Sage Ultimate ERP Guide

What is ERP?
The Ultimate Guide
WHAT IS ERP?
THE ULTIMATE GUIDE
1-866-530-SAGE (7243) Request a demo
Contents Introduction What is ERP?

A short history
of ERP
The key benefits
of ERP
The problems with Getting ready On-premise The future

References
ERP today for ERP or the cloud? of ERP
2 / 35 What is ERP? The Ultimate Guide

Introduction
Did you ever wonder what enterprise resource planning or ERP is and
how it can help your business? Or perhaps you know a little about ERP
but you’re not sure if you should opt for an on-premise or cloud solution
and what to expect from your final choice.
Don’t worry.
If you’re a business owner, manager or director in a mid-sized or growing
business and you’re confused about ERP, this guide will help you.
3 / 35 What is ERP? The Ultimate Guide: Introduction

How this guide will help.

If you’re struggling with issues like the implementation and
maintenance costs of ERP, a poor user experience or being unable
to adapt your chosen software to the demands of your business,
this guide will reveal the answer to your problems.
Why? Well, we’re going to demystify ERP and answer commonly asked questions about
this type of software. You’ll get a short history of how this type of business management
software evolved (did you know it’s been around since the 1960s?) and what the main types
of ERP are today.
Then, we'll explain what an ideal ERP solution should do for your business before detailing
why ERP has a bad reputation today. Finally, we'll reveal what the future of ERP looks like
and how it will change how you and your business works.
4 / 35 What is ERP? The Ultimate Guide: Introduction

What is ERP?
Enterprise Resource Planning is a type of management software for
rapidly growing, medium and large businesses as well as enterprises.
ERP integrates day-to-day processes including: inventory and order
management; accounting; human resources; customer
relationship management (CRM); and more.
ERP is popular in industries like manufacturing, distribution, purchasing, warehousing,

marketing, IT, finance and so on.
ERP enables users to share information across the entire business using a shared database
that supports the way different business units work. In reality, this means employees in different
divisions--for example, accounting and sales--can rely on the same information to meet their
needs. ERP should bring the front-office and back-office together.
According to Nick Castellina, Vice-President and Research Group Director for the Aberdeen
Group, “[ERP] help the business leaders to have more drill-down capabilities into the metrics
that your organisation is monitoring [like] the amount of products you're putting through,
your operations.”
5 / 35 What is ERP? The Ultimate Guide: What is ERP?

“ERP is the solution that brings everything together and has all the
data used to run your organisation. It also has financial information,
it has HR information, it has supply chain information... it’s really
what supports your business from end to end.”
Nick Castellina, Vice-President and Research Group Director, Aberdeen Group
6 / 35 What is ERP? The Ultimate Guide: What is ERP?

A short history of ERP
1960s The research and advisory firm Gartner is credited with coming
up with the term ERP in a seminal 1990 white-paper A Vision
1970s - 1980s of Next Generation MRP II. However, it’s possible to trace the
roots of the concept of ERP to the 1960s.
1990s
Back then, software engineers in the manufacturing sector
2000s developed basic programmes to monitor inventory, reconcile
balances and so on. So, what we know today as ‘ERP’ initially
2006 - 2017
only referred to managing and controlling inventory.
7 / 35 What is ERP? The Ultimate Guide: A short history of ERP

1960s
1970s - 1980s In the 1970s and 80s, software engineers developed these
rudimentary systems so they could manage manufacturing and
1990s
other business processes. These systems became known as
Material Requirements Planning (MRP) and later Manufactuing
2000s
Resource Planning or (MRP II).
2006 - 2017

1960s
1970s - 1980s
By 1990, it was possible to use an MRP system, or ERP, to
1990s manage inventory and other operational processes as well as
for managing back-office functions like human resources.
2000s
2006 - 2017


In the early 2000s, Gartner declared what we knew then as ERP
was dead and that “ERP II” was the future.
1960s
This future comprised web-based software with real-time access
to business-critical information. “ERP II” expanded to encompass
1970s - 1980s
business intelligence (BI) alongside front-office like sales force
automation (SFA), marketing automation and even e-commerce.
1990s
“Since its inception, starting as MRP, ERP has continued to
become more robust, more comprehensive, and is used to
2000s
support more functions within an organisation,” says Castellina.
2006 - 2017 “ERP software vendors are continuously building more robust
functionality for back-office processes, financial processes, as
well as supply chain processes... that are very much industry-
specific, featuring functionality that those industries may need.”


