How to Build An ERP System From Scratch

Jan 9, 2023·18 min read

Custom ERP software development is the way to create the solution tailored to your particular business needs. Learn about ERP system design and development, meet potential competitors and decide on the next steps for your business growth.

Contents:

Key takeaways:

  • ERP system is an absolute must if you want to manage your organization's activities in the right and the most resource-efficient way.
  • Although there are numerous giants on the ERP systems market, available software may fail to meet your unique expectations and demand; at the same time, major ERP players may offer you too complex systems and too much functionality which may be useless for small and midsize businesses.
  • Custom ERP software may help you optimize cost and get a solution tailor-made for your exceptional requirements.
  • You can create a custom ERP software in just five steps, within six months and more, if you cooperate with a reliable and skilled web development outsourcing team.

The exciting part about running your own business is that you have countless opportunities to experiment, shape your growth strategy, and work with awesome people who share your vision.

But a good strategy and cool people may not be enough for business success.

You also need a tool to plan resources, manage manufacturing, track orders, process customers’ requests, and deal with a myriad of other business-related tasks.

While there are plenty of tools you can use for this purpose, they may not cater to your needs, satisfy your ambitions, and provide the exact scope of features you need.

If you feel like no existing enterprise resource planning systems work for you, it may be the time to turn your head towards custom ERP software development.

A custom ERP system is not only a key to internal process optimization; it may also turn into an investment magnet and become your safe harbor in the ocean of intense competition.

Why does your business need a custom ERP? In the guide below, you’ll discover the benefits of a custom ERP system and stages of development of ERP system.

The power of an ERP system for your business

Let’s start with a brief introduction to ERP systems.

One of the biggest players in the ERP niche, SAP, provides this definition of the ERP concept:

Enterprise resource planning (ERP) is a software system that helps you run your entire business, supporting automation and processes in finance, human resources, manufacturing, supply chain, services, procurement, and more.

In this article, we often refer to SAP, Oracle, and other major players not only because they are the pioneers in this niche but also because if we understand their business model and products, we can make better decisions and come up with more innovative ideas for custom ERP development.

Enterprise resource planning software is dedicated to business management. This software can take the form of a web-based system or a mobile app that provides features for specific operational processes management.

ERP systems may include multiple modules. Each of them supports, automates, and contributes to a particular business process:

  • Finance module — aimed at automating transactions and ensuring compliance
  • Research, development, and engineering module — collects data and stores tools for product design and development
  • Asset management module — keeps data and functionality related to assets, devices, and infrastructure currently used by the company
  • Sales module — keeps track of order management, contracts, billing, communication with customers, and other processes related to boosting sales department efficiency
  • Supply chain module — provides tools for inventory and warehouse management, logistics organization and optimization, and more
  • Manufacturing module — helps to ensure production covers existing demand and uses the latest technologies and insights to create better, more user-oriented goods
  • Sourcing and procurement module — handles all operations related to ordering and purchasing materials and services needed for effective manufacturing
  • Service module — allows for keeping an eye an all components of your company while ensuring asset maintenance and resolution of customer issues
  • Human resources module — collects data about employees and allows for managing things like time tracking and attendance, payroll, performance review, and employee experience

erp system modules

An ERP system may include various modules and help to solve a myriad of enterprise tasks. This type of software may support industry-specific requirements; the modules for your custom ERP software fully depend on your business and the niche in which you operate.

No matter how many modules an ERP system includes, it can help you significantly improve internal process management, boost your team’s performance and productivity, and bring numerous other benefits to your business:

  • Automating business processes helps you eliminate manual tasks, streamline business processes, and improve team productivity.
  • An ERP system is a single source of data about your processes, employees, purchases, and manufacturing. It helps you find required information faster and gain insights into business processes without needing to examine and compare data from different tools and resources.
  • ERP software simplifies report generation. You may get business and financial reports in real time in the form of statistics, diagrams, infographics, and text so you can plan your next steps based on up-to-date information.
  • Real-time data, on-the-go reporting, and automated processes allow you to improve overall business agility and swiftly react to market conditions, new opportunities, and users’ demands.
  • By implementing an ERP in your processes, you get a chance to accurately track your costs, optimize expenses, and increase revenue.
  • A well-designed ERP system means transparent internal processes and a better vision of your business strategy. With its help, you can predict and mitigate risks in any department of your company.

benefits of erp system

An ERP system is a sort of powerful virtual assistant that helps you manage all business processes with minimum effort and maximum results.

