ERP vs. PSA: Which One is For You?

Written By Matt Van Vleet

What is ERP?

ERP, or Enterprise Resource Planning systems are software systems originally formed around manufacturing practices. They’re designed to ensure that all the essential factors that help you run your business are managed in one place. For example, if you’re building a car, the ERP can help you ensure that all the parts and materials you need are available at the right times in the right places to get the vehicle built successfully and efficiently.

Benefits of ERP

ERPs can help organizations manage large amounts of information and components going through a process and turning them into products that can be sold for revenue. You can use an ERP to see how efficient each step is and what can be done to improve on them, tracking processes, and making data available every step of the way.

Challenges of ERP

Inflexible

Historically ERPs cost a lot to set up, and not flexible when it’s time to update or change them. This makes it hard to adjust your ERP as your business or market changes.

Barrier to Agility

Many companies try to use ERPs for things they aren’t designed for which gets them into trouble. The more you customize an ERP outside of its original purpose, the more you risk creating an overly complex system for users. Then the more you change it, the harder it becomes to maintain it thereafter. When you can’t make changes easily, the software becomes a barrier to Agility.

Overcoming Gaps

When you use an ERP for purposes not intended, you’ll eventually find that it isn’t going to do everything you need it to do. So you will need to do workarounds like using fields not intended to be used for that purpose, custom forms, spreadsheets, and additional tools they plug into the ERP. Maybe you’ll also need to plug in a CRM or HRIS to help with people management.

It becomes complicated and burdensome.

What you end up with isn’t a system that helps drive you forward, but rather a behemoth that holds you back from making quick moves to adjust to your market and thrive.

ERP vs PSA

If you don’t need an ERP because your business isn’t about making and producing products to sell, that’s where a PSA comes in. Professional Services Automation (PSA) software is a specialized type of ERP for services based businesses that’s designed around managing the flow of people.

Businesses that should select a PSA vs ERP are those that tend to use a lot of services and people to deliver their work, like a tech or engineering consulting company, for example. If you are selling people’s time or project-based work, or most of your expense is labor, a PSA makes the most sense. It’s a purpose-built app designed to handle people-centric businesses.

A PSA helps you understand:

• Are there enough projects for the people we have?

• Do we need to add more people for our projects?

• Where are we at in the sales pipeline?

• Who is joining and leaving the org?

Even though you can try to force it to be, an ERP will never be the same as a system that’s made what you need. People’s time surplus isn’t the same as surplus materials. You have options of how to use unused materials later. But once you’ve lost people’s time, you can’t get it back. A PSA is designed to be forward-looking and help you get insights to predict the future so that you don’t lose people’s time.

5 Essential Attributes of an Ideal PSA

Cross Disciplined. Can you view the current reality in various areas of the business? You need to be able to see into multiple perspectives and specialties.

Future focused. Does it show you insights into the future? You need to see what is coming so you can make the necessary moves and changes.

Scalable. Will the PSA grow with your business? It needs to help you prepare to grow.

Sliceable. Will it enable you to look at different areas of the business? You need to know how you are performing in the market and how different areas of the business are faring.

Traceable. Will it help you see into the past and trace what changed and when? You need to be able to gain insight and make adjustments based on what happened in the past.

Things move fast and clients want answers fast. So you need the right software for the job, one that can give you information quickly, ideally in real-time, and can also adjust and change quickly—so your company can do the same.

Which One is For You?

When you’re looking at your business, take into account what you do and look for software designed for that. A services business with a lot of people who do projects and most expenses are payroll, PSA makes the most sense. Make sure the software is flexible and adaptable and enables you to manage your business without spending time reacting only to the past. If you have a business an ERP is built for, it’s a great choice. But software built for any business, or designed for another type of business other than yours is going to get you distracted focusing on the software more than on running your company.

Managing people is different from managing materials. Ultimately, you want your software to support your business rather than constrain it.