Enterprise Resource Planning (ERP) systems have become critical for organizational efficiency as organizations accelerate their digital transformation journeys. ERP systems seamlessly integrate finance, procurement, supply chain, and HR processes, improving collaboration, data visibility, and automation.
Gartner reports a staggering 55-75% failure rate for ERP implementations due to poor planning and execution. It leads to dissatisfied customers, project delays, financial strain, and decreased employee morale.
Pre-built ERP solutions offer a convenient starting point but fail to align with every organization’s unique needs and complexities. A custom-built ERP system, on the other hand, can provide a more strategic advantage. By tailoring the solution to specific business requirements, organizations can achieve greater efficiency, flexibility, and scalability.
Building an ERP system from scratch is challenging but rewarding. It demands careful planning, expert skills, and dedication, but the payoff is significant.
This blog post will discuss the key considerations and steps in building your ERP system. We’ll discuss the benefits of a custom solution, potential pitfalls to avoid, and best practices to ensure a successful implementation.
What is a Custom ERP System?
Enterprise Resource Planning (ERP) software is a digital backbone for modern businesses. It brings together various business operations under one roof, enabling seamless data flow across departments. Rather than having siloed systems handling different functions, ERP creates a single source of truth for financial data, inventory levels, human resources information, and manufacturing processes.
A custom ERP system is a software solution designed to meet your business’s specific needs. Unlike off-the-shelf ERP systems, it’s built from the ground up to align perfectly with your unique processes and workflows.
Think of ERP as the nervous system of an organization – when a sale occurs, it automatically updates inventory, adjusts financial records, and informs production planning. While most businesses already use basic accounting and operational software, these standalone solutions often create information silos that limit growth and efficiency. ERP systems’ scalability and integration capabilities allow organizations to expand operations while maintaining operational cohesion.
Benefits of a Custom ERP:
- Flexibility: Adapt to your business’s ever-changing needs without limitations.
- Scalability: Grow your system as your business expands, ensuring seamless integration.
- Efficiency: Streamline operations and boost productivity with automated workflows.
- Data Security: Protect sensitive information with advanced security measures.
- Integration: Connect seamlessly with other systems and tools.
Drawbacks of a Custom ERP:
High Development Cost: Building a custom ERP from scratch requires a significant upfront investment in development costs, including software licenses, hardware, and labor. Ongoing maintenance and support costs can also add to the overall cost.
Longer Development Time: Custom ERP development takes time. It requires careful planning, design, and testing to ensure a robust and reliable solution. It can delay the implementation of new business strategies and hinder growth.
Key ERP Features
Enterprise resource planning (ERP) software manages and integrates various business functions. It can be accessed via web browsers or mobile devices and offers features to optimize operational processes. An ERP system includes multiple modules. Each of them supports, automates, and contributes to a particular business process:
Finance Module: Automates accounting, budgeting, and financial reporting.
Research & Development Module: Supports innovation, product development, and intellectual property management.
Asset Management Module: Tracks asset lifecycle, maintenance schedules, and depreciation.
Sales Module: Manages customer relationships, sales forecasting, and order fulfillment.
Supply Chain Module: Optimizes inventory levels, procurement, and distribution.
Manufacturing Module: Manages production planning, scheduling, and quality control.
Procurement Module: Sources materials, negotiates contracts, and manages supplier relationships.
Service Module: Provides customer support, field service management, and maintenance.
Human Resource Module: Manages employee recruitment, onboarding, training, compensation, and benefits.
Why Use an ERP System For Your Organization?
An ERP system significantly improves internal process management and boosts your team’s performance and productivity. An ERP helps you eliminate manual tasks, streamline business processes, and improve team productivity.
An ERP system offers a single data source about your processes, employees, purchases, and manufacturing that makes information search faster. Businesses can gain insights into processes without examining and comparing data from different tools and resources.
Real-time insights and automated processes empower businesses to adapt swiftly to market fluctuations, seize opportunities, and fulfill customer demands. ERP systems can significantly boost revenue and profitability by streamlining operations and optimizing costs. Moreover, a well-implemented ERP fosters transparency, improves decision-making and mitigates risks across the organization.
1. Better Analytics
ERP software provides a centralized database for all your business data, offering easy access to reports and analytics. It simplifies tasks, tracks progress, and helps generate customized reports for better decision-making. With personalized dashboards and KPIs, ERP systems allow you to quickly monitor critical metrics and adapt your processes. Your team can make smarter decisions without constantly relying on IT staff to generate reports.
2. Cost Savings
While ERP software may seem like a significant investment, it offers excellent returns over time. Flexible pricing options make it more accessible for businesses, even smaller ones. ERP systems save money by streamlining processes across departments, from product development to accounting. A single unified system reduces the need for multiple platforms and extra training, making your employees more efficient and saving time and resources.
3. Scalability and Flexibility
Modern ERP systems grow with your business. Whether expanding operations, opening new locations, or entering new markets, ERP software adapts to your changing needs. It integrates seamlessly with other tools, creating an interconnected system that ensures smooth data flow and greater flexibility.
