000 or more, depending on the project’s complexity. For a small to medium-sized business with basic requirements, ERP development costs range from $100,000 to $150,000. For larger organizations with more complex requirements, custom ERP system development costs range from $150,000 to $200,000 or more.

It is important for organizations to understand the factors affecting the cost of custom development and carefully consider their requirements before embarking on the development of their custom ERP solution.

RISKS OF CUSTOMIZATION & DEVELOPMENT OF ERP SYSTEMS

The solutions and services that the development of ERP systems is meant to provide are usually not in the box; therefore, it requires a lot of time and finances to initialize the design resulting in a high upfront fee.

Since customized ERP services are on the basis of your requirements, to get a high-quality system that maneuvers around future changes easily, despite it being a first-time project, you require a developer with experience. Such resources are hard to come by as you are outsourcing.

In addition, your contact with the developer who initialed the system needs to be consistent. This is because they would understand the system better during the development cycle: design, testing, QA/ testing, and training. This may be hard to do, especially if the developer is not reliable.

Despite that, customization in ERP helps to save an enormous amount of money from a long-term perspective. You may ask how that is possible. Each company counts on continued growth, including the number of employees, field force, and offices. In many cases, a bigger number of users means continually growing expenses for the licensed solution. Enterprise support packages are often sold as extra services and are way more expensive than support from the software development provider, whose support is often included in the contract. Also, it is worth mentioning that your organization will be the only one supported for the product, which means better and faster communication.

So, the expenses for the existing user licenses, new licenses, and support of the off-the-shelf solution are growing exponentially and completely overlap development costs in a couple of years. In its turn, it will justify its high upfront costs because your enterprise won’t be locked to the provider, will own the solution and all the data stored in the cloud as a result, and won’t pay for licenses when new user accounts are needed.

ERP customization can bring many benefits, but it also poses some risks. One of the main risks is that customization can lead to increased complexity and can create compatibility issues. This can result in an increase in the time and cost required to implement the system, which can have a significant impact on the overall success of the ERP project.

In addition to the increased complexity, customization can also introduce security risks. As customization often involves the modification of sensitive data, such as financial information, there is a risk that the data may be vulnerable to unauthorized access or manipulation.

Another risk of customization is that it can lead to a loss of functionality. For example, if customizations are made without proper testing, the system may no longer function as intended, causing significant disruption to business operations.

The development of ERP systems can also pose some risks. One of the main risks is the possibility of errors and bugs in the system. This can result in the system not functioning as intended, which can cause significant disruption to business operations.

Another risk with the development of ERP systems is that it can result in increased costs. This can occur if the development project is not managed effectively, resulting in delays and increased costs.

In addition to the increased costs, the development of ERP can also result in a loss of data. If the system is not properly tested and validated, there is a risk that data may be lost or corrupted, which can have a significant impact on the overall success of the ERP project.

To mitigate these risks, organizations must carefully consider the potential impacts of customization and development and take steps to manage these risks effectively. This may include working with experienced ERP development companies, ensuring proper testing and validation, and implementing effective data management processes. By taking these steps, organizations can ensure that their ERP systems are effective and reliable and that they are able to achieve the full benefits of ERP implementation.

ERP CUSTOMIZATION EXAMPLES IN DIFFERENT INDUSTRIES

From the advantages of the existence of software that can meet your business requirements and solutions, most companies have been seen heading to the development of ERP for the management of their operations. Below are a few of such companies:

Oil and gas companies

Oil and gas companies have a great plus with custom ERP system development, but it is usually a tragedy if the system does not support the operations efficiently. Therefore, when going for a tailored system for such a massive company, more considerations are put in place other than the obvious; meeting the user needs.

The development of ERP systems for gas and oil companies should, most importantly, have applications for handling environmental safety. Energy companies are known to be hazardous to their environment, and if not taken care of, it would cause damage and, to some extent, shut down the organization. Therefore, the system should be able to provide data to the technicians as warnings in case of any threat so that they can mitigate the risks.

Also, other than facilitating the operations of the company, the development of ERP systems should be able to open up opportunities for high profit returns investments for the business. That is, it should have a cost management application too.

Finally, oil and gas fields are known to be really massive, and some are usually in dense remote areas, but since it’s business, every asset should be accounted for. In turn, software with good networking is essential to integrating and managing all the company’s operations, regardless of the location. Such location difficulties are curbed with high-tech optimization tools for managing all labor and resources.

