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In recent years, the movement to promote DX has become more and more accelerated, and each company is taking steps to improve operational efficiency. Among these, many companies have introduced or are considering introducing a core system, as it will provide a strong boost to improving business efficiency. However, where within a company a core system should be introduced will vary depending on the company's size and business content. Additionally, small and medium-sized enterprises are currently struggling to make progress due to a lack of information personnel.
Therefore, this time, we will explain what you need to know when introducing a core system, from an overview to the types, benefits, and key points for product selection. Please watch till the end.
In my journey through system development, app development, and digital transformation, I've often encountered the term "core systems." You might be wondering, what exactly is a core system? As someone deeply involved in this field, let me share my understanding and insights.
A core system, as I've come to understand it, is a fundamental framework that companies leverage to manage critical information necessary for their business operations. This includes areas such as inventory, production, sales, accounting, and ordering. In our work with digital transformation, we often emphasize how core systems are pivotal in enhancing operational efficiency.
When we delve into the meaning of "core", it relates to something at the root or center of things. This is exactly what core systems aim to do in the realm of IT technology. They manage the vital components of a company, ensuring business operations run smoothly and efficiently. In my experience, implementing core systems can revolutionize traditional processes.
For instance, in the system development projects I've been part of, we've seen how transitioning from analog to digital processes through core systems leads to substantial time and cost savings. This is achieved by reducing human errors and enabling centralized, real-time data management and updates. This aspect of digital transformation is crucial, as it brings agility and accuracy to business operations.
Many companies, recognizing these benefits, have integrated core systems into part or all of their business operations. In my role, I've witnessed how these systems have become indispensable for contemporary business activities. Whether it's through app development or broader system development, incorporating core systems is a game-changer for businesses aiming to stay competitive and efficient in today's digital era.
There are various types of core systems, and we select systems based on the business content, concerns faced by the organization, and the anticipated benefits of using them. Here we introduce the types of common core systems.
・Production management system
This is a system that centrally manages and efficiently performs tasks such as production planning, process control, quality control, and inventory control in the manufacturing industry, improving production efficiency and maintaining quality. It also visualizes work, displays real-time information, and allows employees to share information with each other.
・Sales management system
By centrally managing sales-related processes such as ordering, delivery, and billing, you can easily track inventory status, order history, and analyze sales. They can improve accuracy and efficiency by taking over tasks that are prone to human error, such as data entry, inventory tracking, and estimating.
・Inventory/Purchase Management System This system
helps optimize the supply chain by comparing products and raw materials received from suppliers with order data and automating inspections, journal entry, etc. You can order products at the right time, make payments on schedule, properly manage inventory, and ensure smooth supply.
・Accounting management system
Creates accounting data such as budget management, journal entry assistance, and financial statement creation, and manages finances such as receivables, payables, and budget management. In addition, business analysis, which would be a bit burdensome to manage using traditional Excel, can be easily performed using an accounting management system.
・Human Resources Management System
This system manages human resources and labor departments, including employee information, attendance management, payroll calculations, and personnel evaluations. Among them, many companies have introduced attendance management systems, which can accurately manage data that is difficult to manage manually and prone to errors, such as attendance records, working time calculations, vacation management, overtime hours, shifts, etc.
Here we will summarize the benefits of introducing a core system.
・Improved work efficiency
Since the process is performed using machines, processing speed is faster, and work processes and procedures can be unified . In addition, it is possible to minimize the small mistakes, errors, and uneven work that inevitably occur when work is done manually, which can improve work efficiency.
・Business standardization
This eliminates duplication of work and uneven work such as mistakes and omissions due to employees' company history or strengths and weaknesses, ensuring a certain level of work quality. This can be expected to standardize work, making it possible for both new employees and veteran employees to contribute to the quality of work.
・Visualize Management Information
By increasing the visibility of data such as sales and debt, it becomes easier to discover issues. Using the latest data, management teams can formulate strategies to overcome market competition and make speedy decisions .
・Unified management of data
By linking business data, you can not only improve business efficiency but also reflect the data necessary for management in real time, making it possible to centralize management . This increases the speed at which information is reflected in management strategies, enabling accurate and speedy management decision-making.
Words used with similar meanings to core systems include "business system," "information system," and "ERP." Here we will explain the meaning of each and the difference between core systems.
・Business system
A business system is a system that supports specific business processes. Core systems are essential for management, but business systems are designed to suit the needs of each department or department. In other words, business systems are useful for optimizing parts of a company's operations, while core systems are useful for optimizing the entire company .
・Information system
Information system is a system that facilitates internal and external communication , such as email and SNS . Specifically, this includes schedule management, SNS such as business chat, groupware, and web conferencing. Communication is very important in business, but even if this system stops, although it may be inconvenient, all business operations will not stop . On the other hand, the core system centrally manages data at the headquarters of the department, so if it were to stop working, it could lead to the suspension of business operations, or in the worst case scenario, the suspension of business activities.
