ERP Replacements and Upgrades – Lessons From the Trenches
By David Mustin, Vice President of Strategic Consulting, Marcum Technology
Throughout 2019, we have worked closely with many businesses on strategies to help them upgrade, modify and replace their enterprise resource planning (ERP) solution. Just as no two businesses are alike, ERP solutions come in all shapes, sizes, configurations and functionalities. One thing they do share, however, is the critical role they play in driving organizational outcomes at every level of the business.
In helping our clients think through their ERP challenges and devising strategies to address them, three challenges in particular come up again and again:
- Large upgrade costs. Businesses that don’t regularly upgrade their ERP solutions eventually find themselves in a position where a sizable upgrade is necessary to keep the system running, and the associated cost is unbearable.
- Over-customization. ERP solutions are highly customizable. While that’s beneficial in some respects, it can be detrimental in others. To use an analogy, think of the many ways you can customize and modify a simple laptop computer. By adding software, memory, RAM, enhanced graphics and many other extras, you can make that machine do more of what you want it to do. But when something goes wrong, all those extras make it harder to trace the source of the problem. Likewise, with ERP solutions, over-customization makes the system inherently more complex, so upgrade costs can be higher, and repair bills also can skyrocket when things break.
- Lack of vendor support and technical assistance. Some older ERP solutions are no longer supported by the vendor—and in some cases, the vendor no longer exists. Again, think about that laptop computer. If you’re running Windows 95 on it and that operating system crashes, Microsoft (or pretty much anyone else) can’t help. With an older ERP solution – one that’s five or 10-plus years old – you could find yourself in a similar fix.
ERP solutions are too important to today’s businesses to leave to chance. Well-designed and implemented systems, with full engagement from team members, can give you real-time insight on inventory, order status, production efficiencies; accounts receivable/payable; and much more.
If any of the three challenges above apply to you and your business, it’s time to address them—especially with 2020 just over the horizon. Some things to consider at the outset:
- Choosing the right ERP solution is a more complex undertaking than selecting software such as Microsoft Excel or Intuit QuickBooks. As mentioned, ERP solutions come in all different shapes, sizes, configurations and price points. Is a basic system right for you? Perhaps one with enhanced functionality? Which custom configurations are necessary for your business? These and other considerations must be accounted for at the outset; otherwise, you could be costing your business more in the long run.
- When it comes to ERPs, you should be very comfortable with the vendor that stands behind it. To gain insight on this, ask them:
- How long have they been in business?
- How big is their team (i.e., a few individuals or many)?
- Do they offer local, national or international support?
- What types of training do they offer (e.g., in-person, centralized classroom or web-based)?
- Do they have a sufficient number of customers to enable them to invest in the products long term?
Over time, you’ll be calling on them for assistance, so this relationship should be a strong cultural fit for your organization.
- You’ll need a well-defined implementation plan in advance. As we said in a previous blog on ERP solutions, many organizations seek to implement a plain vanilla system out of the box or highly tailor it to the processes that have developed organically over time. The best method – a hybrid – optimizes processes and tailors the system (minimal to no programming) to those new processes.
- ERP solutions are significant investments, so you should determine up front the best way to fund that investment—and you also need to determine how ROI will be measured. In fact, determining ROI metrics is essential in understanding the functionality of your system and how it should be configured. Many business owners aren’t comfortable making these determinations on their own, so it may be best to work with an experienced outside consultant who has deep knowledge and experience in ERP selection and implementation.
In the end, your ERP system should help you optimize the performance of your business, strengthen existing customer relationships and help build new ones. We hope our recent experiences from the ERP trenches are instructive in helping you avoid unnecessary potholes and smoothing out the path along your journey.
Do you have questions about your ERP or other business advisory issues? Please contact Dave Mustin, MBA, at 440-449-6800 or [email protected].