4. Faster Business Operations
Adopting new technology is essential to staying competitive. The right ERP software is flexible, scalable, and modular, helping you respond quickly to market changes and customer needs. Implementing modern ERP tools will enhance your business speed and efficiency.
5. Improved Security and Accessibility
Cloud-based ERP systems provide better data security and accessibility while reducing hardware costs. Hosting your ERP on a secure cloud platform allows you to scale, upgrade, and manage your data quickly. This boosts transparency and ensures your team can access essential information whenever needed.
6. Faster Decision-Making
With all your data stored in one place, ERP software provides accurate insights to help you make better decisions. It helps analyze trends, identify patterns, and predict future outcomes, keeping you ahead of competitors. Improved decision-making leads to higher productivity, better sales, smoother communication, and greater customer satisfaction.
7. Enhanced Customer Satisfaction
Happy customers are crucial to business success, and ERP systems enhance customer service. Equipped with CRM tools, ERP software gives insights into customer behavior, such as transaction and purchase history. This helps your team better understand customer needs, leading to more effective strategies, improved lead generation, and stronger customer relationships.
How to build an ERP system from scratch?
Step 1: Identify Your Business Goals
Begin by evaluating your current workflows. Identify which processes are running smoothly and which could benefit from automation through an ERP system. Engaging with employees across different departments can provide valuable insights into the pain points of your current system. By defining your requirements and goals upfront, you’ll significantly improve your chances of success.
Remember to account for industry-specific requirements, existing legacy systems, and potential integrations. Developing a custom ERP solution allows you to incorporate additional features tailored to your unique needs—features that generic ERP systems might lack.
Step 2: Choose a development agency
Outsourcing ERP development can save time, reduce costs, and free up resources for other areas, such as marketing and business expansion. When choosing a development team, look for a company with proven expertise in ERP systems. Consult with your stakeholders and IT specialists to clearly define your goals and expectations. This approach will ensure your plans are practical and aligned with your business objectives.
Step 3: Select the Tech Stack
The next step is to choose suitable programming languages and frameworks for your ERP system. You’ll also need to decide between cloud or on-premise deployment. Cloud deployment allows access through any web browser, while on-premise deployment is hosted on your servers for enhanced security and control.
If you have an in-house team handling the ERP development, this decision will be crucial for them. However, if you’re working with an external software development company, they’ll typically manage this step, based on your preferences and requirements.
Step 4: Design ERP Database Structure and User Interface
The next step is to design your database structure. At this stage, it is crucial to plan for future scalability and ensure data integrity is maintained. You do not want to build an ERP system only to realize you need to start over as your company grows.
Additionally, focus on creating a user-friendly and intuitive interface. Think about your employees’ technical abilities. How comfortable are they with technology? Are there specific preferences for how they navigate systems? Building a simple, easy-to-use system will ensure smoother adoption and better productivity across your team.
Start by creating a blueprint that outlines how the ERP system should look and function. Begin with simple wireframes to share the vision of the app interface with all stakeholders. From there, develop UI prototypes and clickable models to visualize how different modules and components interact, ensuring a seamless and intuitive user experience.
You have two options for the design process:
- Pre-made Design Templates: You can buy ready-made templates from platforms like Creative Market or Dribbble. These templates are quick to implement and save you time, but they might not perfectly fit your specific needs.
- Dedicated Designer: Alternatively, you can add a designer to your development team. This option allows for a more tailored approach, ensuring your ERP system’s design aligns with your unique business requirements. A dedicated designer will help create blueprints, wireframes, and prototypes while providing a user experience that follows modern design trends and meets your product goals.
Step 5: Initiate ERP Software Development
Once you and your team have finalized the product documentation, app requirements, design schemes, MVP feature list, and technology stack, you’re ready to begin the next phase of the software development lifecycle – the ERP development process.
Developing the MVP typically takes 6 to 12 months, depending on the scope of the project and the size and structure of your development team. Remember that any changes in requirements during this phase can impact delivery timelines.
Step 6: Conduct Thorough Testing
Software development and testing go hand in hand. When your development team completes a piece of code or a working feature, the quality assurance (QA) team should begin testing it immediately.
Your team may include several steps in the review process, such as:
- Verifying that the system meets the initial security, integration, and functionality requirements.
- Testing the ERP’s functionality by performing various tasks across different modules.
- Ensuring the accuracy of the results returned by the system.
In addition to the QA team, you may also want to involve focus groups for beta testing specific modules. For example, the HR department might use modules related to payroll, human capital management, and personnel records. To evaluate how well these modules work together, ask employees to test them and gather their feedback.
Implementing detailed quality assurance during this phase ensures the system performs optimally once fully deployed.
Step 7 : Deploy and Transition
After thorough testing, the next step is to migrate data from legacy systems or manually upload information from physical records. Provide comprehensive training for your users to ensure a smooth transition to the new ERP system. Be sure to cover all tasks in detail so employees understand how to navigate the system easily. This is also an opportunity to introduce any new workflow processes.
Step 8: Continuous Growth
Once your ERP system is live, the real work begins. Stay updated with the latest technology trends to keep your system running securely and efficiently. After the initial setup, create a routine support and maintenance plan. Regularly collect user feedback to identify areas for improvement and keep enhancing your ERP system.