・With ERP
Enterprise Resource Planning, we aim to improve business efficiency and optimize management by collectively managing and allocating the various resources that a company has, such as people, goods, money, and information . ERP can be said to be one of the core systems because of the methods used to optimize business management . Centralized management provides real-time performance, data accuracy, and visualization of management data to make decision-making smoother, helping to build an efficient management system and prevent losses.
There are two types of core systems: on-premises systems, in which dedicated hardware is prepared within a company's own data center, and cloud systems, in which systems are stored in the cloud. Here we will explain the characteristics of each and the points to consider when making a selection.
[ On-premise Based]
An on-premises core system is a method in which dedicated hardware is prepared and operated within a company's own data center.
・Improved security
Since the server is installed in-house, all data is within the company, and security and privacy can be controlled.
・Customization
It is easy to customize to suit your business needs, and you can use the system to suit your business. Additionally, operational costs are easier to predict than cloud-based models.
Cloud Based
A cloud-based core system is operated in a cloud provider's data center, accessed via the Internet, and data is stored in the cloud.
・Diverse services and flexibility
You can start without building a system from scratch and use the necessary cloud services as needed, so it takes less time to introduce and expand the system.
・No operation management required
The cloud service provider operates and maintains the server, including backups and updates, so there is no need to do anything yourself.
・Reduction of operational costs
Cloud-based services can be started as long as you have an internet connection. Therefore, initial investment can be reduced. Additionally, since the service itself is pay-as-you-go, you pay only for the services you need, so you can operate without wasting costs.
I'm not saying which is better or worse, but if you want to emphasize customizability, choose an on-premises type, or if you want to reduce costs and speed up implementation, choose a cloud type, depending on your budget, time, and goals for implementation. , it would be a good idea to decide what to introduce.
Additionally, many companies are adopting a hybrid approach that combines on-premises and cloud-based systems .
Moving to the cloud has brought us closer to resolving issues that have traditionally been associated with core systems, such as improving work efficiency and reducing the capacity burden on devices. In addition, due to the spread of the new coronavirus, a way of working that does not involve going to the office has become widespread, and it is attracting even more attention because it allows users to view, retrieve, and edit data necessary for work regardless of location.
According to a survey by the Ministry of Internal Affairs and Communications , the percentage of companies in Japan that use some cloud-based services for their core systems is said to be 68.7% (as of 2020), and cloud-based services are becoming more popular. . Below, we will introduce some of the most important reasons for this attention.
・Security
On-premises type allows you to manage data in-house and control security and privacy, but with cloud type, the service provider provides advanced security functions and strengthens data protection on the cloud.
・The latest infrastructure
cloud services are automatically updated, so you can always maintain the latest services and security. Therefore, unlike on-premises models, there is no variation depending on the time of purchase.
・BCP measures
BCP measures are business continuity plans, and are measures to continue business operations with as little damage as possible even in the event of a disaster. In Japan, where disasters often occur, it is essential to take measures to prevent data from disappearing or servers from stopping even in the event of a disaster. With cloud services, your data is more likely to be safe because it uses a data center remote from your actual location, and automatic backups make recovery easier later on.
We will also introduce here some cases of success by moving core systems to the cloud.
・Daiken Kogyo Co., Ltd.
Daiken Kogyo Co., Ltd.'s most important mission was to improve CX (customer experience) through digital technology, and it cited IT infrastructure reform as an urgent issue. Up until now, we have been operating core and business systems on private clouds, but we have had to deal with the end of maintenance and support for hardware and software, resulting in increased replacement costs, integration of individual systems, and preparation of a recovery environment in the event of a system failure or natural disaster. There were issues such as: We decided to address those issues by introducing public cloud as the foundation for improving user experience.
The public cloud was chosen because of its high performance and flexible expansion of system resources. As a result, by migrating to the public cloud, we were able to achieve smooth operations and cost reductions for our accounting system, and we were able to use the cost savings to make strategic IT investments to promote DX.
・Nippon Manpower Co., Ltd.
Nippon Manpower Co., Ltd., which has been operating a wide range of human resources development businesses from in-house training to career development, has developed a proprietary system that centralizes and operates everything from course inventory management to student management, sales management, and receivables management. They were using a core system, but the legacy system was preventing them from increasing overall efficiency. At the same time, in order to prevent personalization, we have turned to cloud computing.
By moving complex processes such as monthly closing and payment processing, which put pressure on the staff in charge, to the cloud, we have made the overall accounting process more efficient.
Up to this point, we have provided an overview of core systems, their types, benefits, and key points for product selection. A core system is a system used by a company to manage information necessary for the company, such as inventory, sales, finance, human resources, etc., and to improve operational efficiency. By selecting and operating products that align with your company's goals, you can expect to reduce human errors, time, and costs.
In addition, in order to smoothly introduce a core system, the work of "people" such as on-site follow-up and introduction guidance from in-house information systems departments is essential. It is also important to create a system for
JIITAK provides DX support, including the development of core systems.
With specialized teams in each digital field of strategy, design, and engineering, we provide comprehensive support from idea generation to strategic design, development, and operation for companies that are transforming their business models and taking on the challenge of creating new value. If you have any problems or are interested, please feel free to contact JIITAK!
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