Over the past decade, businesses generated an unprecedented quantity of patents, products, and profit models. This trend of consistent expansion is accelerating—2015 being one of the most innovative years in history. In order to thrive in this age of explosive growth and competition, businesses must maximize resource efficiency. And, to do this, they must have tools that are in line with the pace of the 21st-century marketplace.
Arguably the most important of these tools is an Enterprise Resource Planning (ERP) software package. Industry leaders consider ERP software the cornerstone of their company’s organizational and operational efficiency. Yet, some business owners and executives consider ERP software cost-prohibitive due to the oftentimes shocking cost of adopting and implementing an ERP package. However, businesses can avoid many unnecessary costs, and significantly reduce their bottom line, by following a series of steps.
We detailed these steps in a White Paper and broke it down in a series of articles. In the third article of this guide, we will detail why companies should aim to change the process, not the program, and leave infrastructure management to the experts.
• Article 1 (Chapter 1): ERP Software Selection: Where Should I Start?
• Article 2 (Chapter 2): How to Create A Winning ERP Implementation Team
• Article 3 (Chapter 3-4): Do I Need to Customize my ERP?
• Article 4 (Chapter 5): How Can I Save Money on ERP Training?
• Article 5 (Chapter 6): How To Make Sure You Will Not Miss Your ERP Go-Live Date
• Article 6 (Chapter 7): What is the Executive’s Role in an ERP Implementation?
• Article 7 (Chapter 8): What is the Best Approach to ERP Implementation?
Chapter 3-4: Do I Need to Customize my ERP?
Change the process, not the program
ERP systems streamline organizational processes, automate communication across organizational levels, increase operational efficiency, increase transparency, forecast cost and profit projections, and optimize resources. All of these functions provide value to the company, and will inevitably make standard operating procedure less resource intensive. The residual resource (i.e. cost savings) from the efficiency provided by ERP software can then be used to expand the business, enhance the product, or provide value-added services to customers.
To fully maximize the return on cost savings, companies should re-evaluate their operating procedures after implementation, and establish new practices and procedures to fully accommodate the new software. The majority of companies that realize cost savings on ERP projects are eager to change, in terms of culture, people, and processes. Often times, the fatal ideology and mindset of ‘because we have always done it that way’ leads to a change in the software, rather than the process. Most ERP vendors do not include customizations or program changes in their original proposals. Therefore, any change that involves unforeseen programming will ultimately result in a budget overage.
During the pre-implementation planning stage, when the company defines its business process requirements, a good practice is to come up with a list of ‘must haves’ vs ‘nice to haves’ pertaining to software logic, features, and functionality. Decide up front what the ‘showstoppers’ are for the company’s operational needs. If the company has performed thorough and ample research in this process, any customizations that are absolutely necessary to the project will be shared and negotiated with the ERP provider in the budgeting and negotiating phase.
An indirect risk of customizations during the implementation is that it creates a moving target for both the end users and the consultant/project manager. If this becomes a pattern throughout the project, it is inevitable that the timeline and project scope will be compromised, triggering the need for more man hours and another dip into the budget. If a company has chosen the right partner, their consultant should be able to provide ample workarounds or alternatives utilizing existing functionality in order to deter the need for customizations.
Leave it to the experts
As processes change and innovation increases, companies implementing new ERP systems must devote a portion of their budgets to IT infrastructure. Although some of the hardware must inevitably be kept in house (barcode scanners, label printers, workstations, tablets, etc.), many companies are taking advantage of cloud computing, which can dramatically decrease the cost of hardware, personnel, and infrastructure. In fact, statistics from a 2015 survey show that 90% of companies have moved to the cloud in some capacity.
An ERP, if utilized properly, will generate and require data for every facet of a company’s activity. By housing this data in the cloud, the liability of upkeep, maintenance, virus protection, upgrades, and backups is transferred to the ERP hosting provider. Taking advantage of hosted solutions provided by companies like Rackspace, Amazon, or DigitalOcean will allow the organizations to not only leverage the most innovative technology but also dramatically cut the costs associated with hosting a new ERP software platform. Traditionally, in-house IT departments are responsible for an array of timely duties including database tune-ups, load balancing, backups, virus protections, upgrades, and many other system improvement tasks. Headaches and time that would have been spent babysitting, implementing, and troubleshooting the IT infrastructure can be dedicated to more mission-critical duties that contribute to not only the success of the ERP implementation but the company in general.
In the fourth article of this series, we will discuss training, and how to optimize your team’s time to reduce costs. The fourth article will be out soon, but if you don’t want to wait, you can download the white paper “How to cut costs during your ERP implementation: a step-by-step guide to avoid unnecessary costs” now: Download.