How to Build An ERP System From Scratch

Ensure you have your business under control. Here’s our full guide on ERP development. We cover the key benefits of resource planning systems and the steps to take to develop one for your organization

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Resource planning should be part of running any enterprise – small or large, startup or unicorn. The exciting part about starting your own business is that you’ll have countless opportunities to experiment, shape your growth strategy, and work with a huge number of people who share your vision. But all that opportunity and potential can also often end in missteps.

Recently, Fundera released a few statistics on business survival rates. They found that only 30% of companies get to celebrate their 10th anniversary. Apart from lack of capital, one of the most common reasons why businesses fail is poor management. ERP systems have been developed to regulate and optimize processes that impact enterprise performance. From human capital management to operating costs, an ERP system is a clever way to keep things under control.

So what does ERP stand for and why does your business need it? In the guide below, we’ll learn more about the benefits and the steps you should take when developing a custom system.

Getting acquainted with an ERP app model

Let’s start with a brief introduction to ERP. To put it simply, Enterprise Resource Planning or ERP is software dedicated to business management. This software can take the form of a web-based system or a mobile app that integrates features designed to manage specific operational processes. Although you can buy off-the-shelf ERP solutions such as Sap or NetSuite, most enterprises instead opt to build their own custom ERP system from scratch.

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

The pros of custom ERP development

  • Dedicated modules. Because enterprise resource planning software is often used by many stakeholders and employees, it should be as easy to use as possible. With custom-developed ERP, you only use those modules that your organization requires. What’s more, you can roll out the system based on the concept of minimum privilege: every department will only be able to access the specific sets of modules they need for their work.
  • Simplified maintenance. If you build an ERP app internally, your team can provide ongoing support and customization for the system.
  • No changes introduced into the workflow. In contrast to off-the-shelf ERP products, your company won’t have to change its operational processes to better fit an uncustomized management system.

What is an ERP

Market-leading ERP companies

If for some reason you’d rather avoid custom ERP software development, there are a few well-known off-the-shelf products to consider:

  • Sage Intacct. This product is a good choice for finance management across large corporations and e-commerce projects. The software has a huge variety of reporting and accountability features, and clients can add or request extra functionality if required. Pricing starts at $9,000 per user for a basic annual subscription. You can calculate how much the product will cost your organization with this Safe Intacct Pricing Calculator:
  • Sap. With 300,000+ clients worldwide, Sap is clearly the industry leader. The secret to this overwhelming success is the robust functionality of Sap’s ERP modules – the modules adapt versatile business infrastructures. Sap is also a great solution for those getting acquainted with operational management. The Sap ERP tutorial will guide you through the product’s key processes. While this is one of the most efficient tools out there, it’s also pretty expensive: pricing starts at $420 per user per month with an annual subscription.
  • NetSuite. Owned by Oracle, NetSuite is another product popular with large enterprises. NetSuite has earned praised for its business intelligence modules combined with superb accounting management. The NetSuite base license costs $999 per month + $99 per user monthly.

Subscription-based ERPs make a lot of sense if you don’t have time to implement your own system.

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

ERP software development: The key steps and processes

If you’ve decided to create a custom ERP web app that perfectly fits your business needs, you’ve landed in the right place. ERP system development is considered one of the most challenging dev tasks, and it requires a consolidated vision of your company’s growth strategy. But by reading on and learning how to approach this challenge, you’ll be halfway there.

Below is a short guide on building and implementing an ERP system specifically for your business.

How to build an ERP system from scratch

Crystallize your expectations

ERP is a lot like Lego – you can build almost anything with it. For small businesses, ERP web apps typically have dedicated SME modules. Meanwhile, for large corporations, cloud suites like Sap’s S/4HANA are crucial. 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 for your organization?
  2. Does your company host the expertise required to develop ERP, or is it better to hire a dedicated team via an outsource provider?

Once you answer the first question, the second question should answer itself. Ensure you consult both major company stakeholders and IT experts when drafting goals and requirements for enterprise resource planning system. This will ensure you set realistic, achievable expectations.

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Come up with ERP system design

Now it’s time to approach the technical side of ERP development. If it’s your first experience with resource planning software, explore the typical components of ERP systems other industry players are using.

If possible, prepare a blueprint describing how your resource planning system should be designed.

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 aggregate all needed features and outline dedicated module sets for departments.

ERP app development process

Start wireframing

Next, you must decide on the type of system you want to implement. The two common options are web-based ERP software (where the backend and database are hosted in the cloud) or a client/server ERP (where a system runs locally on a network of computers).

Plan the development process step by step. If you’re outsourcing your ERP to an external team, it’s good practice to participate in wireframing so that you stay in the know. Here are the key things to go through at this point:

  • Define modules: Based on your ERP’s functionality, state the modules it should have. These modules could be a combination of CRM, finance management, supply chain management, or any resource management areas based on your requirements.
  • Resources needed: Determine the size of the team working on the project and the resources that team will require.
  • Timeframe: Although you might not yet be able to come up with concrete milestones or deadlines, try to establish a timeframe for the project.