Why now is the best time to build an ERP system

In 1990, the acronym ERP was used for the very first time to refer to enterprise resource planning. For over thirty years, the ERP market has been going through changes and improvements. Starting as simple client–server on-premises software, ERP systems evolved into web-based solutions stored on physical servers. Now that cloud computing rules the world, ERP systems have gone to the cloud, turning on-premises software into a legacy technology.

history of erp systems

Market leaders work hard to keep their positions, while startups boom and raise huge funds to evolve the ERP market.

Why can’t market leaders satisfy existing needs? Let’s talk about this.

Major ERP players and what’s wrong with them

If you’ve been using commercially available enterprise resource planning software, you may have noticed inconveniences and disadvantages.

If you’re new to ERP systems and want to find out more about potential competitors, you can read about their strengths and weaknesses in this section.

Microsoft, Oracle, and SAP are the ERP market leaders.

With such powerful rivals, is there a real reason to enter the ERP market with a custom product?

Yes. There are four weighty reasons you should leave the idea of adopting an out-of-the-box solution behind and build your own ERP system.

  1. Serious inflexibility

Every company requires some level of custom functionality, and pre-built ERP software doesn’t always cater to these needs.

40 percent of UK CIOs, and 50 percent of SAP customers say their current ERP is inflexible.

Your business is unique; you may need to add unique components to your ERP system, but at the same time, you probably don’t need most of the ERP functionality offered by market leaders.

  1. Slow development amid rapid changes

Large ERPs fail to cater to the needs of startups and small, rapidly growing businesses. While small organizations focus on swift development and prioritize agility, large ERPs are literally too large to adapt quickly.

  1. Space for challengers and niche players

Gartner’s Magic Quadrant shows there’s plenty of space for challengers and niche players in the ERP market.

  • Challengers like Epicor have strong products and the potential to turn into a serious threat for leaders.
  • Niche players like Priority ERP and Plex Systems focus narrowly on a specific market and make their way to success.

With the right discovery, development, and implementation, your idea has every chance of breaking into the quadrant as a niche player or challenger.

magic quadrant report on cloud erp

  1. Custom solution vs ERP subscription: cost and time

Although you can buy license and off-the-shelf ERP solutions such as SAP or NetSuite, it may be more profitable to build a custom ERP system from scratch. Let’s analyze the time and cost factors.

The cost of an ERP subscription may depend on required functionality, the subscription plan, and the number of users (your employees).

For example, SAP starts from $150 a month per user. For a team of 50, the annual subscription cost may exceed $90,000.

Because ERP subscriptions are based on the number of users and functionality, building a personalized solution for your business may not just prove more effective – it may even be more affordable.

What about the time factor?

According to a report from Software Path, a company that compares business software, enterprises spend around 17 weeks choosing the right ERP system. After that, implementation and onboarding may take plenty of time too.

Thus, entrepreneurs not only need to invest thousands of dollars annually in ERP subscriptions but also waste time choosing and setting up software, training staff, etc.

Alternatively, you can invest these resources in custom ERP development, test your idea, get an MVP in six months, and boost your business performance with a tool perfectly tailored to your needs.

How can you do this?

Let’s see in the next section.

How to build an ERP system from scratch

Let’s analyze the five main steps you can take to develop a minimum viable product for an ERP system.

how to build an erp system

Clarify requirements and expectations

An ERP system is a lot like LEGOs – you can build almost anything with the ERP modules (the bricks).

Before you begin planning your development process, your company needs to answer two major questions:

  1. What business needs should an ERP web app satisfy?

Would you like to build an ERP system for your internal needs, or would you like to provide it as a SaaS product to other companies according to the SaaS business model, collect investments, and sell it to a market giant?

Define your expectations from the start to increase your chances of success.

  1. Who can build this product for you?

Does your company have the expertise required to develop an ERP, or is it better to hire a dedicated engineering team?

Delegating ERP software development to a dedicated team may save you time, optimize development expenses, and give you an opportunity to allocate more resources to business promotion.

Choose a software development company that has solid experience in ERP systems development. Make sure to consult your company stakeholders and IT experts when drafting goals and requirements for the enterprise resource planning system. This will ensure you set realistic, achievable expectations.

Research the market

Once you answer the first questions, it’s time to compare your idea to solutions available on the market. Take a quick scan of the Magic Quadrant mentioned earlier. Are you aware of the listed products? Can you define their strengths and weaknesses? Do you have an idea for how to make your product different from existing ones?

You may also want to take a look at early stage startups operating in your region and niche.

For example, Katana, an ERP for manufacturers built in Estonia in 2017, raised $34 million in a Series B round in October 2022. Xentral, an ERP for small and midsize enterprises, raised over $90 million in three rounds and even acquired Otaja, a video learning program.

These companies managed to attract impressive investments, so there must be something unique and fascinating about them. Their strengths may inspire you to make your custom product better, stronger, and more attractive to users and potential investors.