During the past ten years, software-as-a-Service (SaaS) solutions or cloud computing
has fuelled the growth of ERP and transformed it into a more affordable and easier to
implement software.
Castellina explains, ”When cloud ERP was first introduced, it was something that
1960s few organisations were willing to consider. What we've seen...is that the amount of
organisations that are willing to consider a cloud solution has increased over the same time.”
1970s - 1980s Although cloud ERP solutions are more popular today, a significant amount of
organisations opt for on-premise solutions to meet specific business requirements.
1990s
“At the same time, there are organisations that prefer to keep their solution in-house and
on-premise,” says Castellina. ”It might be that somebody in IT has that preference, they
have an existing, large IT staff [or] they are concerned about security [or] downtime.”
2000s
Modern ERP software enables real-time reporting business intelligence and should serve
2006 - 2017 as a valuable tool for executives, managers and leaders who need to see what’s going on
across their businesses.
Although the acronym ERP refers to enterprises, medium-sized and rapidly growing
companies today turn to ERP software today when they’ve outgrown their accounting
solution, and they need help with key business processes.

The key benefits of ERP

In rapidly growing and larger companies,
managers often can’t see what’s happening
in every area of their business. They may,
for example, not know how much inventory
their business has and requires at any
one moment in time. Ideally, the right ERP
solution should help managers solve these
types of problems.
The integration of various pieces of software

into one system or solution means owners
and managers can see what’s happening
in every area of their business including:
administration and operational functions,
financial, HR, procurement, manufacturing,
warehousing, sales and marketing, customer
service and more.
12 / 35 What is ERP? The Ultimate Guide: The key benefits of ERP?

Eric Kimberling of Panorama Consulting Solutions has more than 20 years advising businesses of all sizes on ERP, and he explains:
“In addition to making you more efficient and enabling you to spend
your time in other places on more higher-value activities, it also
should give you more visibility and insights into what's actually
happening in your business.”
13 / 35 What is ERP? The Ultimate Guide: The key benefits of ERP

For example, consider the case of a financial director in a

manufacturing and distribution business.
She depends on real-time information about her company’s inventory

and financials to make more informed decisions, but she struggles
to get this information to hand. As a result, decision-making is slower
and more complex.
“From an accounting perspective, [ERP helps] understand in real-time

what my inventory levels are or what my work-in-progress looks like at
any given time, rather than having to wait 30 or 45 days... until you get
to the end of a [financial] period,” says Kimberling.
Once the FD understands how much her company’s inventory costs

and what they business should order in advance, she will be able to
manage the company more efficiently. What’s more, she and other
managers will be free to spend more time on higher-value activities,
like business development.

“Beyond accounting, [ERP helps] me understand how much inventory

I need to order to satisfy demand, and have better data and better
analytics to be able to make better decisions. Those are the sorts of
things that will obviously lead to lower inventory levels, lower wasted
inventory, less work in progress that’s being wasted.”
Eric Kimberling, Panorama Consulting Solutions
15 / 35 What is ERP? The Ultimate Guide: The key benefits of ERP

In summary, the right ERP solution should enable:
Teams in different Easy access to A central repository A means of analysis

business to manage accurate company of information about of sales and planning
and collaborate on information and services, products, information that
project information reports so managers vendors, retailers, managers can act upon
can make more company financials,
informed decisions suppliers, customer
orders and so on

The problems with ERP today

ERP has garnered a poor reputation over the past few years.
According to many users and analysts, ERP often takes months to
implement and is expensive and difficult to use. Business planning
consultant David Hardstaff of DKNS Associates helps managers who
are struggling with systems and processes implement solutions like
ERP. Hardstaff believes that business managers almost always have
specific requirements, which can lead to scope-creep and even cost
over-runs.
“[The customer says], ‘I’d quite like [ERP] to do this, this and this,’ and
[the consultant says], ‘[ERP] doesn't do that out of the box, but we can
make it happen.’ And they start to customise the system and modify it
and you’re paying for all of this, and quite often... it doesn't really work.
There are problems.”
17 / 35 What is ERP? The Ultimate Guide: The problems with ERP today
“The last time I implemented a full-blown old-fashioned