Choose the right technology

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

  • Hosting. You can host an ERP system in the cloud or on your local server. Most enterprises select the first option because the cloud is considered more secure and doesn’t require constant in-house maintenance.
  • Select a programming language for ERP software development. We recommend considering JavaScript as a universal web language. JavaScript frameworks are perfect for frontend development, there is also Node.js for backend. 
  • Database. Choose a reliable database for storing company data. Usually, you have to choose between relational and non-relational databases. This choice will determine how your system organizes and uses data. Relational/SQL databases are better suited for small companies that have a demand for standardization. NoSQL or non-relational databases likely better fit complex data infrastructures because they allow data storage in various easily manageable formats like JSON files. 

Technology stack for ERP softwrae development

Integrate a web-based ERP with existing infrastructure

Before embracing an ERP, companies typically rely on separate apps and workflows to manage key processes. Before starting any progress on the project, hand over or consolidate legacy apps and databases to the ERP software development company (if you outsource) or your in-house developers.

While developing a new app takes a lot of effort, with legacy apps ERP developers could use re-configuring. This will substantially speed up the coding process.

Test ERP implementation

Once you’ve transferred all of your company’s business knowledge to a single resource planning system, it’s time to start testing. There are several processes you should consider including in this review process:

  1. Review whether the system matches initial security, integration, and functionality requirements.
  2. Test the ERP’s functionality by performing accounting or sales operations across different modules. Calculate the accuracy of the results that the system returns.
  3. Employ focus groups to test dedicated modules and module sets. 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 a few people from the target department to use the modules and collect their feedback.
  4. Run security testing. We recommend integrating dynamic security testing with Web Application Firewalls (WAFs). This will allow you to track and respond to vulnerabilities as they emerge.

ERP software for business

The cost of custom ERP software development

Obviously, there’s no such thing as a one-size-fits-all ERP. The costs of ERP development can range from $20,000 to many millions. While planning your budget, consider that the cost of ERP development is typically determined based on the number of departments that will use the system and the functionalities the system will deliver. Small businesses pay substantially less than large enterprises because the latter require both many more users and much wider functionality.

Big or small, there’s a smart way to predict your average expenses and determine a cost-effective choice when it comes to ERP development:

  1. Determine the number of users. Most providers of SaaS enterprise software charge at least $400 per user per month, so it’s possible to make calculations based on your department/company size. Custom software may turn out cheaper.  
  2. Decide what you (really) need. Before you even begin contacting providers and development teams, create a detailed overview of apps and modules you need. Companies who like the idea of “having it all” almost always overpay for ERP development. Remember that the number of ERP features impacts the price, so you might pay for something you won’t actually use. Ensure your list only includes the essentials.
  3. Break down the cost. If you outsource your ERP development, compare prices for several software development providers and ask for detailed summaries of each proposal’s cost distribution. Developer fees can differ wildly, but we have reviewed them all in our article dedicated to offshore development. Choose a provider that offers a reasonable price. In some cases, opting for custom development with an offshore company may cost you even less than SaaS ERP software.

Custom ERP development cost

Ongoing support costs

To keep your ERP alive and functioning long term, your company must budget for ongoing maintenance costs and regular updates depending on company needs. Depending on your system’s complexity and development methods, this budget may have to cater to several different types of expenses.

If you develop your own ERP, you’ll most likely assign a person/team as responsible for its functionality. This means you’ll have to invest in continually training staff on ERP maintenance. If you use licensed software, you’ll pay an annual or monthly fee for its support. Ongoing maintenance covers integrations, hosting, new feature releases, and client support. Either way, if you want to keep your company’s ERP healthy, maintenance is an investment you can’t afford to avoid.

For those who can’t afford extensive support, here are a few tips to minimize the cost:

  • Outsource ERP support. While employing and training in-house maintenance staff is costly and large ERP providers have expensive support packages, there are more affordable options for those wishing to outsource maintenance.
  • Customize like crazy. The more tailored your current ERP system is, the less you’ll have to change day-to-day.
  • Negotiate limited support. ERP maintenance packages are usually comprehensive and include tons of support operations you might not need. Review the maintenance packages your provider offers. If you decide you can exclude some support functionality, try to negotiate a lower price with your service provider.

Need to build your own ERP system?

ERP development companies are not just your service providers, they are your partners. It requires a massive effort to align a single software platform with a business’s entire infrastructure – something to be used at every position within the company. One of the main criteria you should consider when choosing an ERP developer is the development company’s commitment and willingness to hear your requirements.

You want a company with a record of working with complex systems—a company that can translate your needs into a valuable tool.

Ask your candidates how much time they anticipate they’ll spend on planning, interviewing users, testing, and post-implementation. Those ready to invest as much as possible are worth considering.

In terms of ERP development outsourcing, Ukraine is one of the best spots to go. The country’s solid tech expertise is paired with globally competitive developer rates and lots of reliable providers. 

Want to find out more about the possibilities of developing an ERP system absolutely fitted to your business processes?

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