Choosing the "right ERP"
Part 1 - Cost, Cost, Cost and Effort
The need for business to automate, digitize or even eliminate internal and external processes is probably greater than anytime in the last 10 years. Customers, employees and business partners all want and expect efficient and effective business interactions. ERP systems - integrated software that brings all your business processes together - are the logical answer.
But ERP systems are notoriously expensive and difficult to implement! In many cases, it is often not until long after the project is completed, sometimes years after, that real benefits are realised.
However, a lot has happened with ERP in the last 10-15 years. New products and companies have emerged, big players have disappeared, new technology has opened possibilities like IoT and Open Source has become a contender and source for the Corporate market of "core business solutions" (think Netflix, Spotify and Amazon).
So if the demand is higher than ever before, if the options are greater ....
How do you choose the right ERP system?
Is it really possible to get tangible benefits from the very start?
What should you look for in an implementation partner?
Here are some recommendations and "good practice" guidelines, based on more than 25 years of experience as a buyer, project manager, CIO, victim and developer of ERP systems and Business Change management related to ERP!
This is the first article of a four part series.
FOUR KEY SELECTION CRITERIA
Part 1 - COST, COST, COST and EFFORT
What will it cost me?
Part 2 - EASY, EASY, EASY and FLEXIBLE
Easy to install, easy to use, and easy to adapt
Part 3 - GETTING CONNECTED
Making things work together
Part 4 - VALUE NOW not LATER
Speed up your Return on Investment.
COST, COST, COST and EFFORT
there are 4 cost drivers in every erp implementation
Business rule #1 - buy cheap, sell expensive
Licenses Some of the major ERP suppliers will tell you - "don't select a system based on license cost!".
You will pay licenses every year in advance and for as long as you have the system, probably 8-10 years. So price is important factor.
Remember, licenses fund development. So make sure you are getting lots of it and fast! Not just bug fixes - new functionality, innovation. Ask your potential supplier "whats coming in the next release?" - then check what is actually new and what is an "improvement" or fix?.
Nothing new in the pipeline? What are you paying for?
Open Source offers more new development at lower cost than any proprietary solution on the market today.
In my experience ODOO is probably the best value proposition based on innovation and development per unit of license cost.
With a little help from my friendsExpert resources You will need expert help at various times during the project. Probably three kinds of expertise. Business process experts (including change process), solution experts who know the product inside out, and programmers or technicians.
Value comes first from a lower hourly rates, but also from two other factors.
Turnaround time. Try to assess how quickly they can solve your problem, install a new module or app, deliver a project phase or give a concrete proposal for a business need. A combination of fixed price and pay as you go is usually best.
Freedom to change supplier! Competition keeps suppliers focused on your needs. Make sure you can find other suppliers if you need to.
Open Source partner are almost always winners in the areas of solution and programming "expertise". Try to find one that has people in the team with "real business expertise and experience". The combination with lower your cost and your lead time.
If you really want to put a supplier to the test - ask them how long it will take to provide you with a test system. Then you will have a better insight into their "turnaround time".
Integration is key!
Modifications and interfaces Even the most successful of ERP implementations include modifications and interfaces to other systems, both those inside and outside the company network. Almost all companies rely on one or more specialist application other than ERP for some vital aspect of their business.
Bank interfaces, connections to freight systems, a webshop or website, specialist design or production systems, ECM or quality systems. These specialised applications are vital to many businesses and in turn need to provide and/or get data from the company ERP.
Getting your systems and processes to play together nicely across multiple platforms and applications is going to cost money. This is were a flexible system with open standards and comprehensive and flexible API's will make or break your project.
Doing the heavy lifting yourself
Internal work and resources All too often companies underestimate the internal work that will be required to implement a new ERP.
ERP is not a sort "magic bullet" that solves all process problems. A well chosen ERP solution will give your the tools to automate, streamline and change broken business processes. But to do that effectively companies generally need to
Accept that some process must be changed,
Adapt some processes to get the most out of the system,
Eliminate some processes and work,
Work to standardise master data (customer, supplier product etc).
These activities are difficult and dangerous to outsource. As new system implementations occur only occasionally in most companies there is a significant risk this part of the work and cost is under estimated.
But the good new is this - the work employees do when implementing a new system has in itself many benefits by way of process improvements and tailoring the solution to specific business needs.
Because ODOO is open source and has so many use cases in such a diversity of companies both large and small it is probably the easiest system you will ever implement!
What is an ERP system?
ERP systems bring multiple business process into one single system so that all business functions and processes can share the same data and information.
A single database and system
that supports all your business processes and provides the means to logically link your processes. It is not the only software you need to run your business, but it is the core of all your transactional business process. CAD/CAM systems, production control, recipe calculators, design tools are often reliant on ERP as a source of input or a receiver of digital output.
A real time data system
that manages business transactions that are created and shared by (all) employees as they interact with business processes. Collecting data both automatically (machine input) and manually (human input) an ERP collects, creates, stores and presents relational data allowing humans and machines to react on the basis of that data.
Why do you need one?
IF you spend too much time sorting through papers and different systems, if you replicate information regularly, or see different reports with the same data you probably need an ERP!
Integrates your processes
Modern ERP systems that are properly implemented support (and force) different functions and processes to collaborate. To share common information and to work in a coordinated way. One source of data changes business processes.
Converts information to action
Business processes are fueled by instructions and information. Effective ERP systems structure data, reduce conflicting information, eliminate replication, and identify action points. A good ERP helps employees and managers to decide and act - and identifies potential process conflicts when someone doesn't act!
ERP systems are a cornerstone for process automation and digitalisation.