ERP system it cost the company well over six figures.
It was about £150,000 in the end. That's a big
investment for a small business.”
David Hardstaff, Business Planning Consultant, DKNS Associates
ERP projects also sometimes fail due to a lack of planning by the

management team rolling out the solution. Nick Castellina of the
Aberdeen Group points out managers need to figure out if their
business is ready for ERP before investing.
“If you want to avoid a failed implementation, it’s important to

determine beforehand if your business has outgrown its accounting
software and other business management software... and then how
an ERP solution can help.”
He continues, “If your business is continuing to operate and you're

not being hindered by your technology, it might not yet be time to
[choose] an ERP solution.”
Castellina is more cautious about the failure rate of ERP projects,

pointing out that these failures can be attributed to poorly
defined requirements.
“The reason any [ERP] solution implementation is going to fail

is because you have poorly defined requirements of what
you're looking for in a solution [or] you're not implementing
the functionality that your business needs.”
Nick Castellina, Vice-President and Research Group Director, Aberdeen Group
According to our research we found that:

Percentage of users who disliked the implementation of maintenance costs of ERP
38%
Percentage of users who wanted a more flexible solution that they could adapt
36%
Percentage of users who disliked ERP for being unintuitive
32%
Percentage of users who complained that ERP doesn’t always support mobile devices
24%
One thing is clear: a business manager who

wants an ERP solution to succeed, whether
it be on-premise or in the cloud, must gather
requirements from all stakeholders and
carefully plan said-project in advance if they
want to get a return-on-investment.
Cloud-based ERP solutions are typically

cheaper to adopt and implement than
on-remise solutions, due to the nature of
SaaS. This would suggest that cloud ERP
is the future.
Getting ready for ERP

Before selecting an ERP solution, it’s A lot of ERP projects fail because managers don’t consider:
critical to understand what the needs
(and pain-points) of your business are
How processes in the business will be impacted by ERP
and how a proposed solution will help
you address them.
For example, inconsistent data from How people within a company will use ERP as part of their role
different business areas or an inability to
find information when you need it are often
key signs that your business is outgrowing The cost of an ERP project from beginning to end
its accounting or business management
software. However, recognising that your
company is ready for a new solution is only
The time it will take to implement such as solution
the first step.
23 / 35 What is ERP? The Ultimate Guide: Getting ready for ERP

So how long should this process take and

how much will it cost your company? Well,
there is no easy answer because it depends
on the size and scope of your organisation.
However, according to Panorama’s

independent ERP research over the
past five years, the average cost of ERP
implementations is approximately $6.1 million
with an average duration of 15.7 months.

Eric Kimberling of Panorama Consulting Solutions has spent twenty years advising managers considering ERP, and he explains:
“You don't want to treat [ERP] as a small project. You want to make sure you
have a dedicated focus on the people that are addressing the organisational
change management aspects...People always think end user training when
they think of organisational change, but there's so much more that needs to
happen before the end user training in order for that to be successful.”

The good news is the costs of an ERP solution are continuing to fall, particularly
for newer and mid-sized businesses. David Hardstaff explains:
“Now you don't need to be spending that kind of money... There are
lower level offerings... they're simpler to operate. They focus on what
business owners want to do and a lot of these modular systems...
interface with a third-party CRM or an e-commerce solution.”

Whatever your needs, remember ERP represents

an investment of time and resources.
So, when considering a solution, ask yourself:
Does the solution in question provide a complete package for running all aspects of a business?
Does it support the latest technologies?
Is it easy to use?
Is this solution flexible enough to be adapted in the future?
Can this solution be easily customised?
Does this solution provide a detailed online help system?
Does this solution reduce the amount of time my colleagues will spend manually inputting information on multiple screens?
Can this solution increase performance in weaker areas of my business?
Is this solution cost-effective to implement and run?

