Since we are known in ERP circles, it is a topic that comes up in conversation frequently. Recently, at an Executive Forums meeting, one member talked about a situation he knew about where the company lost half its sales after a failed ERP implementation, and they ended up reverting back to their old system. Can you imagine? The unfortunate thing is this is not uncommon although it is a more dramatic example.
Yet ERP isn’t bad as it is essential in achieving scalable, profitable growth although sometimes it can seem bad and have just horrible results. Similarly, no particular ERP system is bad; although some are definitely better for your particular situation and growth plans than others. We cringe when we hear about the plans of potential clients who were sold ‘ice to eskimos’ by ERP suppliers. The challenge is that an ERP system can sound like a significant financial investment and so clients are tempted to not add cost by hiring an expert to assist with the process. However, since it is as significant as it is, when it goes bad, it extrapolates into many times the initial investment with unhappy customers, added cost and more. Thus, it is no wonder clients stick with a ‘dead ERP’ longer than they should in many cases, which limits their ability to grow – and certainly achieve scalable, profitable growth.
All hope is not lost! Here are a few items to consider when evaluating ERP and whether you should think about upgrading:
- Can you support your growth plans 2 years out? – ERP isn’t something you slam in place unless you want to experience the horrific stories. Start 2 years out. If you will be limiting your ability to grow profitably, it is time. It could be that you are on a system like QuickBooks, or you expect M&A activity or a potential sale, or you have a highly customized system or one that isn’t supportable 2 years down-the-line.
- Forget about bells & whistles (cool items ERP suppliers show you) and evaluate a short list of critical success factors for your business – This is #1 to success in evaluating ERP systems. These critical success factors are items relevant to your profit drivers, maximizing the customer experience, unique to your industry/ company etc. Once you identify them, tie them to functionality.
- Consider your partners carefully – Although selecting the best system for your situation is cornerstone to getting the appropriate foundation on your house, if you have the wrong partner, you might as well hang up your hat. The perfect software with the lowest cost proposal from a weaker partner will quickly surpass your highest cost proposal with a so-so partner and double it from there – at a minimum. Selecting ERP partners is quite similar to selecting any good partner – be aware you’ll be happily collaborating or stuck with them for quite a long time.
All businesses will go through ERP upgrades at least once or twice every 10-20 years (if done well, more if not). Why not pay attention to how to make one of the most significant investments pay off?