Managing Resources: ERP Industry Trends That Impact the Bottom Line

What is ERP software?

ERP software records and stores real-time business performance data across departments within a company. You can generate reports from that data to analyze how well departments and individuals are doing. These insights can help businesses streamline processes and help team members operate more efficiently, increase productivity, preserve quality and achieve profitable growth.

An ERP system can take the following forms:

• A collection of software as a service (SaaS) packages that communicate with one another (usually via API or custom integration)
• A bespoke ERP system built around a business’s specific needs

ERPs share a common database, operate in real time and, depending on permission levels, provide a standard user interface. Thus, you won’t have to maintain separate databases or periodically merge databases to generate reports.

ERPs constantly collect and compare departmental metrics. Based on the metrics they select, users can create accurate reports on business performance, such as how productively a team uses company resources. 

Companies may use ERP reports to do any of the following:

• Set budgets and targets across the business
• Manage projects more effectively
• Measure business performance as a whole and on a granular level

What are the ERP industry trends to watch?

According to Research and Markets, the cloud-based ERP market is expected to reach $130 billion by 2027, up from $64.7 billion in 2022. This figure represents a compound annual growth rate of 15 percent. As more businesses rely on ERP solutions, the sector will evolve to accommodate new functions and technologies.

Industry analysts expect to see the following five significant changes in the coming years:

1. AI and machine learning are transforming ERP systems.

ERP vendors are integrating artificial intelligence and machine learning into their systems, a trend that has been picking up pace since the launch of GPT-3 in 2022.

The biggest recent deal was between AWS and SAP. AWS will embed Amazon Titan and Anthropic’s Claude LLM to allow customers to build custom AI-powered apps they can modify to their specific business needs.

Here are three areas where AI is helping transform ERP systems:

• Real-time data processing: IoT firms are creating devices and apps that can feed real-time data into ERP systems for processing by machine learning apps. For example, IoT devices can transmit data on uptime, performance and output quality from factory floor equipment to ERP systems to help manufacturers schedule production, set accurate staffing levels and more. [Read related article: 5 Ways Machine Learning Is Leading to Smarter Manufacturing]
• Inventory and supply chain management: AI integration into ERP is also affecting inventory and supply chain management. Thanks to the data analytics these tools provide, businesses will be much better able to reduce excess inventory and improve order turnaround times.
• CRM AI in ERP software: Some of the AI functionality in CRM platforms is also being transferred to ERP software. Many platforms now offer built-in or third-party plug-ins to help companies improve their marketing campaign outcomes, predict future revenues from sales teams and provide better after-sales customer care through data analytics. 

2. Industry-specific ERPs are helping businesses customize solutions.

Industry-specific ERP systems include standard ERP features like inventory management and finance and accounting tools. However, they also incorporate specialized tools to help businesses in particular sectors.

Businesses can customize standard ERPs with third-party plug-ins to add more functionality. However, this approach requires a significant investment of time and money. In contrast, industry-specific ERPs can bring them much closer to an ideal solution. They also provide specialized plug-in stores with apps that address specific sector challenges. For example, a manufacturer-specific ERP might include apps and customizable automated workflows for shop floor scheduling, product engineering and material requirements planning (MRP).

Implementation time for industry-specific ERPs is often much quicker and less expensive than generic ERPs. Sectors with industry-specific ERPs include apparel and textiles, chemical engineering, food and beverage, mining and quarrying, professional services, and semiconductors.

3. More ERP solutions are moving to the cloud. 

Traditionally, most ERP systems have been on-premises. The transition to the cloud has been much slower with ERPs than other business apps, partly because of timing. Companies tend to swap out or upgrade their systems on five- to 10-year cycles. However, in the past few years, there has been an increasing shift toward cloud-based systems when firms decide to change their ERP. Primary reasons include the following:

• Customizability: The cloud computing trend in ERP software brings unique benefits, including customizability. Cloud-based ERPs are much easier to customize than on-premises solutions, helping businesses better meet their operational needs. 
• Ease of use: You won’t need an IT team to deploy or upgrade your cloud-based ERP. Everything is held and managed in the cloud. 
• Remote accessibility: More businesses today offer remote work plans or hybrid work arrangements to help attract and retain talent. Cloud-based ERPs are uniquely suited for flexible workplace arrangements, especially compared to on-premises solutions. Your team can work from anywhere with an internet connection (more on this below). 

4. Mobile ERP solutions are becoming more entrenched.

In the past, mobile ERP was slow, clunky and offered minimal features. And there was no real demand to improve mobile ERP solutions when remote and hybrid working wasn’t well established.

However, today’s web-based ERPs have changed all that. They’re designed to be responsive and offer extensive functionality to remote employees and team members on the road. Employees can log in from their smartphones, smartwatches and tablets and enjoy a high level of functionality on par with desktop solutions. 

With a touch on their phone, tablet or watch screen, team members can use mobile ERP software to do the following and much more: 

• Submit and approve budgets
• Submit time sheets for instant approval
• Check in and out of work
• Bill clients based on time
• Send receipts
• Create invoices and send them to the appropriate party

Additionally, integrations with meeting and communications tools like Slack and Zoom allow teams to collaborate on projects across different time zones.

