How an ERP System can benefit your company and how you should choose your ERP system
By Tshering Cigay Dorji on 25th April 2021
- What is an ERP System and why do companies need them?
According to g2.com, “Enterprise resource planning (ERP) systems are complete, integrated systems that manage all aspects of a production-based or distribution business, aligning financial management, human resources, supply chain management, and manufacturing or distribution with the core function of accounting. ERP systems are used to provide transparency into the entire business process by tracking all aspects of production or distribution, financials, and back office. These expansive systems act as a central hub for end-to-end workflow and data. A variety of departments can view the information recorded by ERP systems to ensure the correct procedures are taking place”.
Typical modules of an ERP system are accounting, budgeting, HR & Payroll, inventory, fixed assets, procurement (purchase), and Sales. These are typical functions that every business needs.
In my opinion, every business entity with monthly revenue of around 5 million or staff strength of 30 should consider deploying a full fledged ERP system with the abovementioned modules. Of course, we should also consider other factors such as business complexity, number of daily business transactions etc. in addition to the above two factors.
As you can very well guess from the modules mentioned above, it will simplify and automate your business process to a large extent and bring about huge improvements in efficiency. Management reports that are available at the click of a button would facilitate better and faster decision making.
You can easily recoup the investment made in an ERP system through efficiency gain and improved profitability in a matter of few years.
2. What are the typical costs of ERP Systems?
Deploying an ERP system can help your organisation in many positive ways, but it does not come without challenges the least of which is cost. An ERP system can help automate your business processes end to end from HR to accounting to budgeting to fixed assets management. Therefore, implementing an ERP system should not only come with full management support and commitment, but also get the buy-in and support of the rank and file of all the divisions and sections. Otherwise, it will face a lot of obstacles in the initial roll out as well as in its continued usage thereafter.
Given the scope and complexity of implementing a complete integrated ERP package, implementing it can cost a substantial amount of money. The cost can vary depending on the size of the company and the amount of customizations that need to be made.
As a rule of thumb, it can be fair to say that the up-front one-time cost of implementing an ERP system with all the modules mentioned above in a small to medium company with around 50 to 100 employees would be at least about Nu. 2 Million to Nu. 3 Million. Besides the effort required for customizing the system to the particular company’s requirements, a lot of time and effort would go into migrating the data from the old system and training the users. The cost could easily baloon into Nu. 10 million or more for bigger companies depending on the additional modules to be developed and integration requirements with already existing systems.
This should not be surprising given that implementing even a simple ready-made Point of Sale (POS) system in a shop can cost from Nu. 40,000 to Nu. 1 million.
Some companies may promise a lower cost up front just to win the contract, but they may surprise you with additional costs backed by this and that justifications later. Worse still, the project may fail because it may turn out to unsustainable to see it through successfully till the end.
A senior executive from the private IT firm Abit Private Ltd. opined that marketing ERP systems to companies in Bhutan was difficult because they expect the system to come at very low price but want the system to be fully customized to their existing processes instead of adapting the processes of global best practices in the system. Therefore, he said that his company had stopped marketing ERP systems. Instead, they were focusing on Point of Sale (PoS) systems for the retail shops and software for hotels and restaurants.
Lastly, let me not forget to mention here that there are also cloud-based ERP systems with subscription-based monthly billing model that do not require huge up-front payments. This option is available from most vendors who provide the traditional on-premise installation option described earlier.
3. ERP systems currently deployed in Bhutan
a. SMART ERP from Thimphu TechPark Ltd.
Full fledged integrated ERP package with all the important modules such as accounting (BAS compliant), HR & Payroll, Procurement (purchase), Sales, Fixed Assets, Inventory, Budgeting modules, customized and developed using open source ERPNext. Ability to custom develop any other modules and integrate them with the ERP system as per client’s requirement. Locally available team.
Deployed in SMCL, CDCL, Gyalsung Infra, NHDCL, WCCL, NRDCL, and implementation underway in BOBL, BTL and Desuung Office.
Pricing model: One time implementation cost followed by AMC.
b. SAP E6 and SAP Hana
SAP ERP systems are implemented in some of the bigger DHI Group companies such as DGPC, DHI, DCCL, DPL, BPC etc.
Pricing model: One time license cost from SAP plus implementation cost of SAP-recognized system integrator that would implement the system. This is then followed by AMC for licenses to SAP plus AMC to system integrator for its maintenance support services.
Zealous Systems, Druksmart and TTPL can provide information on SAP ERP if you are interested.
c. SAP B1 from Zealous Systems
SAP B1 is an ERP system from SAP for small and medium sized businesses. Being marketed by Zealous systems. One drawback is that it does not have HR module. So, Zealous system provides their in-house developed HR Station with it.
Pricing model: Similar to SAP licensing model above.
d. Microsoft Dynamics
Implemented at STCBL. This is an ERP package from Microsoft.
Pricing model: Similar to SAP’s pricing model.
e. Rancelab Fusion 8 ERP – mainly focused on retail businesses
A version of this is said to be implemented at 8-Eleven stores in Thimphu. Not confirmed.
Pricing model: One-time license and implementation cost followed by AMC.
e. Custom-made ERP system from agile labs, Bangalore
Deployed in BDBL, Penden Cement and now under implementation in BNB
Pricing model: One-time licenses and implementation cost followed by AMC.
f. 3i Infotech – Core banking and ERP system
Implemented at NPPF
Pricing model: One-time licenses and implementation cost followed by AMC.
4. Which ERP system should you choose for your company?
Deciding to implement an ERP System is a very important decision for your company. It is something that will determine how your company operates internally for years to come. Therefore, it should be given a lot of thought, and the ERP system should be chosen very carefully.
The cost quoted by different IT firms for an ERP system may vary a lot. The cost alone should not be the main determining factor in choosing your ERP system because it is a major decision for your company. It should be based on their overall experience, the proposed technical solution and your judgement on their abilities to deliver. In any case, you should visit and look at the system already deployed by the vendor in another company to be sure that the system would work for you as expected.
In addition to that, the other important factor to consider should be the maintenance support available locally once the system is implemented. Without that, there is a high risk that the project may fail after implementation due to lack of sufficient and timely support.