Posted by George Delp
Why do people buy new Enterprise Resource Planning (ERP) software systems? Not for fun, that’s for sure.
Implementing a new ERP is a lot of work and usually costs quite a bit of money. So why do companies do it then? Here's a list of the top five reasons people buy new ERP implementations that I've seen over the past few years. This list is somewhat anecdotal but it is based on real life experience with many different companies, large and small.
Why do people buy new Enterprise Resource Planning (ERP) software systems? Not for fun, that’s for sure.
Implementing a new ERP is a lot of work and usually costs quite a bit of money. So why do companies do it then? Here's a list of the top five reasons people buy new ERP implementations that I've seen over the past few years. This list is somewhat anecdotal but it is based on real life experience with many different companies, large and small.
1. Integration
Easily tied for the number one spot with reporting, integration complaints are much too common. Let’s face it – unless you are a distributor or a manufacturer you are going to have a hard time finding an “all in one” solution. Insurance, hospitality, trucking, we could go on, but the point is there are many industries that require some type of specialized operational software. If you spend a lot of time manually entering data from system to system, you are at risk for data entry errors and are probably hurting the productivity of your staff.
Most modern ERP software has both batch oriented import tools and some sort of application programming interface (API). Batch imports are typically manually triggered or scheduled while APIs are used for automated program to program integrations.
Aside from integrating operational systems, we often get requests to integrate Customer Relationship Management (CRM) solutions with ERP software. Both Microsoft CRM and SalesForce.com are wildly popular and many integration options exist for both.
A third and growing area is app integration. CRM, time & expense entry and financial reporting are the most common types of apps we’ve seen so far. A lot of vendors offer free apps that often get overlooked during the implementation process. Take Microsoft Dynamics Business Analyzer for example. Time and time again, Microsoft Dynamics customers don’t even know this exists.
Most modern ERP software has both batch oriented import tools and some sort of application programming interface (API). Batch imports are typically manually triggered or scheduled while APIs are used for automated program to program integrations.
Aside from integrating operational systems, we often get requests to integrate Customer Relationship Management (CRM) solutions with ERP software. Both Microsoft CRM and SalesForce.com are wildly popular and many integration options exist for both.
A third and growing area is app integration. CRM, time & expense entry and financial reporting are the most common types of apps we’ve seen so far. A lot of vendors offer free apps that often get overlooked during the implementation process. Take Microsoft Dynamics Business Analyzer for example. Time and time again, Microsoft Dynamics customers don’t even know this exists.
2. Reporting
The other biggie is reporting. This one often comes from multi-site/multi-company organizations that are still using solutions like QuickBooks. This means they are doing their divisional reporting and consolidations manually in Excel. Once again, a lot of manual work ripe with the risk of errors and a big productivity killer.
We also get a lot of reporting complaints from companies running older, non-windows based systems, which are sometimes called “green screens”. The problem here is that the green screen environment does not interact well with your Windows desktop. Running queries, dumping data to Excel, even printing in a presentation quality format, can all be very challenging. Don’t even think about having a drill-down capable dashboard in such an environment.
We also get a lot of reporting complaints from companies running older, non-windows based systems, which are sometimes called “green screens”. The problem here is that the green screen environment does not interact well with your Windows desktop. Running queries, dumping data to Excel, even printing in a presentation quality format, can all be very challenging. Don’t even think about having a drill-down capable dashboard in such an environment.
3. Platform
Platform issues arise when a company has multiple environments in place and finds it hard to make everything work well together. If you think of integration and reporting as symptoms, platform issues are often the actual disease.
There are a lot of legacy platforms that are still widely used today. As recent as the late 90s, the PC platform simply was not powerful enough to support operational systems for transaction intensive businesses. Mainframes, AS/400s (and their predecessors) and Unix/Linux/AIX machines were the answer back then and some companies are still running those same systems. Add in older PC based databases and you can easily wind up with a very hard to support mess.
The open source crowd may not agree, but I feel if you are running a system to support your business, you should have a database that has proper support. To me this means either Microsoft SQL Server or Oracle. Our company, InterDyn Artis, offers solutions based on both platforms.
