18 October 2023

Pros and cons ERP systems [5 pros and 5 cons]

Are you thinking about purchasing an ERP system?

Then it is useful to first know the advantages and disadvantages of ERP systems.

Our ERP-expert Peter de Bruin is happy to help you get a better picture of the pros and cons of Enterprise Resource planning systems.

In this article you will discover what the:

  • 5 disadvantages of ERP systems are
  • 5 advantages of these types of systems are.

Let's start with the disadvantages. Read on and find out!

5 (bridgeable) disadvantages of ERP systems

At Softwarematching.io, we like to tell you the honest story. Hence, in this article we also look at the less good points of ERP systems.

The disadvantages below are, in most cases, easily overcome!

The disadvantages of ERP systems:

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  • High costs
  • An ERP system can be complex
  • Lengthy implementations
  • Your organization must learn how to use it
  • Risk of data loss and downtime.

Below, we'd like to give you additional context on the disadvantages listed above.

1. High costs

The cost of an ERP system can be high. Fortunately, there are several ways to keep the cost of your ERP system in check (see Peter's tips below). Also, a well-functioning ERP system will eventually provide you with all kinds of cost savings!

ERP costs can be divided into: one-time costs (think implementation costs), recurring costs (software license fees) and additional customization/consultancy costs.

Especially for small businesses, ERP's can be somewhat expensive. But still, there are ERP systems that are suitable for small companies.

Fortunately, costs for Enterprise Resource Planning systems have become lower since the advent of the Cloud. Do you choose to run your ERP system on your own equipment and servers? If so, your costs will be higher. We call this more expensive option “on-premise”. 

Some tips from our ERP-expert Peter de Bruin to keep costs down:

  • Do as much as possible yourself. Think about importing your balance sheet, accounts receivable, inventory, etc.
  • Adapt your process to your ERP system. Look at what is possible in your ERP system and see how your business processes fit into it.
  • Opt for the Cloud. This lowers costs when it comes to your hardware and infrastructure.

Disadvantage 2. An ERP system can be complex

An ERP system is the beating heart of your organization. As you know, organizations can be very complex (yours too?!).

This complexity also applies to ERP systems. How complex an ERP system becomes depends on the complexity of your own business processes. The processes within your company often become very complicated over the years. This can make it difficult to match your ERP system to them.

Fortunately, ERP systems actually end up helping you simplify your processes. They also help you speed up and improve your organization.

Disadvantage 3. Lengthy implementations.

ERP implementations take a long time at worst. Fortunately, an implementation for a SMB will often certainly not take years. An average implementation for an SME takes a few weeks to a few months at most.

For large international companies, the implementation process takes longer. Ever heard the horror stories on the news by chance? These horror implementations took place at large companies with multiple entities and a multitude of complexity compared to an SME.

Rule of thumb: the larger and more complex the company, the longer the implementation!

Disadvantage 4. Your organization has to learn to deal with it.

As you could already read, an ERP system is quite complex. You and your entire organization have to learn how to use it. This takes time.

Fortunately, after a few months you will know exactly how it works, chapeau! So it takes investment and time to learn how to use ERP systems. This makes it difficult to ever switch to a new system. You will then have to start your learning process from scratch again!

Disadvantage 5. Risk of downtime and data loss.

It makes sense that many people fear downtime and data loss. Downtime and data loss are downright annoying. Hence, you want to avoid this at all costs.

Fortunately, most ERP providers guarantee that you have a maximum of only 44 minutes of downtime per month. Do you have more downtime? Then there are often clauses in your contract. Often you will be compensated for each additional minute of downtime.

Tip from Peter to reduce your downtime and data loss:

  • Have your ERP hosted from the Cloud.
  • Check your ERP provider's terms and conditions when it comes to downtime.

The 5 biggest benefits of ERP software

These are the biggest benefits of ERP systems:

  • Better customer service
  • Cost control and efficiency
  • Sensitive data is well protected
  • Improved business operations
  • An improved position against your competitors.

Read more about the biggest benefits of ERP below.

Benefit 1. Better customer service

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With an integrated ERP system, organizations can improve customer service by having quick access to customer data and order history.

This enables you to respond well to inquiries from your customers. It also makes you appear professional.

With a well-functioning ERP, your employees are simply better prepared. They can answer incoming questions faster, better, and more accurately. This is mainly due to the better insight you get about what's going on in your company. Think about inventory levels and whether products are in or out of stock.

Thus, an ERP system eventually leads to improved customer satisfaction and loyalty.

Benefit 2. Cost control and efficiency

Through an ERP system, organizations gain control over their operational costs.

Streamlining processes and reducing duplication of effort leads to more efficient operations.

This efficiency, in turn, can lead to long-term cost savings. So you will have to invest first (see the disadvantages from this article) before ultimately saving costs.

It is even possible that you need fewer FTEs for the same output. As you know, employing people is costly. So cutting back in the number of employees, can make a significant difference in your cost.

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Benefit 3. Sensitive data is well protected

Modern ERP systems offer advanced security features and backup capabilities. This ensures the integrity of company data.

This good security reduces the risk of data loss and ensures compliance with regulations, such as the GDPR.

Benefit 4. Improved decision-making

ERP systems collect data from various business processes and convert it into actionable information.

This enables organizations to make informed decisions based on real-time data. This promotes strategic planning and growth of the organization.

Benefit 5. An improved position relative to your competitors

With a solid ERP foundation, companies focus on innovation instead of time-consuming administrative tasks. So with ERP, you improve your competitive position in the market.

Do you want to focus on your core business? And not on all kinds of administrative tasks? Then an ERP system is a good choice.

But how will an ERP system make you more competitive? As mentioned earlier in this article, an ERP will result in lower cost, better decision-making, and better customer service. Improving these aspects within your company will lead to this improvement in competitiveness.

Conclusion on the advantages and disadvantages of ERP

In this article, we wanted to give you an objective view of the pros and cons of ERP systems. Hopefully we succeeded in doing so!

Are you opting for an ERP implementation? Then there are a number of things to consider. In our opinion, these mentioned disadvantages can be easily overcome. A good ERP system ultimately makes your organization better.

In short: we definitely advise you to think carefully about an ERP implementation.

Peter de Bruin
CEO & Sr. Software Specialist
With over 15 years of dedicated experience in the enterprise software industry, I have seen firsthand how crucial it is for an organization to find the right software system for success. In this rapidly changing marketplace, a fair playing field is not always a given. My mission is to create a fair match between companies and vendors, putting the importance of appropriate and effective software first. Our independent selection tool is designed to fulfill this mission, with the goal of creating a future where everyone can effortlessly find the perfect software package, with a smile. Let's strive for that effortless future together.
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