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Which ERP Is Suitable for Companies with X Million Dollars in Revenue?

Let’s look at the first question of how large are you as a company?

“Which ERP is suitable for companies with x million dollars?” Revenues size is one of the most common factors in ERP selection. It is a common question facing a manager looking to find a replacement system for their current ERP solution. The question comes down to “How large are you?” and “how scalable is the ERP software?”

Let’s look at the first question of how large are you as a company? Are you “10 Million dollars in annual revenue?” or, do you have “50 Million dollars” in revenue, or 100 Million”, or “500 Million?” All of these companies may require a different level of software capabilities. This is because of a few factors. First, smaller companies tend to have fewer numbers of users. So the solutions at the lower tier usually can support up to a set number of users, be it 20 or 100 users. As database and network technologies are improving, these limits are being lifted, so you will see smaller software vendors supporting larger numbers of users. However, now the limit is on the functionality of the users. The smaller systems allow you to do a lot of tasks within one screen.

Which ERP is suitable?An example might be a warehouse manager who can do inventory transactions and stock level checking from the same screen. Or, the Accounting person can process and post an Accounts Payable batch within two screens; fewer clicks, by fewer people.

A larger system on the other hand, looks at individual transactions and breaks down the processes into small parts. Using the examples above, a larger system would typically be integrated with a warehouse management system, which would allow for bar-coded stock takes on a scanner. So the inventory movements are more automated. The stock levels are shown on various screens depending upon how you want to see them. An A/P clerk would voucher the invoice on one screen. There would be a second screen for voucher approvals, and then a third screen to batch them and process them for a check run. There may even be a separate screen for check approvals. You can see that the processes of a small system would be simpler with fewer screens and for a large system it is broken out into multiple screens with multiple steps for the same type of transaction.

Who is Tier 1 software suitable for?
This brings us to the levels of software. Typically ERP software is broken into three Tiers or sizing of the software to the companies. This is usually broken into three Tiers for ERP software. Tier 1 is for the largest enterprise customers. Typically these are fortune 500 companies who have multiple locations and hundreds, if not thousands of users. Examples of Tier 1 software include SAP, Oracle, and Microsoft Dynamics AX. Companies using these software solutions usually are in excess of $200 million dollars in revenue. Usually Tier 1 software solutions can handle just about any sort of business process in just about any industry.

Where does Tier 2 fit?
Tier 2 Software is for the middle market. This is where you will find a majority of vendors. These software solutions are suitable for companies with $20 to $200 million in revenue. At this level, the software systems are a bit more industry focused and differ depending upon whether you are a service company, a distribution company, a manufacturer, or some sort of specialty niche (such as apparel, consumer packaged foods, job shop, or other unique industry). There are two broad types of players in this market. There are those who are generalists such as Microsoft Dynamics NV (who has specialist implementers who tailor to unique industries), SAP Business One, Epicor Vantage, Sage ERP, Intacct and a slew of other vendors.

You also have some specialty vendors in this mid-market segment. Software vendors such as IBS, QAD, Syteline, and IFS are focused on manufacturers. Companies such as Deacom, BatchMaster, and Oracle JD Edwards are focused on process manufacturers, such as food, cosmetics, paint and chemical manufacturers. There are others who specialize in distribution and logistics companies. And the list goes on and on… There is specialty software for just about every type of business.

So should a prospective ERP buyer look at niche players or generalists? It really depends upon how focused and specialized your processes are. Process Industries (as mentioned above) are difficult for generalist software companies, but there are plenty of process-specific systems available. Companies which are more general like high-level manufacturing or distribution can easily go with mainstream software. The trick is mapping out your processes and specific selection criteria and ensuring that the system will easily fit your business model.

Tier 2 software is often very flexible and can grow with you. Depending upon your business, it can take you far. It is also interesting in that many Tier 1 sized businesses are using a mix of Tier 1 and Tier 2 software to run their operations. A typical example might be a company who is using SAP for their central operations and accounting, and yet also uses a software such as Microsoft Dynamics in each of their subsidiary locations. The MS Dynamics financials are then rolled into SAP for corporate reporting.

What about Small Business ERP software?
The small businesses of the world usually turn to the Tier 3 software providers. Companies of up to about $20 million dollars in revenue fall into this segment. ERP vendors such as Made2Manage, NetSuite (a web based ERP solution), and Bluelink ERP are ideal for this level of company. These are general software solutions that apply to many different types of companies, but do not require a lot of clicks to get any particular process completed.

You can also subcategorize the smallest of solutions such as QuickBooks, Peachtree, and Accpac as a Tier 4. These are starter software packages. These are for companies just getting their processes setup and have revenue of under $1 million dollars.

So to answer the question of which ERP is best for your company, the truth is it depends upon your industry, your revenue size, the number of users on the system, and your expected growth rate as a company. If you are a fast growing company with 20 users now and $10 million in revenue, but you are expecting to grow to 100 users and $80 Million in the next couple years, you definitely want to be in the Tier 2 world and avoid Tier 3. However, if you are a small business and are not experiencing dramatic growth, then stick with the Tier 3 software for ease of use and simplicity.

If you choose the correct Tier of software, and the relative type of industry driven software, you are on the right track. The key will be in your software selection process to map your business requirements and process to the software capabilities of your prospective vendors. Don’t take this lightly. With proper diligence though, you will choose the best software for the next evolution of your company’s growth and prosperity.

The post Which ERP is suitable for companies with x million dollars in revenue? appeared first on ERP Software Selection Help.

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More Stories By Chris Shaul

Chris Shaul has implemented hundreds of CRM and ERP as both a project manager and a solution architect. With a strong background in the manufacturing and distribution industries, he has delivered projects for large and small firms. He has implemented software in many industries, including: High-tech, Manufacturing, Distribution, Service organizations, Medical, Non-Profits and Construction firms. Chris is an experienced leader in Customer Service, Salesforce Automation, Social Enterprise and Marketing. He has trained and experienced in Lean Enterprise concepts, Business Process Reengineering, Strategic Planning, Project Management, and Business Systems Architecture. He is currently working as a delivery manager for a global consulting firm and holds four certifications in Salesforce.com.

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