If you’re nervous consider it a good thing…
In one respect, selecting ERP is a bit like proposing marriage; you’d better be sure you’ll get along since you’re in it for the long haul barring a costly and bitter divorce.
Unlike a real-life bride or groom though, the ERP software vendor you fall for isn’t likely to turn down your proposal. The onus is solely on you to evaluate the options and select the one that’s right. We’d be concerned if you weren’t nervous.
We’re betting you’re considering ERP software because you desire to better manage supply chains, inventory and customer relationships while simultaneously offering a valuable and efficient ecommerce shopping and checkout experience.
We’re also betting a significant portion of your time is spent doing necessary yet seemingly trivial tasks that don’t add value:
- Entering data manually
- Retrieving data that’s siloed from complementary data
- Enduring inefficient inter-departmental workflow or reporting
You know many of these routine chores can be handled much more rapidly and efficiently by integrated software systems.
It’s why you’re considering ERP.
These systems can automate business processes and make managing your business more efficient and profitable. However, ERP systems can also be costly, difficult to integrate, and challenging in terms of measuring ROI.
The secret to a happy ever after is choosing the right partner.
What is ERP?
It might be helpful to think of ERP as the key that unlocks silos in which data is often trapped due to departmental affiliation, organisational structure, or human reluctance to share.
Enterprise resource planning (ERP) software is engineered to collect, organise and interpret data from a variety of business activities including:
- Customer relations
- Supply chain
- Human resources
Without ERP, the bulk of your data is without context, perspective or connection.
Only when you’re able to mine, organise and develop it into insight can it deliver on its promise of helping you make better business decisions. Accessing the data, making sense of it, and doing so in real-time are formidable challenges.
The idea behind ERP is to help organisations become more agile, efficient and make data driven decisions that result in better business outcomes. The data compiled in an ERP system is often presented in a dashboard that decision makers can use to monitor and manage their businesses in real-time.
Even though enterprise software is a relatively mature vertical, the global ERP spend is expected to increase more than 36% over the next four years. Hidden within that growth is change. Increasingly, legacy in-house ERP systems are migrating to the cloud.
How can an ERP solution help you?
Think of your business activities as parts of an engine…
The ability to look under the hood while the engine is running can be invaluable when trying to decide whether to pull over and do preventative maintenance, take it to a shop for immediate repair, or keep going for as long as possible because all is well.
ERP software can provide the vision a business needs.
ERP systems are designed to provide rich overviews of the applications running on an organisation’s computer networks. Besides being able to track key performance indicators (KPIs) in real-time, ERP systems can integrate business departments by tracking workflow, identifying duplication, and ensuring data integrity.
ERP software can save organisations money by:
- Automating certain employee job functions
- Eliminating single-purpose software
- Securing all company data in one place
- Creating a single analytics or reporting location
- Making it easier to accurately track inventory and sales
- Speeding collaboration between employees in different departments
It might be helpful to think about ERP on three levels when trying to match software solutions to your organisation’s individual needs:
- As an ERP system or single solution relied upon for all of an organisation’s software needs.
- ERP as a supplement that may be integrated with existing software or tools.
- ERP as modules, or collection of related software (marketing/sales or finance/accounting), that may be used for mission critical business functions but also integrated with existing software that may be separate or possess a different level of sophistication or focus.
Besides the insight ERP can provide, it can also address some of the agility issues with which businesses must cope.
ERP software can provide an on demand real-time snapshot of what’s happening on the backside of your business. It’s not something customers will see, but it can provide a competitive advantage by helping you make faster, smarter, data driven decisions.
The drawbacks of ERP
If you’ve already spent big money implementing an ERP system over a number of years, you’re not alone.
As a rule of thumb, it is a good idea to budget for a certain spend per user per year. You might be able to negotiate volume discounts, but depending on the size of your company, understand it can also cost a significant amount to implement ERP systems. Consider the recurring costs as well as the fact you could spend between 10-15% of the total cost on yearly software renewal fees.
Other considerations that can impact cost, integration time, and functionality include:
- Whether you’re integrating existing software with new ERP software
- Whether you’re starting from scratch and weighing cloud ERP vs in-house ERP
The IT resources necessary for the scenarios outlined will vary and thus also impact cost and duration of implementation. The vendor you select may implement the software itself, partner with a third-party consultant, or leave it all up to you.
Additional ERP challenges may include:
- ERP ROI – it can be difficult to measure efficiencies, value or the total return an ERP produces.
- Data migration – it can be costly, difficulty and time consuming to transfer data and maintain quality and integrity.
- Employee training – to take full advantage of ERP, employees must use it which could require training that reduces productivity and increases costs.
