Managing Resources: ERP Industry Trends That Impact Bottom Line

What significant ERP trends are ahead?

The ERP market is expected to reach $117.09 billion by 2030 at an annual growth rate of 10%, according to Allied Market Research. As more businesses rely on ERP solutions, the sector will evolve and change to accommodate new functions and technologies.

By 2030, analysts expect the following four significant ERP market shifts.

1. Cloud-based ERP solutions will increase.

Although cloud-based ERPs offer additional features and more customizability, on-premise solutions currently command 65% of the market, according to Panorama’s 2022 ERP report. Most businesses want more control over ERP functionality and security than cloud-based ERPs currently offer, driving this on-premise preference. 

However, Grandview Research reports that cloud-based ERPs are expected to catch up and dominate the market by 2030 thanks to the lack of upfront investment, faster implementation, accessibility, scalability, efficiency and immediacy. 

According to the 2022 ERP report, cloud-based solutions will grow as businesses replace legacy systems – and 32% of respondents indicated this preference. Additionally, Statista found that the global cloud ERP market will reach $40.5 billion by 2025 at an annual growth rate of 13.6%, partly spurred by the pandemic and more remote work plans.

Cloud-based ERP solutions benefit many areas of an organization, including the following:

• IT departments. IT and resource-planning teams will likely prefer the enhanced storage and compute functions that cloud-based ERP solutions offer as companies process ever-increasing amounts of data.
• Finance departments. Finance teams will prefer the cloud because the upfront cost of hardware that is capable of processing data at the same speed as cloud providers will become prohibitively high.

1. More small and midsize businesses will adopt ERP solutions. 

Large enterprises currently comprise 39% of the ERP market share, according to Grandview Research. They’ll rely on ERP solutions even more in the coming years as they seek further streamlining in e-commerce activities, order fulfillment, procurement, inventory management and production planning. 

However, more small and midsize businesses will turn toward ERP solutions as they become more affordable, flexible, customizable and adaptable. Technavio expects the market for ERP systems for SMBs to grow at an annual rate of 7.42% from now until 2025.

ERP systems will help these companies find efficiencies and savings in operations, production and delivery, offsetting increasing government regulation and competition.

Although top accounting software and customer relationship management (CRM) systems will drive most of this growth, analysts expect SMBs to take advantage of the increasing ability of apps to talk to each other. Over time, the apps will, in unison, create effective bespoke ERP systems customized to individual SMB needs. SMBs will become more efficient and profitable as the data insights created by these systems assist with process automation.

3. More companies will implement customized ERP solutions. 

According to the 2022 ERP report, only 3.6% of organizations implement ERP solutions out of the box with no customizations. More than 64% add moderate or heavy customizations in configurations and processes. Customized solutions are expected to increase to help organizations better serve their customers and streamline operations.

Customized ERPs help businesses personalize solutions for their customers to create a better experience. For example, personalizing your ERP solution with chatbot technology can help you answer customer questions with order and account information preprogrammed into the system. 

ERP solutions tailored to industries and businesses will also reduce the need for specialized tech support to maintain these systems. 

4. ERP’s big data amalgamation will grow.

Many ERP systems have the unique selling point of instantly providing operational, performative and financial data.

Before the cloud’s growth, storage space and compute functions were limited by the hardware and software used in on-premises systems. Businesses couldn’t process and analyze big data as they now can by piggybacking on cloud providers’ vast servers.

ERP vendors will likely supply new or modify existing systems that rely more on the cloud to provide their customers with more use cases for their solutions.

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 team members to 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 each other (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 provide a standard user interface, depending on permission levels. You won’t have to maintain separate databases or periodically merge databases to generate reports.

ERPs constantly collect and compare departmental metrics. Users can create accurate reports on business performance based on the metrics they select – for example, how productively the team uses company resources. 

Companies use ERP reports to do any of the below:

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

What are typical ERP features? 

ERP systems generally feature some or all the following functions:

• Accounting tools. An ERP’s accounting tools manage 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; keep track of sicknesses, missed work, leave of absence periods, and holidays; track performance against performance goals and metrics; record disciplinary procedures; and more.
• Manufacturing process tools. ERP manufacturing process tools can streamline processes, eliminate redundant tasks in production, 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 monitoring products that sell the most, automatic stock replenishment, 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 collaboration with vendors 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 data from sensors), 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-premise, cloud-based and hybrid. However, there is a total of seven ERP types. 

• On-premises ERPs. On-premises ERPs are hosted on a company’s servers and terminals in buildings they own or lease.
• Cloud-based ERPs. 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 ERPs. Hybrid ERPs are a mixture of on-premises and cloud-based. Where data and apps are hosted and stored depends on the individual arrangement between the client and the cloud vendor. Hybrid clouds offer greater customizability than cloud-based apps.
• Generic ERPs. 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 ERPs. 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 ERPs. Open-source ERPs provide basic functionality for accounting and processes. Like generic EPRs, 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 EPRs. Two-tier EPRs 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 language, legal and accounting customs. 

How to take 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 each other 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.