Developing an ERP System from Scratch: Key Steps, Costs, and Examples

The larger the company, the more business management tools are necessary to coordinate all of the processes. In 2021, over 50% of businesses developing an ERP system were able to easily manage their accounting, logistics, inventory, and staff. 

On the other hand, those companies that hadn’t used ERP systems yet faced process difficulties and loss of money. 

ERP solutions allow businesses to tackle their work processes better and thus save time and money. 

This guide will share our knowledge about ERP systems and how to develop ERP software that meets all business expectations.

ERP Systems 101: Introduction to ERP Development

Before we talk about the advantages of the ERP system for business, we need to find out what it is and why medium and large companies need ERP systems for their work processes.

What Is an ERP System?

Enterprise resource planning( ERP) software is a system that allows a company to standardize and simplify business processes in different departments. It can also automate operations within the company and securely store and transmit information data to improve planning and decision making.

ERP Market Overview

For the last few years, an enterprise resource planning system has lost its exclusive domain for multinational corporations. Almost all modern companies of any size need an effective system for their management and product and project monitoring. 

From 2022 to 2024, the global ERP software market is predicted to reach $97.15 billion with a compound annual growth rate of almost 0.8%. 

Sloboda Studio created a year-over-year ERP system comparison to analyze ERP market growths and ERP system behavior on the market.

ERP System Year-by-Year Overview

2018 2019 2020 2021 2022
Top industries Manufacturing
Distribution
Manufacturing
Information Technology
Manufacturing
Information Technology
Manufacturing Information Technology Manufacturing
Information Technology
Marketplaces
ERP market revenue $93,4 B $94.05 B $94.71 B $95.37 B $96.04 B
Allocated Annual Company Budget 36% stayed on budget 55%
stayed on budget
62%
stayed on budget
64%
stayed on budget
40%
stayed on budget
Business Process Management (BPM) Focus 49% improved most processes 30%
improved most processes
37%
improved most processes
50%
improved most processes
55%
improved most processes
Top Reasons to Implement Organization issues Organization issues Organization issues
Real-time data access
Organization issues
Real-time data access
Organization issues
Real-time data access
Cost-effective legacy

Source: Panorama ERP Research, FinancesOnline, NetSuite, AppsRuntheWorld

ERP System Functionality and Must-Have Capabilities

The ERP system can be used by enterprises and corporations as a universal dashboard for the following areas:

  • Marketing
  • HR management
  • Financial management
  • Project management
  • Compliance and quality control of production
  • Automated data reporting and business analytics

As a rule, an ERP system can consist of modules such as:

Human Resources Module

This module can have the ability to get data from your employees, create job profiles, track work hours and schedules, and compile a visual skills diagram. Many companies also use this module to track payroll and labor efficiency and reimbursement of courses or medical services.

Finance and Accounting Module

This module automates payroll processing and tax filing and also helps with closing accounts, tracking reservations, and delivers core financial and accounting functions. These all functions provide essential insights to minimize financial risk.

Customer Relationship Management Module

Large enterprises and corporations can use the ERP system to improve sales efficiency and customer service quality. It’s possible with the help of information about:

  • customers and potential audience 
  • tracking communication history 
  • information about purchases and transaction call history 
  • studying data about visitors’ preferences and hobbies, etc.

Supply Chain Management Module

This module allows to automate the supply chain and optimize the flow of product or service supplies from the manufacturer or supplier to end-users.

Inventory Module

A modern company uses this module to track their product inventory, identify it, manage inventory and reports, and determine uniqueness by serial numbers in various contentious situations with customers. Almost all advanced ERP solutions have such a module.

Sales Module

This module regulates sale data, collects and analyzes various requests, compiles offers, sends invoices, and verifies transactions from customers or contractors.

Purchase Module

Purchase modules can help to automate and analyze all internal purchases that ensure the inner life of the company. It can also track and explore:

  • supply of raw materials for production
  • existing services on the market
  • analysis of quotations
  • vendor listings
  • purchase orders

These analytics became possible since an ERP system provides AI and BI support for company marketing and management activities.

Distribution Module

This module helps automate production planning, tracking specifications, monitoring the production progress, and compiling and analyzing actual production.

development an erp system: Different modules involveddevelopment an erp system: Different modules involved

All those modules help control and automatically regulate all of the company’s processes. 

The choice of an ERP system module depends on the business industry. Each industry must have specific modules that will not overload the system. 

For example, the real estate industry will need the following modules: 

  • HR module, which operates with workers profiles and analyzes their activities
  • Sales module, which regulates the sale management activities and tracks real-time reports
  • Inventory module if the company has property equipment 

Our client, Property Repair, has got an excellent feature for real estate managers to track their worker’s activity and the actual time of repair services.  This case perfectly illustrates the work of such an ERP module as HR.

