ERP – Management software what they are and why it’s time to implement them

In today’s digitization landscape, enterprise resource planning (ERP) management software is becoming essential tools for business management. Yet despite their importance, many small and medium-sized enterprises (SMEs) in Italy are still reluctant to adopt them.

In this article we will explain what management software is, why it is essential to implement it, and analyze recent data that highlight the need for acceleration in the digitization of SMEs.

What are ERP management software?

ERP management software are integrated systems that allow all business processes to be managed from a single platform.

These systems cover various operational areas, including accounting, human resources, sales, purchasing, production management, logistics, and more.

Their implementation enables smoother and more efficient management of enterprise resources, better information sharing, and greater ability to make data-driven decisions.

Why implementing an ERP is essential

Implementing an ERP system offers many benefits to businesses, including:

• Improved operational efficiency: by automating manual processes and integrating various business functions, an ERP reduces errors and increases productivity.
• Data-driven decisions: provide insight into business operations, enabling managers to make informed decisions.
• Compliance and security: help companies maintain compliance with local and international regulations while ensuring the security of corporate data.
• Scalability: as the company grows, an ERP can easily adapt to new needs without requiring a complete systems overhaul.

Read also. ERP systems: 4 benefits for your business

Digitalization in Italy still lagging behind

Let us now go into the level of digitization in Italy. According to the most recent data from 2023, about 47.9 percent of Italian SMEs use at least one management software but only 13.6 percent share data with suppliers or customers, which is lower than the EU average of 23.5 percent.

This points to a significant lag of Italian SMEs compared to European competitors, which could penalize the competitiveness of our companies in the medium to long term.

Another significant fact is given to us by the Digital Intensity Index (DII), which measures the level of digitization of enterprises. As for us, the DII shows that only 60.7 percent of Italian SMEs adopt at least 4 out of 12 digital activities, which represents a basic level of digitization and only 21.3 percent of SMEs achieve a high level.

Digital Intensity Index (DII): results in Italy.

As we wrote earlier, the Digital Intensity Index (DII) assesses corporate digitization through 12 indicators.

These indicators are:

1. Internet access by employees: percentage of employees who have access to the Internet for work purposes.
2. Use of Artificial Intelligence (AI) technologies: percentage of enterprises using at least one of the AI technologies.
3. Fixed broadband speed: percentage of enterprises using a broadband connection with download speed of at least 30 Mbit/s.
4. Data analysis: percentage of companies that perform data analysis internally or through external vendors.
5. Purchase of cloud computing services: percentage of enterprises purchasing cloud computing services.
6. Purchase of sophisticated or intermediate cloud computing services: percentage of enterprises purchasing more advanced cloud computing services.
7. Enterprise Resource Planning (ERP) software use: percentage of enterprises using ERP software for enterprise resource management.
8. Customer Relationship Management (CRM) software use: percentage of enterprises using CRM software for customer relationship management.
9. Social media use: percentage of businesses that use at least one social media outlet for their activities.
10. Use of at least two social media: percentage of enterprises using at least two social media platforms.
11. Value of online sales: percentage of online sales to total enterprise sales.
12. Web sales: percentage of total revenues generated from online sales that come from B2C (business-to-consumer) sales exceeding 10% of the total.

In 2023, Italian SMEs (10-249 employees) show significant lags compared to large enterprises, especially in complex activities such as data analysis (25.7 percent SMEs vs. 74.1 percent large) and the use of ERP and CRM management software (41.4 percent SMEs vs. 85.0 percent large).

Only 60.7 percent of SMEs have a basic level of digitization, and just 21.3 percent achieve high levels.

Internet connection indicators and the adoption of technologies such as artificial intelligence are most prevalent in the information, energy and technical professions sectors. Other sectors, such as trade and catering, focus on social media and online sales.

The least digitized are SMEs in 2023

The data thus seem to confirm that the introduction of digital technologies varies significantly by company size.

In 2023, the most common combinations of the 12 Digital Intensity Index (DII) activities show that SMEs (10-249 employees) tend to digitize primarily through:

– the use of the Internet
– cloud computing
– social media

About a quarter of digitized SMEs, at least at the “basic” level, are limited to these three technologies, thus not adopting management software (ERP and CRM) or advanced technologies such as artificial intelligence or data analytics.

For large enterprises (250 employees and above), however, digitization is more complex, typically including a combination of at least nine technologies, including connection to the Internet, use of advanced cloud computing, management software, social media and data analytics.

Interestingly, the adoption of management software among SMEs is not among the top five most frequent combinations, in contrast to large enterprises, where these tools are more prevalent.

In addition, online and web-based sales activities are common only among larger enterprises, while advanced cloud computing is also being adopted by SMEs, albeit to a lesser extent.

Finally, advanced technologies such as artificial intelligence and data analytics are present in SMEs only if they have already implemented other core technologies, suggesting that these innovations are more common in companies with a high level of digitization.

Diffusion of ERP in Italy

About half of the enterprises with at least 10 employees (48.7 percent) use at least one enterprise software among those aimed at enterprise resource planning (ERP), customer information management (CRM-Customer relationship management) or those of Business Intelligence (BI) used, for example, to analyze data for strategic decisions and planning.

Source: ISTAT

Among them, more than half (53.6 percent) say they have made purchases related to such management software in the previous year, and 60.0 percent that the data used are stored in relational databases. The software most implemented by enterprises is ERP (42.2% of enterprises) followed by the use of CRM (19.2%) and BI software (14.3%).

However, only 14.3 percent of companies share their data electronically with suppliers or customers within the supply chain.

In addition, 24.9 percent of companies perform data analysis internally or through other group companies, while only 4.6 percent rely on outside organizations for this task. The most common data sources come from sales (14.8 percent) and customers (11.2 percent), often through ERP or CRM systems.

Think it’s time to take your company to a higher level of digitization? Contact us!