Enterprise resource planning software aren’t created equal. Case in point, how do you rank Salesforce, SAP, Oracle and Microsoft?
Enterprise resource software are as individual as the businesses using them.
As a small business owner, you probably have heard a lot about ERP, but may be unsure what it is and what it does for a business.
Enterprise resource planning or ERP is the cost-effective way to manage your business operations. Sometimes we spend too many hours in the office and lack the time to care for ourselves and our family. As a result, we feel tired and stressed and wonder if it is even worth going to work.
Where does it end? Mr. Alpha slides in the door, sees the software, and says, I think I can trust you, Mr. Beta, but not Mr. Gamma.
Top Five Mistakes To Avoid When Choosing ERP Software
1. Not Knowing What You Really Need in ERP Software
Before diving right into choosing a solution, take the time to understand what you really need. To begin with, determine whether you need fully integrated ERP software or best-of-breed software. This will often depend on the issues you are trying to solve or the opportunities you are trying to capture, as well as the size and structure of your company. For example, if you’re a small to mid-sized company with limited budget and limited resources, then you’ll probably want to consider a fully integrated ERP software system. This type of system will allow you to streamline your processes and achieve improved productivity at a lower cost and with fewer resources.
Take into consideration that, in order to efficiently implement and use best-of-breed solutions, you will need extensive knowledge of both the business rules and the database constructs within each application of your business processes. This is due to the fact that all of your individual systems need to run in unison in order for your data to be consistent and accurate throughout your operations. If you’re not prepared to deal with the sometimes overwhelming task of creating your own interface between disparate systems, then fully integrated ERP software is your better choice.
Unless your needs are very narrow, expect to experience a significantly lower total cost of ownership (TCO) with fully integrated ERP software in comparison to best-of-breed solutions. Using separate best-of-breed solutions can often drastically increase your overall license and implementation costs, not to mention reduce overall operating efficiencies. With a best-of-breed solution, you may not be protected from version obsolescence, which can result in additional investment later on. Additionally, support of your operations can be hindered as you manage problems across multiple vendors.
The best fit for many small to mid-sized companies is often fully integrated ERP software. However, the solution needs to fit most, if not all, of your key business requirements – no small task for a single application. To overcome this obstacle, choose a partner with industry specialization who can help to ensure that your most critical business requirements are met.
2. Not Recognizing the Uniqueness of Your Business
Every industry is unique. Lack of industry specialized capabilities within your software is a common cause of failure for an ERP software implementation. Often “horizontal” solutions that serve many different industries need to be significantly customized in order to fit your business model and to integrate with your other internal systems. Take caution that while initial license and maintenance fees can sometimes appear lower, these generic solutions can often result in increased costs due to extensive customization requirements, upgrades, ongoing maintenance, and longer system deployment timeframes; reducing and delaying your overall return on investment.
Avoid choosing software that limits your capabilities and your company’s growth. Your software should enhance your business, not hinder it. The software you choose should have the specialized capabilities necessary to address all of the business requirements of your company and your industry, not just some of them. For an industry tailored solution, find a provider who offers specialized software for your industry and therefore will be able to provide the most beneficial solution for your business needs. Your solution should be specifically tailored for your business and industry and your provider should know your industry as well as you do; enabling them to make recommendations. By choosing an ERP software solution that is specialized for your industry, you will be able to get a specific targeted solution to meet your unique business needs. The right solution will deliver improved efficiencies, reduced costs, enhanced revenues and profitability, and faster ROI.
3. Not Choosing the Most Qualified ERP Software Vendor
When shopping for ERP software, choosing the right vendor can make the difference between a successful implementation and ending up with one that falls short on satisfying your business needs. One of the most common mistakes in vendor selection is choosing an ERP software vendor who doesn’t know your business. Decision makers are often under the misconception that choosing software by a “big name” provider will equal a big return on investment (ROI). However, most big name providers are often too big to offer specialized industry knowledge for any specific industry. Avoid putting yourself in a situation where you have to teach your ERP software partner your business. Choosing a partner who already has an in-depth understanding of your industry will help you achieve more rapid deployment, be more cost effective, and be more efficient with the use of your ERP software solution. In many cases, resellers will have to learn your business and then retrofit a customized solution to meet your specific needs, which ultimately costs you more money. Find a partner who is using best practices, not just generic business process flows, in your industry.