Who Would Benefit From Building an ERP System?

An ERP system is needed by medium and large businesses that effectively organize their work processes. Panorama ERP created research that shows ERP systems’ popularity among different industries in 202, such as:

  • Manufacturing
  • Information Technology
  • Distribution
  • Public Sector
  • Professional Services
  • Retail
  • Healthcare

Below, we highlight the most popular business sectors where an ERP system works well.

Popularity of ERP development among different industriesPopularity of ERP development among different industries

Source: Panorama 2021

Worldwide businesses find it challenging to choose an ERP system. The system costs money, whether it’s ready-made or custom-made, with different functionality and design.

Many companies can’t decide which ERP system to choose because of insufficient system awareness.

developing an erp system: time to choose the best ERP systemdeveloping an erp system: time to choose the best ERP system

Advantages of ERP Software Solutions

Over the past two years, the use of ERP systems has effectively changed the business processes of enterprises. 

Enterprises of various sizes were able to save 20% on their business budgets with the help of ERP. So, let’s take a closer look at what advantages a company gets by choosing an ERP system.

Optimization of Business Processes

Business process optimization allows enterprises and middle-sized companies to save time and automate their daily business tasks using HR, supply chain management, and inventory modules. More importantly, it will save companies from routine paperwork and minimize errors related to the human factor.

ERP development system successERP development system success

Real-Time Data Access

Companies will make more effective decisions with accurate and timely access to reliable information thanks to constant reporting and real-time data.

Better Business Collaboration

Cooperation between business partners is an opportunity to swap information between all business participants and activate high-quality partnerships between various parties. Most businesses increased their cooperation productivity by 30% using an ERP system.

Cost Savings on Legacy Support

If a company needs legacy support for their businesses, ERP systems can help significantly. 

For example, an ERP system stores all records about the uniqueness of the product, so it will be easier to provide better product protection and prove that the product entered the market first or is unique compared to others. 

By the way, in 2021, over 65% of small businesses have benefitted from using ERP legacy services.

Advanced ERP software development for legacy systemAdvanced ERP software development for legacy system

Source: Hubspot

Reduction of Unnecessary Operations

With medium or large-sized companies, the number of unnecessary operations can escalate quickly. Here, an ERP system can significantly help companies analyze what is needed for business, and free up space for priority tasks with the help of Artificial Intelligence and Business Intelligence opportunities.

Improved Work Performance

Labor productivity is an important criterion that will allow the company to properly analyze the effectiveness of each employee, develop individual growth plans, and increase the effectiveness of cooperation.

Many companies create long reports about their work. In this case, the ERP system can now calculate how effective the business process is and organize the procedure correctly to create a good balance of work.

Disadvantages of ERP Software Development

Like every system, an ERP is not devoid of disadvantages. Let’s deal with the pitfalls that can become a stumbling block for integrating an ERP system into different businesses.

Cost

Installing an ERP system is not cheap. Installing an ERP system will take up to 40% of the allotted budget in 2021. Of course, this is worth paying attention to if you are a small company with a few staff. However, for medium and large businesses, the payback of this system remains exceptionally high.

Staff Training

For procedures of an ERP system to work as efficiently as possible, the staff must be trained on how to work with it, how to process reports correctly, and with what regularity it is necessary to do this. Ready-made designs without an experienced vendor seem too complicated, and they do not want to spend money on staff training. Furthermore, this path may lead the company to even higher costs and reduced competitiveness in the consultant market.

System Complexity

Some ERP systems are overcomplicated. 

This is typical for ready-made ERP products that may initially interest companies in their capabilities and delivery, then cause confusion about its management and correct workflow. 

Here, the winning choice is a custom ERP product that will avoid difficulties with the volume of the system, because it will fully meet the requirements of the business.

However, no matter how good an ERP system is, its advantages will not appear immediately, but they will be evident for a long time after ERP is integrated.

The final implementation stage depends on the workforce’s abilities and skills and involves training and preparation to apply the system correctly.

Before installing the system, a company should understand its goals and further develop its strategies.

Why companies choose an ERP software systemWhy companies choose an ERP software system

Source: Panorama ERP Research

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Out-of-the-Box vs. Custom-Made ERP Systems

There are two options with ERP software — a ready-made system or a custom-made solution. Each solution has its own benefits that a company should study before implementing an ERP.

Third-Party Solutions

An out-of-the-box option means buying an ERP system from suppliers. The company pays a single entry fee to purchase a license or buy a subscription for a certain period. 