On-premise or cloud?
One question many business owners and managers ask is: should I
choose a cloud-based ERP solution or is an on-premise solution more
appropriate? Typically, the size and organisation of your business
dictates whether on-premise or the cloud is the right choice.
“If you're a company that's very decentralised and you have very
independent business units and operations then maybe a best of
breed solution is better,” says Kimberling.
For example, a relatively new small business that doesn't have a lot
of well-defined business processes or sophisticated IT will be able to
implement and use a cloud ERP solution quickly and easily. However,
an older, larger business may need a different type of solution that
takes longer to plan and implement.
Kimberling explains, “But...if you’ve got disparate business processes

and now you’re trying to scale the company for growth – maybe you’re
a family-owned company and you’re third-generation, and now you
want to take it to the next level - it may be that there’s a different
solution out there. Maybe it’s not cloud.”
28 / 35 What is ERP? The Ultimate Guide: On-premise or cloud?

”It's not that there's one-size-fits-all or one answer for everyone. You
have to [understand] what your goals and objectives are and what
your overall strategy is and what that strategy drives, what the scope
of your ERP initiative is, whether it's one single ERP system or whether
it's best of breed or whether it’s some other type of option.”
Eric Kimberling, Panorama Consulting Solutions
29 / 35 What is ERP? The Ultimate Guide: On-premise or cloud?

The future of ERP

Since its inception in the 1960s, the concept of ERP has evolved from
a tool for materials to a solution for managing every area of your
business.
However, today ERP doesn’t encompass what growing businesses

need. Often, when a customer adopts ERP, they struggle to get
support or find fixes for bugs. Similarly, it can take years for a business
to generate a return-on-investment on a traditional ERP solution, and
these solutions are difficult to adapt.
Today, a business management solution accomplishes more than

what ERP is capable of. Whether based in the cloud or on-premise,
it streamlines business processes and improves collaboration for
organisations operating in multiple countries or that collaborate
across the supply chain.
30 / 35 What is ERP? The Ultimate Guide: The future of ERP

It solves the problems typically associated with ERP, for example being
difficult and expensive to implement and use. It also supports multiple
languages, currencies, companies, sites, and legislations and enables
individual divisions or countries to follow business rules while sharing
information.
For example, consider a manager of a distribution company. He or she

may want to scale up their solution as the holiday season approaches
and add additional users based in the business’s warehouses. Later after
the holiday season when demand reduces, this manager can scale down
their business management solution and remove users.
Sage X3 is an example of a powerful next-generation business

management solution that delivers a return on investment faster.
According to independent analyst Forrester, a composite company
using Sage X3 achieved “a 177% ROI” or “$1.7M from cost savings over
three years”.

"With Sage X3, we can invest our resources in growing the business,
not in managing the software and maintaining an IT infrastructure. In a
growing business, we all wear many hats and are on the go at all times.
I love that I can access Sage X3 from by desktop, my laptop, my tablet
and my phone—all I need is an Internet connection and a browser."
Grant Morehead, CEO and CFO, Southern Silicones

Unlike ERP, a business management solution:
Reduces the costs Is flexible and Offers you and your Simplifies every
of implementing can be adapted to team a modern part of your
and maintaining changing business and intuitive user operation and
your software requirements experience helps reduce costs
Enables the Helps you and your

reviewing of business- management team
critical information focus on growing
in real-time your business

WITH A BUSINESS MANAGEMENT SOLUTION, YOU CAN FINALLY
WORK DIFFERENT
Request a business review
For more information, visit Sage.com or call 1-866-530-SAGE (7243).
34 / 35 What is ERP? The Ultimate Guide

References About us
Forrester, January 2016. The Total Economic Impact™ of Sage X3. Cost Savings And Business Benefits Attributed To Sage X3. Sage is the market leader for integrated
Available at http://www.sagex3.com/~/media/markets/erpx3/forrester/sage-x3_forrester-tei-case-study_feb-16.pdf?la=en-gb accounting, payroll and payment systems,
supporting the ambition of the world’s
Gartner, March 2, 2016. Gartner Says Through 2018, 90 Percent of Organizations Will Lack a Postmodern Application Integration Strategy. entrepreneurs. Sage began as a small business
Accessed at http://www.gartner.com/newsroom/id/3233217 on October 13, 2016. in the UK 30 years ago. Over 13,000 colleagues
now support millions of entrepreneurs across 23
countries as they power the global economy.
Gartner 1990. A Vision of Next Generation MRP II.
We reinvent and simplify business accounting

