Selecting and implementing an ERP system: tips for success

As companies grow and expand both internally and geographically, management is increasingly faced with decisions regarding how to gain control of their internal IT systems in order to cope with growth. A business is only as efficient and effective as the systems used to manage it, but selecting and deploying an ERP system can be daunting in terms of costs to acquire, conversion, and implementation, as well as the dedicated resource allocations needed to make this happen. Organizations often enter the ERP selection phase without the proper tools and understanding and can be misled by vendor promises and hype, which all too often leads to failure on the vendor’s side to deliver on its promises.

How can businesses tell when it’s time to make the decision to move to a modern fully integrated enterprise resource planning (ERP) system? How can they know which system will offer greater overall corporate visibility and facilitate informed decision-making?

WHY AND WHEN SHOULD I CONSIDER A NEW ERP SOLUTION?

Most of our clients come to Reflex with one goal in mind: they’re looking to modernize their business with an ERP solution that matches their business requirements and objectives. Their decision to move to the next generation Reflex ERP often happens because:

•  – Their current systems are not providing the information needed by the management team, who are forced to address issues with offline point solutions or a myriad of spreadsheets not connected to the main corporate systems.
•  – They are dealing with multiple systems from different suppliers and vendors. These systems are difficult to manage and although enhancements in one system may be available, they do not work with the other systems being used.
•  – The overall corporate goals and objectives are not being met by the current IT systems.
•  – They do not have a common global corporate information database. They also lack the fiscal and auditable control that is needed to ensure all parts of the business are operating efficiently and within the controls established for proper reporting and regulatory compliance.
•  – They identify a number of siloed systems and numerous information data repositories and have no way of sharing this information.
•  – They are not getting the information out of their main financial reporting system that would allow them to quickly address areas of concern and make the necessary adjustments.
•  – They want to have more effective use of their field personnel and sales teams but these employees have limited access to up-to-date information.
•  – They are trying to position their company for growth, as they have proven products and services to expand, but don’t have the necessary systems in place for support and monitoring.
•  – They complain that the level of customization applied to their current systems is costly, is no longer supported, and locks them into a position that is difficult to solve.

HOW DO I APPROACH THIS MAJOR DECISION AND AVOID THE COMMON PITFALLS?

While the aforementioned are but a few of the common issues consistently heard from frustrated companies, there is also a reluctance to take the plunge into a new ERP solution based on the number of horror stories regarding failed or less than successful ERP implementations. Potential buyers of ERP software should be aware that the majority of products being marketed from mainstream vendors, while advertised as “new and improved,” primarily feature a product face-lift on dated software that can be 15, 20, or even 25 years old. The problem with these legacy systems comes when the required functionality cannot be achieved without considerable and costly customization. It also limits access to upgrades and new product releases to keep the software current.

According to Panorama Consulting Solutions’ 2016 ERP Report, the reasons for many failed implementation projects include such things as: expanding scope, unanticipated technical/organizational issues, underestimating internal project staffing, additional technical requirements, unrealistic budgets, training issues, and consulting fees rising as project schedules slip. In order to ensure that a project will deliver the desired results while staying on target, companies need to be clear on what measures should be taken to hold all parties accountable.

Most of the current mainstream ERP vendors, such as SAP, Oracle, Microsoft Dynamics, and SAGE, rely on resellers to drive sales of their base software offerings. Resellers make their profit in professional services associated with the installation, including: project management, business analysis, organizational change management, data cleansing and conversion, dealing with out-of-scope items, and customization and interfacing with other solutions.

Modern ERP systems that offer extensive configuration capabilities differ greatly from older systems that require heavy customization. Extensive customization of the software is often where the project goes off stream and where costs to the client start to rise above budget.

WHAT IS THE RIGHT WAY TO ENSURE SUCCESS?

As businesses grow and change, they need a system that is adaptable. From expansion to new locations, addressing new regulations, or introducing new product lines, a company’s ERP system should handle business growth seamlessly.

There are several ways to help avoid the pitfalls of implementing the wrong ERP solution and ensuring that company goals and objectives are met.

•  – Ensure that you have the necessary internal skills to identify goals and objectives and define current and desired business states. Also ensure you have the internal staffing available to manage and control projects of this magnitude. If not, engaging knowledgeable industry consultants is highly recommended.
•  – Look into supplementing your organization with an unbiased consulting company that can assist with the requirements gathering and process re-engineering. While it can be difficult to find consulting groups that are not resellers for a specific company, there are several of them out there. (If you’re looking for software in Canada or the U.S., feel free to contact us for advice on unbiased consulting companies by messaging or commenting below).
•  – Ensure that all requirements and scoping documents are clearly understood by the vendor.
•  – Hold the selected IT business partner accountable to ensure budget limitations are maintained.
•  – Contact the vendor references to discuss past experience with conversion and implementation, as well as post-implementation service and support.
•  – Avoid agreeing to professional services without an estimate. Establish a rate for time and materials. Based on the vendor’s experience, they should have a reasonable idea of what these will be if the project has a clear mandate and definition of requirements and deliverables.
•  – The goals and objectives that are established at the outset of this undertaking are critical and should be referred back to during and after the implementation process. If there is no clear and defined goal, the process of selecting a product and a vendor will be futile.
•  – Establish clear terms for payment that are based on pre-defined goals and objectives that are signed off by both parties before payment is made.
•  – Your chosen ERP partner should offer options both for deployment (cloud or in-house), as well as a traditional license, subscription, or a hybrid pricing model that offers options on ownership.

WHAT CAN YOU EXPECT IF YOU FOLLOW THESE GUIDELINES?

One of the most significant benefits of selecting the right ERP solution is the reduced operating costs that result from having a common database. Moving from disparate systems, manual offline procedures, and a myriad of spreadsheets means that fewer personnel are required to handle tasks involving the compilation, organization, and processing of business data.

Modern ERP systems with fully integrated operational components not only present business information in a more useful and responsive form, they also incorporate integrated business intelligence functionality, along with key performance indicators and predictive analytics. This type of functionality should be a native part of the vendor’s ERP offering, rather than requiring data warehouses and business intelligence tools as add-ons.

Best practices and workflow automation are the cornerstone of modern ERP systems; unlike older legacy systems, this functionality has a significant impact on overall corporate efficiencies and ensures everyone is following a pre-defined business process with full monitoring.

If companies plan the project ahead of time and ensure they have the right team, they can expect to see an increase in overall corporate efficiencies as a result of the ERP software. Efficiency makes it easier to pursue expansions or business growth, allowing companies to plan, track, and control resources and expenditures in a controlled fashion. Likewise, more efficient operations and business processes will show a marked improvement in customer relations, which is generally a significant contributor to corporate growth.

This article was originally posted on LinkedIn Pulse on October 27, 2016.