ERP Systems for SMEs in South Africa

For most small to medium-sized enterprises (SMEs), the tools you adopted five or ten years ago might not be able to support your business now. Now, SMEs need digital systems that centralise operations, comprehensively complete compliance-based activities, and save time on administrative work. If your business is outgrowing disconnected tools, you need enterprise resource planning (ERP).

As your business grows, you will need an ERP system to ensure seamless scaling. Your ERP system is there to act as the ‘central nervous system’ of your business and offers various advantages. Unlike massive corporate systems, SME ERPs are often modular and cloud-based. Businesses pay only for what they need and add modules as they grow.

In this article, we look at what ERP systems are, how they work and the benefits they provide. We also look at the different ERP offerings available for South African SMEs.

What is an ERP and ERP Systems?

Enterprise resource planning (ERP) refers to a type of software that organisations use to manage day-to-day business activities such as accounting, procurement, project management, risk management and compliance, and supply chain operations. A complete ERP suite also includes enterprise performance management, software that helps plan, budget, predict, and report on an organisation’s financial results.

ERP systems are complete, integrated platforms, either on-premises or in the cloud, managing all aspects of a production-based or distribution business. Furthermore, ERP systems support all aspects of financial management, human resources, supply chain management, and manufacturing with your core accounting function.

These systems will also provide transparency into your complete business process by tracking all aspects of production, logistics, and financials. These integrated systems act as a business’s central hub for end-to-end workflows and data that various departments can access.

Core Features of an ERP System

Here are some of the core features of a robust ERP system.

Financial management
Accounting features
Order processing
Project management
Embedded artificial intelligence (AI)
Real-time data
Automation
Data analytics
Business process controls
Reporting
Integrations
Centralised database location
Manufacturing production, planning and resource management
Customer relationship management
Sales management
Marketing tools
Human resources (HR) management
Supply chain and purchasing
Business intelligence
Automated compliance tools

How ERP Systems Work

ERP systems consist of integrated module solutions or business applications that share a common database, which lets them communicate with each other. Every ERP module focuses on one business area, but they work together using the same database to meet your company’s needs.

You can pick and choose the module solution(s) that work for your business. This can be anything from financing, logistics, procurement, to HR, and you can add and scale modules as needed. ERP systems can also support industry-specific requirements, either as part of the system’s core functionality or through application extensions that integrate with the suite of modules.

Modern ERP systems provide a large range of business functionalities, but they must connect to and synchronise with other applications and data sources to be effective. They can also connect with other ERP systems.

ERP integration provides companies with a unified view of information from different systems and data points, which helps increase business process efficiency, improve customer experiences, and facilitate collaboration across teams and business partners.

The agility of an ERP system allows it to integrate with a wide range of software products using connectors or customised adaptors, such as application programming interfaces (APIs). Other methods for ERP integration include enterprise service bus (ESB) and modern integration platform-as-a-service (iPaaS).

Types of ERP Deployment

An ERP system has four common deployment types: cloud-based, on-premises, two-tier, and hybrid. Each type has its benefits and drawbacks, and businesses must identify which ERP deployment option best fits their needs.

The different types of ERP deployment include:

Cloud ERP

With cloud ERP, the software lives on a remote, third-party server. It’s accessed via the Internet as a subscription service (SaaS), with the software provider handling maintenance, updates, and security on the business’s behalf. Today, cloud ERP is the most popular ERP deployment method, offering lower upfront costs, greater scalability, faster innovation, and easier integration.

On-premises ERP

On-premises is the traditional model for deploying ERP software, allowing for the greatest level of control. The software is typically installed on-site in a company’s data centre. While total control is certainly a benefit, it also comes with the responsibilities of installation and ongoing maintenance.

Two-tier ERP

Companies undergoing major operational changes, such as mergers, expansions, or acquisitions, will often opt for a two-tier model. For example, the tier 1 ERP may be an on-premises server at the parent organisation’s headquarters, and the tier 2 ERP could be a cloud-based subsidiary system handling local or specialised functions. A two-tier strategy enables companies to start a controlled move to the cloud, migrating specific functions or business units without disrupting operations.

Hybrid ERP

A hybrid model is a type of two-tier ERP system that combines on-premises and cloud-based deployment to give businesses the flexibility to choose the best deployment for each application. Hybrid cloud ERP can be a stepping stone to a cloud-only two-tier model while still accounting for applications that may need to be on premises to meet industry regulations or security requirements.

Key Benefits of ERP

The advantages of implementing an ERP system vary depending on the deployment model. The following are the benefits that apply to all modern ERP solutions.

Higher productivity: Streamline and automate core business processes so people throughout the organisation can do more with fewer resources
Deeper insights: Eliminate information silos, gain a single source of truth, and get fast answers to mission-critical business questions
Accelerated reporting: Fast-track business and financial reporting and easily share results to act on insights and improve performance in real time
Lower risk: Maximise business visibility and control, ensure compliance with regulatory requirements, and predict and prevent risk
Simpler IT: Use integrated ERP applications that share a database to simplify IT and give everyone an easier way to work
Improved flexibility: Identify and react to new opportunities with efficient operations and ready access to real-time data