When deciding on an ERP (Enterprise Resource Planning) system, companies often wrestle with a decision between selecting a monolithic generic ERP system and an industry-specific ERP system. Both have their advantages and disadvantages.
Are you struggling to decide whether you should choose a generic ERP or an industry-specific ERP? If so, you’re in the right place. Here are a few steps you can take to support your decision-making process.
What is the Difference between Generic ERP vs Industry-Specific ERP?
Generic ERP Systems
Generic ERP software systems refer to ERP systems that can be used across industries and vertical markets. The features and functions cover a broad range of cross-industry requirements. For example, the same generic ERP system might be used by companies in banking, manufacturing, mining, and professional services industries.
The pros of generic ERP software include an ability to leverage cross-industry best-practices. In today’s economy, companies often straddle industries. For example, many high-tech and electronics manufacturers are embedding software service subscription requirements into their offerings. And, so, they might benefit from functionality relating to subscription contracts, recurring billing, and associated revenue recognition.
The cons of generic ERP software area that they might lack functionality that supports industry-specific idiosyncratic requirements. As a recent example, our team was helping a client evaluate generic ERP for a consumer packaged goods company in the food and beverage space. This particular ERP lacked food industry-specific functionality relating to item-related storage and handling requirements.
Industry-Specific ERP Systems
Industry-specific ERP systems are partly developed based on common requirements that are shared among companies in a specific industry. In addition to industry-specific functionality, the benefits of industry-focused ERP solutions often include what are called best-practice models or implementation accelerators. These accelerators are pre-configurations designed to support standard industry specific business processes. The idea behind the accelerator approach is to streamline implementation by providing meaningful business processes that are largely configured, mapped, and documented.
The cons of industry-specific solutions is that they may lack functionality in areas of a business that are atypical in a given industry.
3 Tips to Evaluate whether Generic ERP or Industry-Specific ERP is Right for Your Business
Here are three tips to evaluate whether generic ERP or industry-specific ERP is right for your business.
1. Define Your Business’ Strategic Drivers
The first step in the process is to define your business strategies and models. It is important to understand how you want to grow your business and defend its market share. Typically, companies break down strategic requirements relating to innovation, profitability, productivity, customer experience, and employee experiences into specific departmental and operational goals and metrics. With this clarity, your business will be able to prioritize technology-specific requirements and functionality, and anchor technology selection decision-making criteria in actual business drivers.
2. Map your Business Processes, Architect your Future State, and Create a List of Business Requirements
With defined strategic priorities and business models, you can progress to the next stage – mapping business processes, architecting your future-state technologies, and defining your business requirements for ERP. When architecting future state business processes and technologies, it is important that your decisions be guided by business strategy and model drivers. With defined future state architectures, your business should develop a prioritized and timed list of business requirements. You will use these business requirements to (a) assess ERP systems capabilities, and (b) assess how the ERP system can deliver those capabilities. It is important to catalogue requirements by business function (e.g. finance, supply chain, sales) and by business process group (e.g. accounts receivable, purchase orders, and sales orders). If you define your requirements well enough, you will also be able to use them to support implementation planning, change management , and implementation resource capacity planning.
3. Evaluate ERP Vendors Against the 8 Dimensions of Vendor Fit
Your ERP selection and evaluation project should be deeply rooted in your company’s future-state architecture and requirements. For our clients, we group and categorize these various ERP selection and decision-making requirements into what we call Pemeco’s 8 Dimensions of Vendor Fit.
Several dimensions will provide insights into whether a generic ERP system or an industry-specific ERP system is right for your business, notably:
- The functionality dimension should show whether the system supports the business requirements
- The roadmap dimension should show whether the vendor plans to invest in R&D in industry-applicable areas
- The implementation dimension should show whether the vendor has industry-specific consulting expertise and implementation accelerators
By properly structuring your ERP software due diligence, you’ll be well positioned to evaluate various ERP offerings (both generic and industry-specific ERP) against one another and against your own business requirements.
Would you like no-obligation, expert advice on the 8 Dimensions of Vendor Fit or on your ERP selection project? Contact Pemeco consulting today.