The Statista 2021 Survey showed that there are three top ERP system vendors on the market: Deltek, Microsoft, and Workplay.

developing an erp software system: third-party solutionsdeveloping an erp software system: third-party solutions

Source: Statista

However, that’s not a complete list of suppliers companies can choose for their projects. Sloboda has prepared an extensive survey of the TOP 10 ERP vendors that a company should know about before making any buying decisions.

Need a list of top 10 ERP suppliers with all vital data?

Write an Email

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Custom ERP Solutions

Companies can also implement custom ERP systems tailored to the provision of a particular company that will not contain unnecessary functionality. 

A custom ERP solution is more expensive than ready-made solutions on the market, but a company receives such significant benefits as:

Customization

Custom ERP solutions do not lack the necessary business functions, which means the functionality is in order. This saves a lot of time to study, and companies also pay more for what they won’t use in the future.

Essential Functions

Companies with experienced ERP services can choose practical functionality that will help analyze the process more clearly and make decisions faster.

Сompanies choose custom ERP solutions and get over 91% of satisfaction when developing an ERP system.

ERP software solution satisfaction levelERP software solution satisfaction level

Source: Panorama ERP

However, companies should consider the disadvantages of custom ERP systems.

Longer Creation Time

A custom ERP system solution needs to be created, which means the system’s implementation time will be longer than the ready-made solution. And here, companies need to understand whether they can wait and for how long.

Development Cost

A custom ERP solution will cost more. However, it will be made entirely for a specific company, a specific industry in which it works, and thoroughly adapted to employees and their needs.

ERP software development: Step-by-step Process

While developing an ERP system, a company should follow a step-by-step implementation process.

developing erp software systems: 5 crucial stepsdeveloping erp software systems: 5 crucial steps

Clarifying Your Ideas and Expectations

An ERP system will be ideal for a company if all its participants in the business process are aware of: 

  • ERP system’s operation and its functionality
  • How an ERP helps run various business solutions effectively
  • ERP expectations and their timelines

All parties interested in the company’s development must have the same vision of action and movement. Only then will the process work smoothly and bring results. Each company should clearly define the following issues:

1) What are the initial goals of the project?

2) Why does the project need a system?

3) What functions and needs of the company should the system cover?

Let’s suppose the business owner doesn’t clearly understand what features are needed and the most profitable business solutions. In that case, the experienced vendor will help find out and put on the right path with the Discovery Phase. The discovery phase is the first stage of a product development cycle (it can be a part of the product development roadmap, too) in which business owners have: 

  • Extensive data analysis of the product idea, its prospects, and its market needs
  • Estimation of product requirements and the tech stack to follow
  • Evaluation of all the possible development challenges and best suitable solutions 

As a result of the discovery research, a client receives an SRS (Software Requirements Specification) document, which has a full description of: 

  • Technology stack
  • Platform architecture
  • Product functionality
  • User journey
  • Wireframes

Implementing an Intuitive UI/UX Design

Design is significant for any project. If we are talking about software, its design should be as user-friendly as possible, convenient, and easy to use to save teams from meticulous study. 

ERP software typically has multiple user roles, navigation buttons, charts, and other elements. It should be created to provide a visually comfortable perception of information.

Choosing the Right Tech Stack

Sloboda Studio tech stack while developing erp systemsSloboda Studio tech stack while developing erp systems

The technical stack depends on the platforms chosen for implementation. For example, if a company creates a web version system, developers can use C++, Java, Python, Ruby, React, or Flutter if a mobile app is necessary.

Integrating ERP System With Existing Infrastructure

When developing an ERP system, it’s crucial to analyze the existing infrastructure. Sometimes, an ERP system can’t be integrated or combined with buggy and inconsistent software.

Our Expertise

Sloboda Studio has been creating ERP-like systems for different businesses worldwide for over 11 years. Next, you can search the most prominent examples of our cooperation:

Enterprise Automation App

Our client, a manufacturing enterprise providing technical industrial services with 30,000 employees, needed to develop an automated solution to improve business processes by tracking

1) registration and order placement

2) status of orders, changes in orders, the cost of orders

3) price formation and invoices.

4) technical documentation based on the order description, etc.

As a result, the company digitalized its internal business processes and routine work of its workers. Our client showed significant results after these changes quickly, such as cost savings and revenue growth.

The Skills

Our client, US e-learning project The Skills, needed to create a custom dashboard that made it possible for admins to: 

  • Add users
  • Assign subscriptions
  • Create and deactivate promo codes for users
  • Manage content displayed both on the website and mobile app
  • Set the video display order
  • Filter and search

 
Our developer’s team built a custom dashboard with analytical functionality that automatically provides necessary data showing:

  • User visits
  • Subscription usage
  • Registration of new clients, etc.