Panorama Consulting Solutions, 2015. 2015 ERP report.
through brilliant technology, working with a
Accessed at http://go.panorama-consulting.com/rs/panoramaconsulting/images/2015%20ERP%20Report.pdf on October 13, 2016.
thriving community of entrepreneurs, business
owners, tradespeople, accountants, partners and
Sage, 2016. Interview with Nick Castellina, Vice-President and Research Group Director for the Aberdeen Group, October, 2016.
developers. And as a FTSE 100 business, we are
active in supporting our local communities and
Sage, 2016. Interview with David Hardstaff, DKNS Associates Limited on October, 2016. invest in making a real difference through the
philanthropy of the Sage Foundation.
Sage, 2016. Interview with Eric Kimberling, Panorama Consulting Solutions, October, 2016.
Sage – the market leader for integrated accounting,

payroll and payment systems, supporting the
ambition of the world’s entrepreneurs.
© 2017, The Sage Group plc or its licensors. Sage, Sage logos, and Sage product and service names mentioned herein are the trademarks of The Sage Group plc or its licensors. All other trademarks are the property of their respective owners.

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What is ERP?

The Ultimate Guide

Contents Introduction What is ERP?

The problems with Getting ready On-premise The future

2 / 35 What is ERP? The Ultimate Guide

3 / 35 What is ERP? The Ultimate Guide: Introduction

How this guide will help.

4 / 35 What is ERP? The Ultimate Guide: Introduction

ERP is popular in industries like manufacturing, distribution, purchasing, warehousing,

5 / 35 What is ERP? The Ultimate Guide: What is ERP?

6 / 35 What is ERP? The Ultimate Guide: What is ERP?

A short history of ERP

7 / 35 What is ERP? The Ultimate Guide: A short history of ERP

A short history of ERP

8 / 35 What is ERP? The Ultimate Guide: A short history of ERP

A short history of ERP

9 / 35 What is ERP? The Ultimate Guide: A short history of ERP

A short history of ERP

10 / 35 What is ERP? The Ultimate Guide: A short history of ERP

A short history of ERP

11 / 35 What is ERP? The Ultimate Guide: A short history of ERP

The key benefits of ERP

The integration of various pieces of software

12 / 35 What is ERP? The Ultimate Guide: The key benefits of ERP?

13 / 35 What is ERP? The Ultimate Guide: The key benefits of ERP

For example, consider the case of a financial director in a

She depends on real-time information about her company’s inventory

“From an accounting perspective, [ERP helps] understand in real-time

Once the FD understands how much her company’s inventory costs

14 / 35 What is ERP? The Ultimate Guide: The key benefits of ERP?

“Beyond accounting, [ERP helps] me understand how much inventory

15 / 35 What is ERP? The Ultimate Guide: The key benefits of ERP

In summary, the right ERP solution should enable:

Teams in different Easy access to A central repository A means of analysis

16 / 35 What is ERP? The Ultimate Guide: The key benefits of ERP?

The problems with ERP today

“The last time I implemented a full-blown old-fashioned

ERP projects also sometimes fail due to a lack of planning by the

“If you want to avoid a failed implementation, it’s important to

He continues, “If your business is continuing to operate and you're

Castellina is more cautious about the failure rate of ERP projects,

“The reason any [ERP] solution implementation is going to fail

According to our research we found that:

Percentage of users who disliked ERP for being unintuitive

One thing is clear: a business manager who

Cloud-based ERP solutions are typically

Getting ready for ERP

23 / 35 What is ERP? The Ultimate Guide: Getting ready for ERP

So how long should this process take and

However, according to Panorama’s

24 / 35 What is ERP? The Ultimate Guide: Getting ready for ERP

25 / 35 What is ERP? The Ultimate Guide: Getting ready for ERP

26 / 35 What is ERP? The Ultimate Guide: Getting ready for ERP

Whatever your needs, remember ERP represents

Does it support the latest technologies?

Is this solution flexible enough to be adapted in the future?

Can this solution be easily customised?

Does this solution provide a detailed online help system?

Can this solution increase performance in weaker areas of my business?

Is this solution cost-effective to implement and run?

27 / 35 What is ERP? The Ultimate Guide: Getting ready for ERP

Kimberling explains, “But...if you’ve got disparate business processes

28 / 35 What is ERP? The Ultimate Guide: On-premise or cloud?

29 / 35 What is ERP? The Ultimate Guide: On-premise or cloud?