Platform standardization can save on licensing costs, support costs and allows for easier connectivity between systems.
There are a lot of legacy platforms that are still widely used today. As recent as the late 90s, the PC platform simply was not powerful enough to support operational systems for transaction intensive businesses. Mainframes, AS/400s (and their predecessors) and Unix/Linux/AIX machines were the answer back then and some companies are still running those same systems. Add in older PC based databases and you can easily wind up with a very hard to support mess.
The open source crowd may not agree, but I feel if you are running a system to support your business, you should have a database that has proper support. To me this means either Microsoft SQL Server or Oracle. Our company, InterDyn Artis, offers solutions based on both platforms.
Platform standardization can save on licensing costs, support costs and allows for easier connectivity between systems.
4. Cloud
We generally see two types of companies that want to move to the cloud: startups and companies where managing their information technology department has become a burden.
You can find just about everything you need to run your company as a software as a service (SaaS) offering these days. ERP, CRM, Microsoft Office, Email, storage, you name it, it is available. For startups that need to focus on their core business this makes tremendous sense.
On the other end of the spectrum are companies with on premise hardware that have simply grown tired of the hardware upgrade rat race. You don’t have to buy pure SaaS products to move to the cloud. You can keep your existing systems and move them to the cloud with offerings like Microsoft Azure and Amazon Rackspace.
You can find just about everything you need to run your company as a software as a service (SaaS) offering these days. ERP, CRM, Microsoft Office, Email, storage, you name it, it is available. For startups that need to focus on their core business this makes tremendous sense.
On the other end of the spectrum are companies with on premise hardware that have simply grown tired of the hardware upgrade rat race. You don’t have to buy pure SaaS products to move to the cloud. You can keep your existing systems and move them to the cloud with offerings like Microsoft Azure and Amazon Rackspace.
5. Obsolescence
Unfortunately my experience here is wrought with horrible stories of companies continuing to use software that is no longer supported and hardware for which you simply cannot buy replacement parts. On top of that I would wager that at LEAST 50 percent of companies that do backups DO NOT test the ability to actually restore said backups. Put all of this together and you have a recipe for disaster.
As long as everything is currently running fine some companies simply assume that if something happens they will deal with it later. Well, stuff does happen and it can result in downtime of your operational systems. That means not taking orders or taking orders on paper pads. not being able to find inventory in your warehouse… you get the idea.
However, other companies realize that this is a risk and seek out new solutions before their business is interrupted.
As long as everything is currently running fine some companies simply assume that if something happens they will deal with it later. Well, stuff does happen and it can result in downtime of your operational systems. That means not taking orders or taking orders on paper pads. not being able to find inventory in your warehouse… you get the idea.
However, other companies realize that this is a risk and seek out new solutions before their business is interrupted.
6. ROI
Yes, I said top five and the preceding five reasons are in fact why people usually call us. However, ROI usually rears its head near the end when it is check signing time.
It is important to develop a solid ROI in order to justify a software investment. If you have $200,000 to spend, will it be better for your business to replace the ERP software or buy a new manufacturing machine?
Developing a solid software ROI can be tricky and often requires projections of anticipated labor savings and/or increased sales volumes. Nevertheless it is possible to do and when done right can get a long stalled project moving forward again.
I suggest having a workshop with all of the key management team members to discuss before-and-after scenarios, then quantify the impact of each change. Really, the trick to getting a proper ROI is having someone facilitate the process. We have people well versed in this process. If you want to learn more, reach out to us.
It is important to develop a solid ROI in order to justify a software investment. If you have $200,000 to spend, will it be better for your business to replace the ERP software or buy a new manufacturing machine?
Developing a solid software ROI can be tricky and often requires projections of anticipated labor savings and/or increased sales volumes. Nevertheless it is possible to do and when done right can get a long stalled project moving forward again.
I suggest having a workshop with all of the key management team members to discuss before-and-after scenarios, then quantify the impact of each change. Really, the trick to getting a proper ROI is having someone facilitate the process. We have people well versed in this process. If you want to learn more, reach out to us.
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