#Guides | 16 min read | Updated: 8/16/2022

Developing an ERP System from Scratch: Key Steps, Costs, and Examples

Updated: 8/16/2022
, Delivery Manager
#Guides
16 min read

The larger the company, the more business management tools are necessary to coordinate all of the processes. In 2021, over 50% of businesses developing an ERP system were able to easily manage their accounting, logistics, inventory, and staff. 

On the other hand, those companies that hadn’t used ERP systems yet faced process difficulties and loss of money. 

ERP solutions allow businesses to tackle their work processes better and thus save time and money. 

This guide will share our knowledge about ERP systems and how to develop an ERP software that meets all business expectations.

ERP Systems 101: Introduction to ERP Development

Before we talk about the advantages of the ERP management system for business, we need to find out what it is and why medium and large companies need ERP systems for their work processes.

What Is an ERP System?

Enterprise resource planning ( ERP) software is a system that allows a company to standardize and simplify business processes in different departments.

It can also automate operations within the company and securely store and transmit information data to improve planning and decision making.

ERP Market Overview

For the last few years, an enterprise resource planning system has lost its exclusive domain for multinational corporations. Almost all modern companies of any size need an effective system for their management and product and project monitoring. 

From 2022 to 2024, the global ERP software market is predicted to reach $97.15 billion with a compound annual growth rate of almost 0.8%. 

Sloboda Studio created a year-over-year ERP system comparison to analyze ERP market growths and ERP system behavior on the market.

ERP System Year-by-Year Overview

20182019202020212022
Top industriesManufacturing
Distribution
Manufacturing
Information Technology
Manufacturing
Information Technology
Manufacturing Information TechnologyManufacturing
Information Technology
Marketplaces
ERP market revenue$93.4 B$94.05 B$94.71 B$95.37 B$96.04 B
Allocated Annual Company Budget36% stayed on budget55%
stayed on budget
62%
stayed on budget
64%
stayed on budget
40%
stayed on budget
Business Process Management (BPM) Focus49% improved most
processes
30%
improved most processes
37%
improved most processes
50%
improved most processes
55%
improved most processes
Top Reasons to ImplementOrganization issuesOrganization issuesOrganization issues
Real-time data access
Organization issues
Real-time data access
Organization issues
Real-time data access
Cost-effective legacy

Source: Panorama ERP Research, FinancesOnline, NetSuite, AppsRuntheWorld

ERP System Functionality and Must-Have Capabilities

The ERP templates can be used by enterprises and corporations as a universal dashboard for the following areas:

  • Marketing
  • HR
  • Financial management
  • Project management
  • Compliance and quality control of production
  • Automated data reporting and business analytics

As a rule, an ERP system can consist of modules such as:


Human Resources Module

This module can have the ability to get data from your employees, make job profiles, track work hours and schedules, and compile a visual skills diagram. Many companies also use these templates to track payroll and labor efficiency and reimbursement of courses or medical services.

Finance and Accounting Module

This module automates payroll processing and tax filing and also helps with closing accounts, tracking reservations, and delivers core financial and accounting functions. These all functions provide key insights to minimize financial risk.

Customer Relationship Management Module

Large enterprises and corporations can use the ERP system to improve sales efficiency and customer service quality. It’s possible with the help of information about:

  • customers and potential audience 
  • tracking communication history 
  • information about purchases and transaction call history 
  • studying data about visitors’ preferences and hobbies, etc.

Supply Chain Management Module

This module allows to automate the supply chain and optimize the flow of product or service supplies from the manufacturer or supplier to end-users.

Inventory Module

A modern company uses this module to track their product inventory, identify it, manage inventory and reports, and determine uniqueness by serial numbers in various contentious situations with customers. Almost all advanced ERP solutions have such a module.

Sales Module

This tool regulates sale data, collects and analyzes various requests, compiles offers, sends invoices, and verifies transactions from customers or contractors.

Purchase Module

Purchase modules can help to automate and analyze all internal purchases that ensure the inner life of the company. It can also track and explore:

  • supply of raw materials for production
  • existing services on the market
  • analysis of quotations
  • vendor listings
  • purchase orders

These analytic features became possible since an ERP system provides AI and BI support for marketing and management activities.

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Distribution Module

This module helps automate such features as production planning, tracking specifications, monitoring the production progress, and compiling and analyzing actual production.

How to build an erp system: different modules guide

All those modules help control and automatically regulate all of the company’s processes. 

The choice of an ERP system module depends on the business industry and necessary in-built features. Each industry must have specific modules that will not overload the system. 

For example, the real estate industry will need the following resource modules: 

  • HR module, which operates with workers profiles and analyzes their activities
  • Sales module, which regulates the sale management activities and tracks real-time reports
  • Inventory module if the organisation has property equipment 

Our client, Property Repair, has got an excellent feature for real estate managers to track their worker’s activity and the actual time of repair services. This case perfectly illustrates the work of such an ERP module as HR.

Who Would Benefit From Building an ERP System?

An ERP system is needed by medium and large businesses that effectively organize their activities.

Panorama ERP created research that shows ERP systems’ popularity among different industries in 202, such as:

  • Manufacturing
  • Information Technology
  • Distribution
  • Public Sector
  • Professional Services
  • Retail
  • Healthcare

Below, we highlight the most popular business sectors where an ERP system works well.

Why build an ERP guide among different industries based on research

Source: Panorama 2021

Worldwide businesses find it challenging to choose an ERP system. The system costs money, whether it’s ready-made or custom-made, with different functionality, in-built features, and design.