Quality Assurance of an ERP

The better the system is, the faster companies will receive positive effects for their businesses using an ERP system. The ERP vendor must conduct quality assurance at every stage of development to ensure a quicker process.

How Much Does It Cost to Develop a Custom ERP Software

A custom solution is suitable for those who want a convenient, simple system that will satisfy all business needs and not overload the system. The cost of custom solutions varies. However, we have calculated the cost of an ERP for a small clinic and have included all of the criteria that define the exact cost.

What Determines the Cost of Development?

Most popular ERP systems have such modules as a default:

  • Human resource management module
  • Financial and accounting management
  • Inventory management
  • Reporting tools
  • Planner
  • Supply chain management
  • Customer relationship management
  • Sales and Marketing

And different businesses may require or have even more.

Regarding the cost, Sloboda Studio should consider that ERP is a complex system, and price cost rates vary depending on the business processes and thus final man-hours needed for planning, developing, testing, and implementing it.

Estimation of Developing ERP Modules

Using the example of an ERP system for a small clinic, our team suggests understanding the stages and time frames of custom product development.

Let’s just break an ERP system down, which includes several stages:

Estimation of Developing ERP Modules

Stage Time Description
Work scope planning and analysis (1-2 weeks) Determination of the main goal, process, and roles
Design (1-2 weeks) Creation of functional requirements

Modules

HR module for managing clinic’s practitioners and patients
Patients module responsible for any history and encounters patients have with our clinic, including prescriptions
Documents module managing all the documentation within the clinic, either patient, financial, or reports
Financial module for regulating financial documents and invoices
Inventory module for handling in real-time medicines and equipment available, auto resupply, stock management, etc.
Planner module for setting practitioner’s working hours and available slots, book an appointment by the patient, plan and map any clinical procedures

ERP Development Stages

Stage Time Description
Development 6-12 weeks per module Creating of new software and external API 
Testing 3-8 weeks per module Testing the software for any errors or design mistakes, user experience, and performance of the system
Data Migration 8-10 weeks Migrating old data to a new solution
Deployment and Training 3-4 weeks Integrating ERP to all the customer’s business processes, including staff training
Support ongoing In order for the product to be of high quality, support is needed at every stage of development

So how much exactly does it cost to start developing an ERP system for a small clinic?

During our calculations, we relied on the average rates of specialists, based on the data of Clutch and Upwork for Eastern European countries, such as Ukraine, Poland, Hungary, and Belarus.

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If you don’t know the worldwide rate for developers, it’s a good idea to read our article.

The first product design phase includes the involvement of such experts as:

  • project manager
  • business analyst
  • designer
  • tech leads

Before making a final decision, companies should look at the example below to develop the HR module. Having analyzed all the available data, Sloboda Studio relied on the rates of Eastern Europe as the most reliable partner with high-quality expertise and acceptable rates.

ERP Development Cost: Product Design Phase

Expert Hours Eastern Europe
(per hour)
Project Manager 60 $62
Business Analyst 120 $60
Designer 40 $60
Tech Lead  (sometimes 2 leads) 40 $75
Total cost $16320

Development Stage

Project Manager 240 $62
2 mid developers 320 $55
QA mid engineer   320 $40
DevOps engineer  40 $58
Total cost $65200

Data Migration Stage

1 DBA specialist 320 $62
2 QA specialists 320 $55
Total cost $47600

Deployment and Training Stage

DevOps 80 $58
Specialist as a trainer 160 $45
Total cost $11840
Full cost $136560

*Ratings are formed as the average value of rates, they can be lower and higher.

Source: Global Software Outsourcing Trends and Rates Guide 2022

ERP Development: To Sum it Up

At the moment, medium and large businesses need ERP systems to optimize their business processes, increase efficiency, and ensure growth.

Many ready-made solutions are from well-known brands Microsoft, Oracle, and others. However, many of them may be challenging to use, and train personnel may contain unnecessary functionality overloading the business system. 

In 2022, many enterprises are choosing a custom solution. Before using one of the types of ERP system, it is necessary to define the following points clearly:

  1. Clarifying your ideas and expectations
  2. Defining UI/UX design
  3. Choosing the right tech stack
  4. Identifying how to integrate ERP system with existing infrastructure 

Developing an ERP system is not an easy task since it requires calculating every detail not to take long and is economically less costly. In the hands of an experienced software development vendor, companies can achieve great success in 2022.

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