Whether they realize it, all businesses use some form of ERP (Enterprise Resource Planning) system, it just may be that one or more components are manual or disjointed. An effective ERP system provides greater team efficiency, continuity of information, enhanced visibility into the business and data security. More formal systems come in all shapes and sizes, both generic and highly specialized with increasingly cloud-based as well as server-based options. In evaluating a new ERP system, there are several key considerations to take into account:
Do I Truly Need to Make a Change?
• Why is the current system inadequate? Does the system not suffice, or is data not being inputted or used timely or accurately? Is the system the problem, or are communication breakdowns between departments causing issues? Is the system maxed out, or are there opportunities for advanced training?
• Is the ROI there? New ERP systems have an ongoing cost associated with them, but also can involve sizeable 3rd party implementation costs, and time investment of the internal team. Based on these costs, is there enough ROI to make a change now or can you find ways to bridge what you have until human and financial resources are available to execute properly.
What We Have vs. What We Need
• Who are the users? Who should or could be using a system? Systems like this impact multiple people and departments. ERPs rely upon the interaction of human capital and technology. Understanding who needs to use the system, how often, why, and for what are essential to scoping out needs.
• Form an internal implementation team with people from all the key departments in your company. What are their “must haves” in a new system vs. the “nice to haves”. This initial assessment needs to be thorough – a missed important function/output can be very expensive to add down the road.
• What is the desired output of the system? And this can vary across the business. What reports are needed? Can the system provide metrics and dashboards? What about the ease of entry and access to data? How digestible of a form is it in? Too often, we see companies with more data than they know what to do with, or almost none at all. This is an opportunity to decide what output is right for you and your team.
How to Choose
• What is your budget? With the proliferation of cloud-based systems, the cost of ERPs has come down dramatically. For example, many smaller companies are using platforms like Xero with an open API that allows multiple other programs to link together to form an affordable ERP. There are solid options for smaller budgets. More robust ERP’s can involve an investment of well over $100,000. How much can you truly afford to spend? Narrow the list of options based on that.
• Industry Specific vs. Off Shelf – Some industries have very good industry specific software platforms. That can be a big advantage, but also limiting.
• Do thorough demos – Any quality system has demos available to dive deeper into system capabilities and understand implications and how features can be used for your specific business. This is often one of the key go/no go decision points.
We have seen ERPs with well-organized evaluation and implementation processes provide a return on investment for companies many times over. Unfortunately, we have also seen systems that were not well thought out, leading to frustration, lost productivity and in more than one case, situations where six figure investments were scrapped in favor of starting over. Thoughtful planning can be the difference.
Part II (link here)