It is vital to understand how many users you need to run an effective ERP system as this will determine how your system is set up as well as the capital and running costs of this investment in the digital transformation of your business.
Modern business management solutions for small to medium-sized businesses
Globalisation and rapid advances in technology have made it possible for small business professionals to travel further to find and service new customers. The competition is however always on and with it comes higher customer expectations too.
The way in which these business representatives are managed and how quickly they can service clients, getting quotes, orders and invoices out will determine who continues to get the business deals.
Growing small to medium-sized businesses are always looking for ways to make their operations more efficient. Fortunately, there are integrated business management systems which have been developed specifically to help these businesses to manage larger footprints profitably.
Business owners and managers who have been resolving problems by employing more people and who are spending more time acquiring data than using it are not realising the potential of a technology solution to solve pressing issues.
Once you have come to the conclusion that relying on accounting software is not enough and it is time to move to an integrated business management system, you have to carefully consider who all the users of your new system will be. This is a critical step to ensure that you implement the right Enterprise Resource Planning (ERP) system successfully.
User count and licencing costs
The user count is one of the defining factors of the total ERP investment requirement. Knowing how many users you will have and what tasks each of them will have to perform, serves as a market segmentation guideline to find suitable ERPs to choose from. Different software providers have different types of features or user settings available to different types of users and there are often different pricing structures depending on the number and types of users.
Modern integrated business management systems offer functionality to manage all aspects of business operations, including accounting, inventory management, sales, warehouse operations, customer retention management and more. Some people may only need access to certain areas of the system or tools that interact with the system, such as barcode scanners used at a warehouse.
Approaches to user count: Modular vs named user licence models
The fundamental principle ERP solutions are based on is that all business information is recorded in the same system. If there is no licence available to insert data, it defeats the purpose of having the business management system. Different solutions have different user types and it can be quite difficult to do an exact licence count.
The two main defining costing models ERP vendors usually adopt are the modular/granular approach and the Named User approach.
The modular/ granular approach to ERP user costing
With this approach, the business buys a license for users in bundles for concurrent users and modules and functionality is purchased afterwards as and when required. Each user is not required to have an individual license for modular/granular solutions. This is usually cheaper at first but costs can quickly escalate.
The named user approach to ERP user costing
The named user licence model offers free software but requires each user to have a license which is costed. This approach requires a little more upfront investment but is far more predictable in terms of cost through the customer’s ERP lifecycle. It also negates the concern that a user may not have access.
Deciding who will use the system and their areas of application
The purpose of implementing the ERP solution defines who the users are. Knowing what the business objectives are and what the different players in your team need to be able to do, see and share in order to do their work efficiently is an important part of understanding the user count. Determining the user licences is the first step in defining the users’ ability within the ERP system and their level of insight into the business.
ERP systems also offer various levels of authorisations, depending on the company, branch or department and other specific requirements, as well as levels of authorisation to data that prohibits access or offers access or viewing only.
User license ratios
The ratios of users to licenses can vary greatly between different types of businesses, but there are generally around 20%-25% of a business’s users with greater functionality in the financial and services sector and up to almost 40% in logistics, manufacturing and project-based businesses or business units. It is well worthwhile to sit down with your implementation partner to get a thorough understanding of the user count licencing that fits your requirements as it can help to free up investment capital that can be used to fund profit-driving initiatives.
It is also worth keeping in mind that vendors get more competitive as sale size increases. Seidor offers discounts based on investments, driven by the licence requirements. Therefore, it is a good idea to speak to your ERP partner about the best way to take advantage of available discounts
4 Clever ERP choices for small business
Small businesses are usually wary of investing in an ERP system because they are concerned that it will cost too much. However, business management systems have become far more affordable and can be cloud-hosted, implemented at the business, leased or owned. Each option has its own unique merits and small businesses can also choose a combination to suit their needs.
Here are four smart choices that can put an ERP system within the reach of small businesses:
- Limit users, especially if full functionality is not required
- Agree with your ERP partner on clear and measurable objectives
- Move to areas in the business where revenue is leaking first to increase return on investment and accrue additional revenue for future projects on your implementation roadmap
- Don’t take on additional functionality during the initial phase that does not support the key objectives originally defined to avoid scope creep which can be costly
Understanding users for effective change management
Working out who the users of the new system you will be implementing will be is also very important and helpful from a change management point of view. People often fear change or struggle to adapt to change which is why it is crucial to understand the different users to provide them with the necessary information, training and support to help them through changes so they can play their respective parts to get the value the system can offer your business.
A seasoned business management solution provider can analyse a small business and give advice on how to decide who should have access, the type of access needed for every employee and the change management needed.
Read our article on Understanding you Budget
Written by Lyall O’Carroll