There are a myriad of opportunities in the ERP market, and you can seize them swiftly as soon as you define your plans and expectations. Build your plans and enhance your vision of the target industry with in-depth market research.

Shortlist functionality for an MVP

If it’s your first experience with resource planning software, explore typical components of ERP systems other industry players are using.

You can add numerous components to your ERP. But there’s no need to pack an MVP with features from day one. Cut your plans into small steps and focus on the most critical ones.

What functionality would you like your MVP to demonstrate? What features are a must?

There are basic features any ERP will need as well as particular features for each module and your organizations’ needs. For example, no matter what other modules you plan to add to your ERP, authorization is a must. You may also want to get detailed reporting about every module, and data analysis and visualization will help you extract insights from your company’s data.

In the table below, we’ve collected some basic ERP features as well as features for particular modules:

Basic features

  • Admin platform

  • User authorization

  • User profiles

  • Data analysis

  • Reporting

  • Data visualization

Finance module

  • Payment processing

  • Sales analysis

  • Expense management

Research, development, and engineering module

  • Task tracking system

Asset management module

  • Asset database

  • Infrastructure management system

Sales module

  • Customer database

  • Customer profiles

  • Billing tools

  • Communication tools

  • Sales history

Supply chain module

  • Inventory management system

  • Order management and tracking

Manufacturing module

  • Product database

  • Manufacturing management system

Sourcing and procurement module

  • Procurement and logistics management system

Service module

  • Customer support features

  • Customer requests and complaints analysis

  • Asset maintenance management

Human resources

  • Applicant tracking system

  • Payroll functionality

  • Onboarding trainer

  • Compensation and benefits platform

This list contains ERP system features. We recommend focusing on significant functionality for each target module before starting MVP development.

If you’re designing an ERP for a large organization with multiple departments, it’s important to involve representatives of every department in planning. This will help you aggregate all necessary features and outline dedicated module sets for departments.

To get insights from market research, prioritize modules and features, and create documentation for MVP ERP development, start your project with a project discovery phase.

Sketch the ERP system design

 

Usability will make users love or hate your app.

  • Prepare a blueprint describing how your enterprise resource planning system should look.
  • Start with simple wireframes to share the vision of the app interface among all stakeholders.
  • Develop UI prototypes and clickable prototypes to better understand relations between your ERP modules and their components and ensure an intuitive user experience.

You can either buy ready-made design templates available on Creative Market by Dribbble, or you can add a dedicated designer to your web app development team. Ready-made designs are instantly available on particular web platforms, so if you choose them, you don’t have to invest time in the custom design phase. At the same time, they may fail to meet your custom app needs. A dedicated designer may help you not only create blueprints, wireframes, and prototypes but also develop an impeccable user journey, follow the latest design trends, and achieve your product goals.

Choose the right technologies

To build a web-based enterprise resource planning app, you should pick the right tech toolkit for developers.

Cloud technologies

A couple of years ago, we should have started this section with three types of ERP systems: on-premises, cloud, and hybrid solutions. However, on-premises and hybrid ERPs are already legacy technology. In 2020, Accenture released a report claiming that the main ERP software development trend is to build the journey in the cloud, not to the cloud.

Cloud-based ERP systems are not a trend anymore; they are a must for every digital business that wants to succeed in the 2020s.

Consult with your team’s technical leader to choose a cloud computing service that precisely meets your product’s needs. The technical leader should have software architecture experience and DevOps skills to answer your cloud-related questions and make critical tech choices.

Here are the top five cloud computing providers you may want to consider:

Programming language

Choosing a programming language is another technical decision you should make together with your technical leader, or you can fully delegate this decision to your ERP development team.

We recommend JavaScript as a universal web language. JavaScript frameworks like Vue, React, and Angular are perfect for frontend development, while the Node.js framework covers all server-side development needs.

Database

Choose a reliable database for storing company data. Consider relational and non-relational databases. Your choice of database will determine how your system organizes and uses data. Relational/SQL databases are better suited for small companies that require standardization. NoSQL or non-relational databases better fit complex data infrastructures because they allow for storage of data in various easily manageable formats like JSON.

Before embracing a custom ERP system, companies typically rely on separate apps to manage key processes. Before starting the development process, hand over data extraction and integration tasks to the ERP software development team.

Extensions

To speed up ERP development and bring key features to users as fast as possible, use third-party integrations and extensions for your ERP software:

  • Enable effortless sign-in and log-in via the Google, LinkedIn, or Facebook API
  • Enhance the sales module with eCommerce integrations like Shopify
  • Integrate the Salesforce CRM in your product
  • Use business intelligence tools like Power BI and Tableau
  • Connect your ERP to Breezy HR and improve the HR module

There are a limitless number of integration opportunities for an ERP system, so investigate and focus on the ones that can automate operations and improve the whole product.

