What is Cloud Enterprise Resource Planning (ERP)? How is it different to On-Premise Enterprise Resource Planning (ERP)?
What’s the difference between Professional Services Automation & ERP?
With the increasing need to become more agile, responsive and the competitive in the marketplace, many service-based and project focussed organizations are looking to technology to provide business solutions. These include PSA & ERP solutions such as SAP, Netsuite, Workday, Oracle, Microsoft Dynamics and more.
In this article we will introduce both Professional Services Automation (PSA) and Enterprise Resource Planning (ERP) and begin to look at what distinguishes these solutions:
What is Professional Services Automation (PSA)?
Professional Services Automation (PSA) is typically used within service based organizations such as; accountancy, consultancy, advertising & marketing and engineering. These businesses use knowledge as the source of their value, and they provide this to other organizations in order to generate revenue.
PSA use technology or software to automate routine tasks and processes which professional service workers undertake in their jobs.
Professional Services Automation Software Modules
PSA software typically has many different modules which can provide capability across an organization. Some of the most popular are;
used to provide greater visibility and management of projects through project status, milestone and schedule tracking. Holding project data in one place allows a holistic view of project costs and profitability and enables an organization to have greater clarity on the true cost of a project and the resources needed to complete it.
This module gives the organization a view of how resources are allocated across projects and/or teams and the cost associated with these resources. By providing accurate real time information it also enables better utilization of resources and faster decision making on how to allocate them across current and future projects.
Time & Expense Management
Providing employees with the ability to enter and track time and expenses across multiple projects and teams, enabling greater forecasting and predictability.
Customer Relationship Management (CRM)
CRM is used to manage sales opportunities and customer relationships. Detailed client information can be documented and stored, with real time updates added as needed. Sales opportunities can be tracked, through multiple stages of the sales cycle, providing real time collaboration.
What are the benefits of Professional Services Automation (PSA)?
We have touched on how many organizations are using technology in order to become more adaptive and responsive in an ever changing marketplace. A recent report found that 53% of employees state that they can save up to 2 work hours a day (240 hours per year) through automation and PSA is just one of the options available.
Some of the benefits typically seen from Professional Services Automation (PSA) include;
- Save money!
- Increase efficiency – employees are able to use the technology to automate routine and repetitive tasks, ensuring they can focus on value generating activities within your organization.
- Make data driven decisions – PSA software gives access to real time information, in a single format, across multiple business areas. This data can be analysed in order to reduce costs, increase predictability and identify issues before they impact business performance.
- Increase performance and revenues – through greater visibility and management of sales and billing and the identification and management of issues
What is Enterprise Resource Planning (ERP)?
Enterprise Resource Planning (ERP) is a type of software used by organizations to manage and integrate day-to-day business activities such as accounting, supply chain, operations, reporting, manufacturing, and human resource activities. Using ERP software means that each of the different functions in a business are able to see what each other are doing and collaborate – because information is held on a single system. For example, Finance and HR can easily share and access the same data in relation to employees.
What does ERP software typically include?
ERP software can be used across a number of functions in an organization and is often talked about in terms of the ‘modules’ which can be purchased. Some of the most popular examples are;
The centre of every ERP software is financial management and accounting. By putting your organizations financial information in one place it will give a real time snap shot of your businesses financial performance – aggregating and managing how money moves through your organization. The module manages typical finance requirements, such as cash inflows and outflows, ledger management, bank reconciliation and regulatory compliance whilst also reducing the need for manual entry. Financial Management can flow from your front office (for example incorporating sales data) through to your supporting functions.
The Human Resource module provides workflows to manage the whole of the employee lifecycle, effectively managing hiring and employee onboarding through to payroll. As data can be collected and shared across departments, it enables a single source of the truth in relation to employee data.
The Procurement module enables greater control and visibility of the procurement process and suppliers to an organization. Supplier details can be stored, approved supplier terms and costs can be recorded and the process to request, receive and negotiate quotes can be automated.
Order Management is used to track all elements of the Order process – from the moment an order is placed, through to delivery to a customer or retail store. This includes tracking orders through the warehouse and providing real time updates on the progress of an order. By enabling this real time information, the number of customer orders which are delayed or lost can be managed, resolved and prevented.
For product focussed organizations, the Supply Chain module is invaluable. Moving away from manual, paper based processes, or systems which do not integrate, the ERP enables a real time view of stock data. This can enable effective stock and demand planning, allow issues in the supply chain to be quickly identified and gives greater visibility of challenges in production or logistics. The module can include and/or work alongside many other components to enable it to provide a cross organization view of stock and manufacturing, such as procurement, manufacturing, inventory management, warehouse management and order management.
Customer Relationship Management (CRM)
Similar to the PSA example above, a CRM is used to manage sales opportunities and customer relationships. Detailed client information can be documented and stored, with real time updates added as needed. Sales opportunities can be tracked, through multiple stages of the sales cycle, providing real time collaboration.
What are the benefits of Enterprise Resource Planning (ERP)?
Many of the benefits of ERP implementation are similar to that of PSA, but on a larger scale. One of the key benefits is that of efficiency. For example, in accounting, approximately 47% of accounts payable professionals consider manual processes their biggest challenge.
By utilizing the Financial Management module in an ERP many of these heavily time consuming tasks can be automated.
Simplify the IT landscape – as the ERP provides a single database which is shared across the organization the number of disparate IT applications can be reduced, saving money and reducing IT complexity
Increase efficiency – core processes within the business are automated through the ERP, reducing the number of manual, often error prone, tasks which employees complete.
Provide real time data across an organization – ERP software gives access to real time information, in a single format, across multiple business areas. This enables decisions to be made which are based on a single source of the truth without the need to mine and analyse data across multiple data sources
Greater control – the level of regulatory control, compliance and business continuity can all be increased through the use of ERP as there is greater visibility of reliable organizational data
Faster reporting – reports can be quickly generated and shared, reducing the number of man hours needed to source and interrogate data
What are the Key Differences between PSA and ERP?
As you will have read from the information provided about both Professional Services Automation (PSA) and Enterprise Resource Planning (ERP) software, there are a number of similarities between the two.
Historically, one of the key differences between ERP and PSA was that ERP software was designed to manage tangible assets, for example products, goods and stock and had a number of modules related to this (manufacturing, warehouse management, inventory management etc). PSA software was instead focussed on intangible assets and the service based industries, for example, staff and consultants. PSA software therefore had a much heavier emphasis on modules such as project management and time and expenses to enable the management of staff. Software such as SAP professional services automation can handle both PSA & ERP in one solution.
So what does this mean for you?
Despite these historic differences, Enterprise Resource Planning (ERP) and Professional Services automation (PSA) software can be both complementary and interchangeable. As ERP software has continued to evolve, it is increasingly being used by professional services organisations, providing the functionality previously only seen in PSA software. In these scenarios, the product management elements are instead being replaced by resource management, timesheets and billing.
When deciding which solution is suited to your business it will largely be dependent on the business requirements, existing IT landscape and the problem which you are trying to solve across your organization.
Although the functionality of ERP software has increased, it does not mean a standalone ERP is right for you. In some industries, niche PSA solutions have been developed which may suit your business needs and can be easily integrated into a larger ERP.
Despite the benefits which this approach may offer, a truly integrated ERP with PSA functionality provides the greatest level of integration and financial visibility into the business.