With the accelerated development of information technology in the business environment, this resource has become strategic to the point of making differences and preferences in the market for those who keep up to date. Under these conditions, businessmen and executives are concerned with keeping up to date with information systems. Companies have the most modern tools in ERP for information management and consolidation of all data, but they have a big problem and that is their high cost. Given the desire to have one of these systems, who will make the decision must first know how your company is doing and if it is prepared for an ERP.This article describes some stages in the development of the integration of information so that the current state of a company can be located and how long is the road to be traveled, in addition to knowing how far along that path will allow you to reach your budget.
Introduction
The hypothesis that companies need information systems to streamline their administrative processes and to improve production processes is already more than proven by all entrepreneurs and executives. All of them are aware that software tools not only make work easier, but by making the company more dynamic and healthy they make it more productive. The time when systems were bought to follow a trend or to bring business to modernity just by having them has passed into history. Now these same people, concerned about this important company resource, are thinking about how to stay up to date on their information technology.
But following the evolution of information technology at the same pace is not so simple. The level of complexity in software for companies has increased dramatically. Not long ago, cash management programs, invoice systems, checkbook administration, payroll and human resources management, and policy systems were developed. All activities had their system isolated. At this stage, companies frequently hired programmers to develop such tools for them. Depending on the type and size of the company, it was the complexity of the software developed, but businesses soon had their tools.
Software engineering after providing these simple tools began an accelerated development, where the integration of information became the goal to be achieved, the systems of the same department were first linked through the use of the same files and much later, It integrated everything into a single system that would serve the entire company in different modules but with the information integrated in a single database. Each new type of tool brought with it a higher level of complexity and, consequently, a higher cost for the company, so this aspect became a kind of “filter” for those who could and could not pay for them, placing them at the development level of IT who could give you your budget.Large companies with resources were the ones that quickly took advantage of the new advantages of technology, while others had to delay it until they were fully convinced of the benefit to their companies or until they had sufficient resources to finance them.
But business software has not finished offering alternatives to companies. After several types of comprehensive systems and the appearance of tools that offer services to activities that were not previously contemplated, such as managing customer relationships with CRMs, the use of systems that, in addition to integrating the entire operation, is being appreciated The companies help in the administration of the resources themselves, and in their planning to give the executives the weapons to make decisions in an accurate and timely manner. These are ERP systems.
But as we have witnessed, not all companies have adopted ERP technology at the same rate, and that is that if each new stage of the systems was more expensive than the previous one, these systems do not break the rule and especially the current ones have prices that they simply make them inaccessible to some midsize companies and unthinkable to small ones.
The idea has always been that small companies do not have this type of software because their budget for this type of resources is low compared to prices. But if the software houses offer affordable prices for their possibilities and could acquire them; How would you know if doing it really suits the company? What conditions would be optimal to implement these systems? These are unknowns that must be resolved before committing the company's resources, and even more so when talking about resources that can jeopardize the stability of the company given its size.
How can I know if I need an ERP type system?
First of all let's see what we are talking about when we mention ERP
An ERP or Enterprise Resource Planning can be defined as:
An integrated information system to manage all the resources of the company, these resources are human resources, financial resources, material resources and information resources.
These are tools that support the company from market research, to determine its needs, through production with the selection of materials, its use, its indicators of quality, performance, etc., including the financial aspect of the entire company, that is, the handling of all operations with securities, whether they are purchases, payments, bill collections, salary payments, tax payments, interest, costs, etc. Dealing with all this, carry out all the strategies defined from its planning by the senior executives.
Through these tools the integration of all the dispersed parts of the company is achieved and in this way it becomes a single entity moving in the direction in which the strategies mark.
The main obstacle of ERP is the human factor and in particular the resistance to change that is found in all companies, some more than others, but this problem is present in all. The inertia that the workers maintain over the processes is very difficult to break and it is that actually introducing this type of systems means imposing on all employees a very strict work discipline that involves each and every one of them, since the tool It considers all parts of the company and each one of them trusts the information that the system has. Any failure in any element of information has chain consequences and therefore requires the absolute commitment of all people.
A system like ERP is that every shareholder would like to have in their company, something that could guarantee that all the parties are working in coordination to achieve the objectives, but before going into the adventure of an ERP, it is necessary to check if the company itself is ready for it.
In the book E-Business and ERP Transforming the Enterprise, (Norris 2000) a cycle of development of companies in the field of information technology and ERP is proposed, from it 5 stages can be extracted through which companies must normally go through full development in ERP. The stages are:
Initial stage
Companies that are starting their activities are generally in this stage and therefore do not have information technology resources. The activities they carry out are controlled by office systems such as word processors or spreadsheets. The constant at this stage is the search for tools suitable for their functions, but the interest in systems such as ERP is very low or nil.
Non-integrated systems
In this second stage, companies already have some software that supports them specifically in the areas in which they are used. There are for example:
- Financial management systems for accounting areas, Design and material management packages for the production area, Customer invoice management system, Inventory systems for warehouses, Supplier account management systems, etc.