When planning an ERP integration, map out all the use cases you can think of, and then group them by how often you expect them to occur. Focus on the most common when building and deploying, but also test how well the integration is able to handle edge cases as well.

— Joel Sturmfels, CTO of Obodo

Integration also allows you to connect a custom ERP system to solutions you’re familiar with. If you’ve been using particular tools for manufacturing, logistics, HR, or any other process and want to keep on using them, an engineering team can integrate tools you’re familiar with into your ERP.

Initiate ERP software development

Once you and your team have your product documentation and app requirements ready, agree on design schemes, shortlist features for the MVP, and choose the technology stack for product development, you can start the next phase of the software development lifecycle - the ERP development marathon.

MVP development typically takes around 6 to 12 months, depending on the scope of work and your software development team structure and size. Changing requirements may impact delivery times.

Test the ERP system

Software development and testing are simultaneous processes. As soon as your development team delivers a piece of code or working functionality, the quality assurance and quality control team should start testing it immediately.

There are several processes your team may include in the review process:

  • Ensuring the system matches initial security, integration, and functionality requirements.
  • Checking the ERP’s functionality by performing various operations across different modules.
  • Calculating the accuracy of the results the system returns.

Besides the QA team, you may involve focus groups to beta test dedicated modules. For example, the HR department will likely work with some combination of modules designed around payroll recording, human capital management, and personnel records. To test how these modules work together, ask people your employees to use the modules and collect their feedback.

Collect and analyze feedback

What are users’ opinions of your app?

That’s the very first question you should ask as your app goes live and reaches your team, target market, or beta users.

Make sure you’re solving problems effectively. Ask if users like your app, and see what they find challenging or complex about using it.

Create a simple questionnaire to build a clear picture of users’ impressions. User-generated feedback may turn into a springboard for improving your app. Listen to wishes and complaints, detect errors, and never stop improving your app.

ERP system development: what’s next?

Your app is live, your users are happy, and you’re sure you can do better. What might be your next steps?

Use the three Cs approach for continuous improvement:

  • Cloud

Improve your cloud services and set up a more convenient and prosperous digital environment. If you deploy your ERP as a SaaS software development solution, find out about architectural specifics and potential dangers such as the noisy neighbor effect, decide how to deal with them, and eliminate risks related to cloud computing.

  • Customization

Make your users feel at home when using your app. Add customization features and turn your ERP into a hyper relevant software product. Constantly follow trends and keep an eye on the market situation. Customization and personalization may be powerful tools to keep your business in the desired position.

  • Connection

Keep in touch with ERP users. After you collect initial feedback, go back to your ERP, implement changes, and return with an upgraded version. Then, ask users what they think and repeat the procedure.

principles to improve your erp system

Software development is an iterative process. If you want your software product to be successful, never stop updating it.

Quality data plus insights equals business success.

Collect, store, process, and analyze data, gather insights from the market situation, rivals, and users, and achieve your business goals.

In conclusion

Custom ERP development is the way to improve your internal processes, use collected data in a better way, find ways to optimize costs, and avoid risks. At the same time, it helps with two more critical tasks:

  • A custom approach allows you to build a tool for your unique needs instead of trying to get used to massive, lagging products that are full of unused features.
  • With a custom ERP, you eliminate subscription costs.

At the same time, your product can bring you investments or may even get acquired by a powerful company.

With a skilled ERP development team by your side, you can have a working solution running in the cloud in just a few months.

Ready to make a move and upgrade your company’s processes?

Build an ERP system with Clockwise Software.

Contact us

FAQ

Q: What is an ERP?

A: ERP stands for enterprise resource planning. ERP software allows businesses to optimize daily activities related to management, accounting, HR, supply chain operations, and other.

Q: What are examples of ERP software?

A: Microsoft Dynamics 365, Oracle ERP, SAP S/4HANA Cloud, Epicor and Plex systems are examples of ERP software.

Q: What are the main steps to build an ERP system from scratch?

A: There are five main steps you need to take to build a custom ERP system:

  1. Shortlist your requirements
  2. Choose the technology stack
  3. Design an application and develop an MVP
  4. Test your product
  5. Collect and analyze users’ initial feedback.

Also, you may need to find and choose a reliable software development consulting partner to release a viable solution,

Q: How much should I pay for a custom-developed ERP?

A: Typically, custom software development cost depends on two primary factors: scope of work and location of your development team. If you choose to outsource app development to Ukraine, a price for a simple MVP of an ERP system may start at $50,000.

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