Many companies can’t decide which ERP system to build because of insufficient system awareness.

development an erp system: time to choose the best ERP system

Source: Learn.G2

Advantages of ERP Software

Over the past two years, the use of ERP systems has effectively changed the business planning processes of enterprises. 

Enterprises of various sizes were able to save 20% on their business budgets with the help of ERP. So, let’s take a closer look at what advantages a company gets by choosing an ERP system.

Optimization of Business Processes

Business process optimization allows enterprises and middle-sized companies to save time and automate their daily business tasks using HR, supply chain management, and inventory modules. More importantly, it will save the company from routine paperwork and minimize errors related to the human factor.

ERP development system success based on research

Source: Panorama ERP Research 2021

Real-Time Data Access

Companies will make more effective decisions with accurate and timely access to reliable information thanks to constant reporting and real-time data features.

Better Business Collaboration

Cooperation between business partners is an opportunity to swap information between all business participants and activate high-quality partnerships between various parties. Most businesses increased their cooperation productivity by 30% using an ERP system.

Cost Savings on Legacy Support

If a company needs legacy support for their businesses, an ERP system can help significantly. 

For example, an ERP system stores all records about the uniqueness of the product, so it will be easier to provide better product protection and prove that the product entered the market first or is unique compared to others. 

By the way, in 2021, over 65% of small businesses have benefitted from using ERP legacy services.

Advanced ERP software development guide for legacy system

Source: Hubspot

Reduction of Unnecessary Operations

With medium or large-sized companies, the number of unnecessary operations can escalate quickly. Here, an ERP system can significantly help companies analyze what is needed for business planning, and free up space for priority tasks and their time with the help of Artificial Intelligence and Business Intelligence opportunities.

Improved Work Performance

Labor productivity is an important criterion that will allow the company to properly analyze the effectiveness of each employee, develop individual growth plans, and increase the effectiveness of cooperation.

Many companies create long reports about their activities. In this case, the ERP system can now calculate how effective the business process is and organize the procedure correctly to create a good balance of time and work.

Disadvantages of ERP Software Development

Like every resource system, an ERP tool is not devoid of disadvantages. Let’s deal with the pitfalls that can become a stumbling time block for integrating an ERP system into different businesses.

Cost

Installing an ERP system is not cheap. Installing an ERP system will take up to 40% of the allotted budget in 2021. Of course, this is worth paying attention to if you are a small company with a few staff. However, for medium and large businesses, the payback of this resource system remains exceptionally high.

Staff Training

For procedures of an ERP system to work as efficiently as possible, the staff must be trained on how to deal with it, how to process reports correctly, and with what regularity it is necessary to do this. Ready-made resource-like templates without an experienced vendor seem too complicated, and they do not want to spend money on staff training. Furthermore, this path may lead the company to even higher costs and reduced competitiveness in the consultant market.

System Complexity

Some ERP systems are overcomplicated. 

This is typical for ready-made ERP products that may initially interest companies in their capabilities and delivery, then cause confusion about its management and correct workflow. 

Here, the winning choice is a custom ERP product that will avoid difficulties with the volume of the system, because it will fully meet the requirements of the business needs and building priorities.

However, no matter how good an ERP system is, its advantages will not appear immediately, but they will be evident for a long time after the ERP tool is integrated.

The final implementation stage depends on the workforce’s abilities and skills and involves training and preparation to apply the templates correctly.

Before installing such a system, companies need to understand its goals and further develop their time strategies.

Why companies choose an ERP software system development: Results based on research guide

Source: Panorama ERP Research

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Out-of-the-Box vs. Custom-Made ERP Systems

There are two options with the ERP guide — a ready-made resource planning system or a custom-made solution. Each solution has its own benefits that a company should study before implementing an ERP guide.

Third-Party Solutions

An out-of-the-box option means buying an ERP system from suppliers. The company pays a single entry fee to purchase a license or buy a subscription for a certain period. 

The Statista 2021 Survey showed that there are three top ERP system vendors on the market: Deltek, Microsoft, and Workplay.

development an erp software system guide: third-party solutions based on Statista survey

Source: Statista

However, that’s not a complete list of suppliers companies can choose for their projects. Sloboda has prepared an extensive survey of the TOP 10 ERP vendors that a company should know about before making any buying decisions.

Need a list of top 10 ERP suppliers with all vital data?

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Custom ERP Solutions

Companies can also implement custom ERP systems tailored to the provision of a particular company that will not contain unnecessary functionality. 

A tailored ERP solution is more expensive than ready-made products on the market, but a company receives such significant benefits as:

Customization

Custom ERP solutions do not lack the necessary business functions and planning, which means the functionality is in order. This saves a lot of time to study, and companies also pay more for what they won’t use in the future.

Essential Functions

Enterprise companies with experienced ERP services can choose practical functionality that will help analyze the web app process more clearly and make decisions faster.

Сompanies choose custom ERP solutions and get over 91% of satisfaction when developing an ERP system.

ERP software solution satisfaction level based on Panorama research

Source: Panorama ERP

However, companies need to consider the disadvantages of building bespoke ERP systems.

Longer Creation Time

A custom ERP system solution needs to be created, which means the system’s implementation time will be longer than the ready-made web app solution. And here, enterprise companies need to understand whether they can wait and for how long.

Development Cost

A custom ERP solution will cost more. However, it will be made entirely for a specific company, a specific industry in which it works, and thoroughly adapted to employees and their customer needs.

ERP Software Development: Step-By-Step Process

While developing an ERP system, a company should follow a step-by-step building process.