Tips for Implementing ERP Without Mistakes
Tip 1: Use an Outsourcing Team for ERP App Development
Many companies wonder whether to build their ERP system in-house or outsource the development. 57% of organizations believe outsourcing allows them to focus on their core business activities. Outsourcing ERP development can offer significant benefits, such as:
- Access to modern technologies and top talent
- Optimization of IT processes
- Cost savings
- Clear project timelines
- Reliable forecasts
Tip 2: Stay Involved in the ERP Software Development Process
To ensure the success of your ERP system, it’s essential to stay actively involved in the development process. No matter how skilled the development team is, the result may only align with your vision if you’re engaged. You need to oversee every project stage to ensure the final product meets your expectations.
Tip 3: Implementation Is Just as Important as Development
Remember that the implementation phase is just as critical as the development itself. Even the best-developed ERP system is ineffective if it’s not correctly integrated into your existing infrastructure. The goal is to ensure the ERP system fully integrates into your company’s operations.
Tip 4: Focus on the Core Features of the Custom ERP System
When developing your ERP system, it’s important to focus on the essential features the system cannot do without. A successful ERP system should support automation, seamless integration, scalability, real-time reporting, and data collection from various
departments.
Tip 5: Prioritize Information Architecture
Information architecture is critical to creating an intuitive user interface. A well-organized, structured system improves navigation and overall usability, ensuring your ERP system is easy to use. Proper information architecture not only enhances the user experience but also boosts the competitiveness and effectiveness of your product.
How Much Does ERP App Development Cost?
The price of ERP system development can vary significantly based on factors such as the size of the business and the required functionality, making it difficult to provide an exact estimate.
Factors Affecting ERP Software Cost
Features and Functionality
The cost of the ERP system depends on the features and modules you need. Additionally, the number of users and their roles can impact the price—more users or complex roles may require additional features, which can increase the cost.
Deployment Type
Deployment options can significantly affect both the initial cost and ongoing expenses:
- On-premise ERP: Involves higher upfront costs for software, servers, hardware, and dedicated IT staff for system maintenance.
- Cloud-based ERP: Typically follows a subscription model with lower upfront costs, as the vendor hosts and maintains the system.
- Hybrid ERP: Combines both on-premise and cloud solutions to meet the specific needs of a business, often increasing the complexity and cost.
Business Size and Complexity
Larger businesses with more complex needs will require more modules and features, increasing costs. Small businesses usually need a more straightforward system, while multinational corporations require more advanced systems with specialized modules.
Industry-Specific Requirements
Some industries have additional needs beyond standard ERP functions. For example, manufacturers may need specialized supply chain management capabilities, which can increase the system’s cost.
Customization and Integration
Many ERP systems only cover essential business needs outside the box, and additional customization may be necessary to meet specific requirements. Customization and integrating existing systems like CRM or business intelligence platforms can significantly increase costs.
Modules and Features
Many ERP vendors charge differently based on the modules added to the system. Modules such as inventory management, HR, CRM, and finance can be priced separately or included in industry-specific tiers. Ensure you assess your needs against the available modules to align with your budget.
Data Migration and Implementation
Migrating data from old systems into a new ERP platform can incur additional costs, especially if the data needs to be cleaned, validated, or audited. External consultants may be hired for this task, further increasing costs.
Training and Support
Businesses often need training for their employees to maximize the ERP system’s potential. Vendors may offer training packages, which could be bundled or charged separately. Additionally, support services to maintain the system may add to the overall cost.
Compliance and Security Features
Industries like finance, healthcare, and manufacturing often require compliance with specific regulations, which might involve additional security or compliance features within the ERP system. These add-ons can increase the system’s cost.
Infrastructure Costs
For on-premise systems, businesses must invest in hardware like servers, storage, and workstations capable of running the ERP software. Additionally, an IT team will be required to manage and maintain the system. For cloud-based systems, the vendor usually handles infrastructure, reducing these costs for the business.
Operating System and Platform
ERP vendors often require specific operating systems or database versions. If your current systems aren’t compatible, you may need to upgrade your infrastructure or invest in third-party services, which adds extra costs.
Third-Party Add-ons and Services
Some ERP systems may not have all the modules needed for specific functions, such as inventory or warehouse management. In such cases, businesses may need to purchase third-party add-ons or integrate external systems, which can increase the overall ERP cost.
Final Words
Building an ERP software system from scratch may seem complex, but its benefits to your business far outweigh the challenges. With proper planning, a skilled development team, and the right approach, you can create a custom ERP solution that streamlines your operations, enhances decision-making, and fosters business growth. From automation and resource optimization to improved risk management and compliance, an ERP system is no longer just a nice-to-have; it’s a vital tool for businesses looking to thrive in today’s technology-driven world.
At Upsquaretech, we specialize in building custom ERP software for small businesses and large enterprises. Whether starting from scratch or looking to improve an existing system, our team of ERP developers and consultants can help you navigate the entire development process and create a solution that will take your business to the next level.
