Enterprise resource planning (ERP) is the talk of the accounting, finance, business and technology worlds. Everyone is doing it , integrating their core business processes with one ERP software system. ERP software is designed to bring together the key accounting, business and management functions of a company and provide a high-level overview of what is going on within a company.
Imagine a company that has its general ledger information in one database, its inventory information in another and its manufacturing information in yet a third. The company is hard-pressed to integrate its critical accounting information with other key business areas.
Before ERP, chief financial officers would have to manually integrate and interpret data and chief information officers would have to develop complex, expensive links between computer systems to allow them to “talk to each other.”
Now, with the purchase of ERP software, accounting and other senior managers can focus less on figuring out what is going on and focus more on fixing what is going wrong or embellishing what is going right. ERP also allows the accounting and finance gurus to become more strategic in their long-term planning and projections for the company.
But not all ERP software was created equal. Many different types of ERP software are on the market. Companies looking to purchase and implement ERP software should take the time to perform proper planning and due diligence before purchasing. Being smart up-front will avoid mistakes many companies have made when selecting an ERP system.
– Bigger Isn’t
Typically when ERP software is discussed, a few names are mentioned time and again: SAP, Oracle, PeopleSoft. Granted these products are high quality and the companies that have developed them are leaders in the ERP field. But many other solutions are available and those looking to purchase ERP software shouldn’t assume that the biggest is always the best suited for their unique needs.
This is especially true in San Diego where the vast majority of companies are small and medium sized. Software such as Platinum, Great Plains and J.D. Edwards, while not as famous as the solutions geared toward larger companies, could be better suited for smaller and growing businesses.
One major drawback of the large software programs is the amount of people that are required for installation and maintenance. Accounting and other specialized skills are needed to utilize the programs properly and effectively. ERP solutions that require less skills and people power are available and probably more closely fit the requirements of smaller businesses.
Taking the time to evaluate your needs and analyzing the various products on the market is key to selecting ERP software that is right for you. CFOs at some of the best and brightest corporations in the world can tell horror stories about not properly determining needs and/or not properly understanding the strengths and limitations of the ERP software they are purchasing. Lack of proper planning can lead to expensive and time-consuming mistakes.
– Consultants Can
Be ERP Guides
Companies should begin by hiring a consultant who can help them to understand how ERP can make their company more effective.
Consultants can assist companies in conducting a thorough analysis of their internal needs and requirements and establishing priorities. A qualified consultant can also provide a realistic overview of the many ERP challenges and opportunities. A realistic approach is important , ERP software can be the cure for most problems, but not necessarily all problems.
Once a company has determined its needs and priorities, a consultant can assist in the evaluation and purchasing process. ERP software salespeople are sharks. They can quickly grab you and won’t let go. An experienced consultant knows the benefits, drawbacks and unique functions of the various software products on the market. Some discriminating features of ERP programs are obvious. Unfortunately, others are not. Many companies have purchased programs only to discover that critical business functions cannot be accomplished via the software.
One large retailer reportedly spent many months and significant dollars on an ERP rollout only to determine that the software would not allow an inventory item to be listed at more than one price. It was critical that the company has the ability to assign two prices to each item , one for domestic sales and one for international.
Experts agree that price should not be the lone factor when purchasing ERP software. However, the price you pay for ERP should correlate with the size of your business. For example, corporations with $25 million or more in annual revenue can easily spend $100,000 or more on ERP software alone. Thousands of hours will also be spent on implementation and maintenance. Hourly rates for vendors to assist in the various aspects of your rollout range from $100 to $300 per hour, depending upon the complexity of the tasks.
Your consultant can help you establish a price that is right for you and can negotiate with the software company and others during the bidding process.
The ERP process is difficult not only in the planning and selecting phases, but also in implementing the software and getting it to work at its maximum potential.
Ford is the director of operations for the San Diego office of Resources Connection. With offices throughout the U.S. and internationally, Resources provides businesses with high-level project professionals in the areas of accounting, finance, information technology and human resources.