Companies at this stage have been concerned with meeting the needs of information technology as they have been presented and have tools that give good support in each area, but the problem is that the information is not integrated, to know the state of the company regarding a particular factor, investigations must be made through the department systems and then the information must be integrated so that it meets the objective of such investigation, and this is repeated every time another similar data is needed, and even the same data but updated.
The cause of this problem is in handling information separately, and in this case the concern will be its integration.
ERP Limited Function
At this stage, companies have already been concerned with implementing ERP-type solutions, but it is only considered in some business units, such as central offices or only in the largest branches, this due to the high rate of implementation throughout the whole company mainly. In these conditions, the benefits of a system such as these are not appreciated or it is done in a low proportion, but it can become the favorable conditions to continue developing and integrating the company completely, as resources allow.
It is common that support systems continue to exist throughout the company and that they do not manage to integrate into the resource planning integration system, therefore some problems may arise such as information inconsistencies or delays for updates. In addition to requiring extra work to ensure you have the real information at all times, that is, working in this way can give good benefits but you must always take care that the parts that are not integrated do not lose control.
Business units integrated by ERP
This stage is reached when the ERP has been brought to each and every one of the company's business units, that is, the entire company already has the resource planning tool and can fully use it. At this stage, non-integrated information management processes are eliminated and their functions are transferred to the ERP system.
The main characteristic of this stage is the communication between business units, particularly in geographically dispersed companies, the use of re-communications makes it possible to have the data as if everything were in the same goal, with which actions can be taken to a lesser extent. time and with greater opportunity.
Integrated company with ERP
The last stage of the Company-ERP development is when full integration is achieved, that is, in the previous stages, details of the company that had not been contemplated in the software or, on the contrary, parts of the software that does not apply to the company could be found., but full integration is achieved when all the administrative information management functions can be carried out through the ERP system and here when decision-makers have a very effective weapon in their hands to overcome all the conditions that they have to face. the company, and give it the dynamism that is needed in this environment.
An entrepreneur must analyze the stages described above and locate his company according to the conditions he has at that time, after reviewing how he is and where he wants to go, he can take the necessary actions to get there.
A very important and perhaps the most decisive part is the cost involved in these software tools, and according to the size of the company and, logically, the stage it is in its technological development, it will be the amount of the costs of arriving where it is intended.
For example, someone who is in the initial stage and has a small company may first opt for commercial and non-integrated packages, which usually do not exceed a few thousand pesos. On the other hand, a company considered as medium or large and that already has systems that work more or less integrated to undertake an ERP project will have to think about costs of several million pesos, since it is known that in this type of project the cost of software represents only 15 to 25% of the total cost of the project, with implementation being the part that involves the highest proportion of costs, and as data it can be mentioned that the costs of ERP solutions in some commercial houses range from 100 to 250 thousand dollars, which would be only the price of the software.
Costs are therefore impossible barriers to overcome for small companies, for which less expensive solutions must be implemented. That will be the challenge for the software industry, to be able to include the important SME market in ERP system strategies, since at the moment there are really few companies that can spend several million dollars to reach the last stage described in this document.
Conclusions
Planning has become the aspect that makes the difference between companies that can face adversity and those that cannot. Nothing can be left to chance because there will always be someone who takes the initiative and can seize the preference of customers. Being this a premise for the future of any company, it can be thought that since there is a tool that helps for such planning and also provides support during the execution of all the plans and activities of the company, entrepreneurs would seek to have it immediately. But that idea changes a little when knowing that such a tool has a very high acquisition cost and even more so in its implementation; So high that depending on the size of the company it could compromise its financial stability.
When faced with that decision, you have to stop the step in the technology career, look inside the company and verify if the state of the business, the dynamics of the processes, the culture of the employees, the configurations of the facilities, in short, all the details of the company are optimal so that once the new resource has been acquired, its full potential could be exploited. ERP systems. As the name implies, they are tools to plan the resources of the company, and if those who make decisions are willing to dive into the whole process that involves the implementation of an ERP system, the key will be the planning itself.
The starting point of this planning will be an analysis of the current conditions of the company that intends to adopt an ERP system. You have to have well defined what your current systems are and their degree of integration to be able to verify if those tools can be reused in the new architecture or at least be useful to establish the logic of the current processes. You also have to make an evaluation of the technological infrastructure, both of computer equipment and communications. In short, a technological diagnosis has to be made to find the: How are we? Let him serve as a reference for him: How much do we need?
Something that will be of utmost importance for this type of projects and sometimes it is not given its place is the human aspect, it is explained how the implementation of the system is the most difficult and costly part for the company but this is because the investment that has to be done in human resources. These systems require all staff to contribute data when they are generated and work in coordination throughout the entire company. For this you need a lot of training and training by experts in such systems but all the training and all the training and even all the technology will not give results if those who must provide information do not have the initiative to do soSo if you plan to implement an ERP in your company, what you should evaluate first is that your human resources are prepared for this step forward.
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