Beyond easing remote work, mobile ERP solutions can benefit retail establishments, factories and warehouses. For example, shop floor workers, warehouse staff and field service technicians can carry mobile devices connected to ERPs and update inventory, record service activities and track production progress, ensuring all data across the business is current.

5. Two-tier ERPs are growing in popularity.

Despite the many benefits of cloud-based ERPs, not every company is willing to let go of their on-premises solution yet. However, they may be willing to compromise by installing two-tier ERP systems:

• They’ll keep their existing on-premises ERP system at the corporate level (Tier 1).
• Divisions, departments and subsidiaries will use a cloud-based solution (Tier 2). 

A two-tier ERP system may be attractive to some companies because of the cost, complexity and lead time required to roll out an ERP across a large business. Sometimes — particularly in new divisions created from merger and acquisition activity — a department’s operating procedures are sufficiently different to make the head office ERP solution inappropriate. And adapting the current solution to cope with those workflows would be an expensive and lengthy process. A two-tier solution can be an ideal compromise.

This setup’s primary challenge is ensuring a free and easy data exchange between the Tier 1 and Tier 2 systems. In response to the growing demand for this setup, many ERP platform providers have now built plug-ins that allow for smoother integration with legacy corporate ERP systems.

What are typical ERP features? 

ERP systems generally feature some or all of the following functions:

• Accounting tools: ERP platforms’ accounting tools manage a company’s standard financial recordkeeping. Many systems have additional management accounting capabilities capable of generating complex financial reports for C-suites, senior managers and other stakeholders. Read our Oracle NetSuite Accounting review to learn about accounting software that includes ERP resources.
• HR tools: ERPs may include HR tools to manage recruitment, monitor adherence to employment legislation, track performance against performance goals and metrics, record disciplinary procedures, and track sick days, missed work, leave-of-absence periods and holidays.
• Manufacturing process tools: ERP manufacturing process tools can streamline processes, eliminate redundant production tasks, prevent waste, ensure sufficient stock is available when needed, match demand and supply, and more.
• Inventory management tools: ERP inventory management tools are particularly useful for companies operating “just in time” models. Broader benefits include observing high-selling products, automatically replenishing stock, calculating the landed cost of goods sold, and monitoring sales channel performance, turnover rates, quality checking and shrinkage.
• Order processing tools: ERP order processing tools manage customer data processing, packaging and shipping teams, invoice and receipt creation, payment processing, investigations into delayed orders, and more.
• Supply chain management tools: ERP supply chain management tools improve vendor collaboration and handle demand planning and warehouse planning. They also monitor parts and personnel utilization, create import and export documentation, and more.
• Maintenance tools: ERP maintenance tools measure equipment efficiency and effectiveness (including sensor data), monitor scheduled upkeep, and manage work orders and ticketing.
• Project management tools: ERP project management tools assign costs to individual projects, monitor progress against milestones, coordinate engineer-to-order projects, provide dashboard insights for project managers and other stakeholders, and more.
• CRM tools: ERP CRM tools manage marketing and sales channels and customer and technical support. CRM systems are not ERP systems, but many ERP systems have built-in CRM functionality. Read our reviews of the best CRM software to learn about solutions that incorporate ERP capabilities.

What are the different types of ERP solutions?

The three primary ERP solution types are on-premises, cloud-based and hybrid. However, there are seven ERP types in total. 

• On-premises: On-premises ERPs are hosted on a company’s servers and terminals in buildings it owns or leases.
• Cloud-based: Cloud-based ERPs are hosted in the cloud and are commonly referred to as SaaS offerings. Businesses pay for them via a monthly subscription. The vendor will provide updates, training and support. Customization levels vary.
• Hybrid: Hybrid ERPs combine on-premises and cloud-based services. The individual arrangement between the client and the cloud vendor determines where data and apps are hosted and stored. Hybrid clouds offer greater customizability than cloud-based apps.
• Generic: Generic ERPs are excellent for finance and accounting but don’t cover operational analysis. You may need a developer to add the broader functionality you want at an extra cost.
• Industry-specific: Industry-specific ERPs fit the specific needs of sectors like hospitality, waste management, construction and retail. Much less customization is needed on these systems than generic ERPs.
• Open-source: Open-source ERPs provide basic functionality for accounting and processes. Like generic ERPs, you must employ a developer at your cost to customize the ERP to perform the functions you need. Open-source ERP software is often free or very low cost.
• Two-tier: As mentioned above, two-tier ERPs are for larger companies with a head office and regional centers. All locations share the same database, and the head office sets general functionality across the entire system. However, regional centers can customize the head office ERP to match local languages and legal and accounting customs.

Taking advantage as ERP growth and adoption continue to increase

The coming decade will likely bring healthy overall growth in ERP usage across businesses as companies seek a competitive edge with improved efficiency and streamlined processes. Investing in complete ERP systems may be economically prohibitive for some companies. It’s possible to replicate many ERP features with API plug-ins to get your existing business apps to speak with one another until you feel able to invest in an ERP solution. 

Whichever route you take, ensure you’re clear about how you want to improve your business, and use that as a starting point in your ERP planning.