Retail businesses

The retail industry requires an ERP system to manage customer relationships, sales, and inventory. For instance, the development of ERP can be customized to support omnichannel retailing. This involves integrating different sales channels, such as brick-and-mortar stores, online stores, and mobile apps. ERP software is customized to support this by providing a centralized view of customer data and inventory levels. This helps organizations make informed decisions about which products to stock in which stores and how much inventory to hold.

Manufacturing companies

With manufacturing firms, custom ERP systems are saviors when it comes to saving costs, eliminating office paperwork, tracking business performance, and improving customer experience. This is made possible by integrated custom application platforms for the management of its operations.

Managing national or international business operations can be a challenging task. ERP customization can, however, bring light to all your business processes as it enables management of the creation of a product, marketing, and availing of the product across all the decentralized outlets. In addition, it integrates all that data, thus incorporating workflow and control automatically.

Education institutions

Educational institutions that are going for complete computerization of their functions and processes have the development of ERP to opt for. A great number of schools have been seen heading in this direction with the use of highly tailor-made programs to handle school management, and they are known to be very successful.

Whether it is nursery/ kindergarten, high school, or college, these systems have proven to provide efficient management of institutions.

Healthcare institutions 

The healthcare industry requires an ERP solution to manage complex processes, such as patient care, billing, and inventory management. For instance, it can be customized to support electronic medical records (EMRs). EMRs are digital records of a patient’s medical history that healthcare providers can access. Also, the development of ERP systems is customized to support EMRs by integrating with existing healthcare systems, such as hospital information systems (HISs) and laboratory information systems (LISs). This helps to ensure that healthcare providers have access to the latest information about a patient’s health, which can improve patient outcomes.

WHAT ADVANTAGES WILL YOU GET WITH THE DEVELOPMENT OF ERP

• Examples of ERP solutions are more of a prototype system whereby you can start designing the most basic and important features and functionality you have in mind. Later, you can add other essentials to especially efficient software during testing and maintenance.
• With a custom-tailored system, you will likely achieve the solutions or seamlessly attain the services you are going for from software.
• The staff is usually at an advantage of comprehending how the system works easily because it was designed following the business practices and language. In turn, they have little to adjust to their side.
• Customized ERP systems are usually flexible regarding future technological or even business changes. There is always a capacity for incorporating any developing trends.
• Unlike the off-the-shelf system, you get a special solution, and its design is made specifically to meet your needs. Therefore, you need not wait for feature requests and enhancements as you completely control the system.
• The development of an ERP system provides a centralized database for all business data, making it easier to manage, analyze, and report on information. This can improve the accuracy and reliability of data, enabling businesses to make better decisions and achieve their goals.
• Customized ERP provides enhanced security features, such as password protection and data encryption, to protect sensitive business information. This can reduce the risk of data breaches and ensure that sensitive information remains confidential.
• Custom ERP provides real-time data and insights, which can help businesses make informed decisions. With access to accurate, up-to-date information, managers can make better decisions that drive growth and improve performance.
• The development of ERP allows businesses to streamline their operations by integrating all the essential functions into one system. This eliminates the need for manual data entry and reduces the chances of errors. By automating processes, businesses can save time, reduce costs, and increase efficiency.
• Custom ERP can facilitate collaboration between departments and across the organization. By sharing data and information, employees can work together more effectively, reducing the risk of miscommunication and improving overall performance.
• Custom solutions can improve customer service by providing a centralized database for customer information. This can help businesses respond to customer inquiries and requests more quickly, improving customer satisfaction and loyalty.

CONCLUSION

In summary, the basic thing you need in hand while planning to adopt the system is you have to budget for high upfront fees. You will require a team of tech experts, from programmers, quality controllers, and database engineers to designers and probably more. Then patience is needed, too, to develop software that uniquely fits your business, just like Rome cannot be built in a day. It will require a lot of work which will consume time months or even years.

In addition, you need to be fully aware of the company you have set your eyes on to work with because that would be a tragic decision and a blessing even before you start. The expertise, as well as a software development company’s stability, is essential to check while assessing them. Have they done this before? Do they understand your business needs? These are the type of questions you should have answered before moving forward with them, and that is where Existek comes in.

We provide the development of ERP systems that enables organizations to automate, plan, collaborate, and execute their business processes with ease. This is seamlessly possible for us because we have been doing software development and, most importantly, custom-made for years now. Moreover, we have adopted a rare quality from most IT service and ERP development companies; we not only assess your business operations in the make of the system but also bring you on board as well as the environment of your business. We believe in engaging with our customers as partners in the development of ERP. Visit our Custom Software Development Page to learn more, or contact us to talk to an expert.