- Reliance on lone vendor – the vendor you select will be responsible for upgrades and customisations and must remain in business for years for you to reap the full benefit of an ERP system.
Identifying exactly what your objectives are by implementing an ERP, evaluating the IT and infrastructure necessary to integrate and maintain the system, and mapping out exactly how you’ll track, and measure success are crucial in staying on budget and on time.
Identifying and understanding these items well in advance will not only help you select the right vendor but also contain costs and improve the odds that implementation won’t drag out for years to come.
Selecting the right ERP software
Selecting the right product and the right vendor hinges on intimately understanding your organisation’s needs and appropriately evaluating competing systems side by side.
Here are six things to consider that can help you make a more intelligent decision:
Objectives and requirements
Why exactly are you interested in an ERP system? What problem are you trying to solve?
Outlining ultra-specific objectives will help you identify narrow requirements ERP software must meet to be purchased. To avoid being influenced by vendor marketing, you might consider listing your requirements before you begin researching options.
Reminder: mobile ERP
When identifying your requirements remember to balance them with your employee policy on mobile devices. While mobile ERP isn’t new, the BYOD trend is and should be considered when balancing the advantages of using ERP on the go and ensuring data is secure.
When you begin researching ERP options you’ll notice no shortage of warnings regarding how difficult it is to measure ERP ROI. Fortunately, articulating ultra-specific goals as you’ll have already done will help.
You might measure ERP performance by:
- Reduce headcount by X% in Y (months)
- Increases employee productivity by X% in Y (months)
- Reduce inventory by X% that results in Y accounting improvement
- Increase customer touches by X times that increases lifetime value by Y (amount)
- Improve accuracy of manufacturing cost quotes by X% in Y (months)
Reminder: cloud considerations
When figuring out how you’ll measure performance be sure to consider differences between in-house and cloud ERP. While cloud ERP is often user friendly and may require less in-house to maintain, it also means sensitive data will be stored off-site. Conversely, an in-house ERP may allow you to store sensitive data closer to home but doing so could require additional staff for system maintenance. Either decision can impact your IT culture and headcount.
Demystify the demo
You’re ready to see software demonstrations.
You may want to provide a demo script that outlines specific functions, workflows, or features you expect to see during the demo. You might feel as if directing the demo with precision will save time and help you better determine whether the software meets your goals.
An alternative approach is to simply provide the vendors with a goal and see how they respond…
Remember, you provided the vendor with several of the goals you expect ERP to help you achieve:
Do the salespeople spend time learning about your business, asking follow up questions about how you’ll use ERP, and voluntarily incorporate your goals in the demo?
The demo you receive can be extremely revealing in terms of what kind of partner the vendor will be over the long haul; implementation, customisation and support.
Get the real price
To select the right solution for your business, understand exactly how much the project will cost at each stage:
- Upfront cost
- Recurring costs
Having a thorough discussion about price can prevent future surprises and disappointment. It can also help you shape a contract both parties can be happy with.
Reminder: customisation 2.0
Customisation is crucial in squeezing every bit of value from ERP software. However, too much can result in major cost, overruns and delayed implementation. Over customisation can also result in higher upgrade costs. Unless a specific customisation provides a competitive advantage or measurable benefit, consider saving the extra time and money custom coding often requires.
Gauge vendor viability
As the enterprise software space consolidates, companies may not wish to support all of the products they acquire in perpetuity. Acquirers may choose to sunset a specific product or notify customers it will no longer support a product after a certain date.
This is a risk that anyone considering ERP software must be concerned with.
For ERP providers that do not appear to be acquisition targets, it’s important to see their balance sheets so you can assess their financial strength and whether they’re likely to be around for the long haul.
Be sceptical when researching ERP systems online.
Much of the content claiming to help you select and implement the right ERP system is produced by the very people trying to sell it to you or by:
- Outfits collecting leads to sell to ERP vendors.
- Publishers who are paid by ERP vendors to be included in guides, handbooks or whitepapers.
This doesn’t mean the content isn’t accurate or potentially useful. Just be mindful of the source and whether a conflict of interest may exist.
Selecting the right ERP system requires disciplined attention to detail but a rather simple strategy:
- Understand exactly what you need
- Identify precisely how you’ll measure performance
- Understand exactly what the vendor will provide
- Check on the vendor including unconventional references
- Pinpoint the price including recurring costs and incentives and penalties
- Gauge vendor’s financial health and strategic direction
Good luck with the proposal. Just be sure they’re the one.
So, with all that said, we would like to propose to you that you get in contact with us as we might be the one and we don’t want to slip through your fingers and be the one that got away. Contact us here to organise a free consultation and demo, or call us on 0191 500 8150 to speak to a Business Software Consultant.