Avoid vendors who are not in sync with where your industry is going. Instead, look for a partner who both knows your industry and knows where your industry’s future is headed. Your vendor should be very knowledgeable with new industry standards and incorporate related processes into their standard ERP software solution to handle these requirements, such as RFID. This will save you money by eliminating the need to customize your solution to fit standardized industry requirements. Additionally, the vendor you choose for your ERP software should ensure that solution licenses are all encompassing for any unique and necessary modules, such as EDI, RFID, and chargeback management.
Plan on having a long-term relationship with your ERP software partner. Be leery of vendors who want to implement your system and run; you want the vendor to grow with you so you can continue to grow your business. Responsive product support, ongoing product releases, and user forums such as on-line bulletin boards and user conferences are all essential business tools and services that your vendor should offer if they are looking to build lasting relationships.
4. Not Giving ERP Software Implementation the Attention It Needs
A common problem during ERP software implementation is the lack of a committed Project Manager on the customer’s part. The majority of successful implementations occur when the customer’s Project Manager dedicates 80-90% of their time to the implementation project. The role of the Project Manager is to streamline the process and keep things in check. When you’re investing your money and time into implementing a system that will enhance the performance of your business, isn’t it worth dedicating someone to making sure it’s done right?
Lack of commitment and support from the top is another area where companies fall short. The President or other top executive of the company should be involved. This does not by any means refer to them leading the day-to-day activities of the project, that’s what the dedicated Project Manager is for, but more so to their being involved in status meetings. A solid commitment from the top will flow through the organization to make implementation of your new ERP software a success.
Not documenting your business process flows when implementation is complete is another common ERP software mistake. The most successful transition can be achieved when there is written documentation for each department. This enables the company to continue to conduct business at its maximum potential during transition and learning. And, in the event that an employee leaves or changes positions within the company, the next person stepping into the position can learn the job more quickly and do the job more efficiently if there’s documentation at hand that serves as instant training.
Don’t assume that your employees’ training needs have been met by combining the implementation with the initial training provided by the vendor. This is another common misconception that can lead to failure of your new ERP software solution. It is imperative that employees continue to receive training after the software has been implemented, even with documentation that helps support employee training. Once the new system is live, users should have continued follow up training, whether it be every 4, 6, or even 8 months. This will enable your company to identify any implementation areas that may not have been needed at the time of deployment, but which have become necessary later on.
Proper and thorough testing is another common oversight when implementing ERP software. It is necessary to perform “a day in the life” test where users from each department of your organization do their job using real data. Walking through the complete process with a pseudo-real order while still in testing will allow you and your users to identify any errors or misunderstanding in the process flows before live deployment. In many cases, problems will be discovered during this testing process that may require some minor modifications before going live. In order to minimize errors after deployment and maximize the potential of your new ERP software, it is crucial to test all of your data, procedures and processes before launch.
5. Not Investing in ERP Software for the Long-Term
When choosing ERP software, be realistic about your expectations and perceptions of cost – you’re making an investment to improve or enhance your business. So, while hard dollars spent are important, the key is choosing the right ERP software and the right partner who will provide you with a fast and effective implementation, high ROI, and low TCO after implementation. While human nature tends to lead us down the path to the bargain deal – we often do this at home, not just at work – with ERP software, what appears to be the lowest cost solution often results in the greatest long term cost. When securing proposals, if you find a vendor’s quote to be far below that of other vendors you are considering, chances are the deal is too good to be true.
Use your intuition and good business judgment when comparing provider costs. Look for applications that support your ability to achieve your company’s primary strategic goals. Work within your budget, but make sure you know what you’re getting up front and anticipate with your provider when you can expect to start seeing a return on your investment. Hasty decisions in favor of the lowest cost ERP software provider or solution may leave you plagued later with hidden costs, and delay or eliminate any ROI for your business.
What are the chances of finding a ready made solution for your electronic records management and business processes? But that’s not the case since ERP is a customized software.
Want to go beyond software and customize ERP for your business processes.
As Customized ERP experts at Cutting Edge Infotech, we build Enterprise Resource Planning (ERP) systems to solve our clients’ complex business problems.
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