It’s time to replace your ERP… or is it? Updating for the wrong reasons.
A while back, I asked a CFO how he reported to the street certain numbers within a very small margin. He replied with “If I don’t know how we are going to perform, it will make the investors uneasy, it could be as bad as going up or down in our forecast.”
Growing and controlling a business is every CFO’s job. Knowing where the business is heading in the short and long term is a top priority.
This means that creating the right infrastructure is necessary for success. From IT to information systems, some consider the ERP as the “circulatory system” of any company – if any step in the company process gets jammed, there is a big repercussion.
I have had the opportunity to hear some reasons for replacing an ERP:
- Intermittent system errors causing delays
- Inconsistent reports, reports not matching up to other reports
- Data is not accurate, addresses are wrong, inventory categories not right
- Slow system causing unneeded delays
- Outdated hardware
Just so you know, none of these are worth even considering moving to another system.
Before you make your decision to switch:
- Hire an ERP functional consultant with expertise in your current ERP for a day or two to discuss the pros and cons of switching, and if the problems could be resolved with your current software (Important: avoid salespeople sponsored by a specific product).
- Check similar companies to yours that are using your current ERP, contact their CFO, and discuss their experiences and how big of a priority is for them to update the ERP.
- Check similar companies to yours that are using a different ERP, contact their CFO, and discuss their experiences and how big of a priority is for them to update the ERP.
Then, if you make your decision to change:
- FYI: Every software vendor will tell you their software is a perfect fit.
- Cloud or No Cloud: You need the functionality in an ERP, the cloud should not be a major influence in your selection and decision; cloud or no cloud is a convenience not a compelling reason for most.
- Always include an internal and possibly an external auditor- they are going to make extra recommendations. Be sure to push back on audit recommendations that do not make sense to your business. You need them to fit well in this new system (segregation, controls, audit, recovery, etc.).
- The biggest failure at the time of going live with a new ERP is reporting.
- Check similar companies with the ERP you selected and contact the CFO and the IT Director. You need both point of views – how many resources are needed to support the new system, etc. If possible, request a visit to this company to help you understand how to plan and control the project.
- The most important advice before starting a new ERP: Define what data goes into the new system. If you don’t, you will notice the impact it has on your transition.
- How to budget your ERP replacement: Easy. Your quote times 3. You will most likely need more resources going forward, and will not have planned phase 2, 3, and 4.
- Get an internal project management team (aside from the implementation partner). It will help you control costs.
- Get backfill personnel for ALL the users that should be in the project instead of running the daily business- they know your business better than the implementation partner.
- Retool-the-shop: Probably the roughest part of the switch, but it’s likely that not everybody will be able to adapt to the new system. Be prepared to “retool-the-shop.”
- When you go live, you must decide if the implementation partner remains for continuity, assistance, and training for a period of time.
Be prepared for the surprises. Here are some experiences behind changing to a new ERP:
- A chocolate company failed to deliver $100 million in sales after the ERP was implemented
- A company spent tens of millions to upgrade to a major ERP and only G/L.
- Changing from Dynamics GP to SAP, a $4 million quote turned into a final bill of $14 million, 3 delays plus double the internal staff originally recommended by the implementation company and reporting took an extra 3 months.
- From Dynamics GP to AX – the quote was doubled but went live with less than what was offered in the initial proposal. The implementation partner continued on-site for another 6 months with 8 consultants.
So, should you go to a new ERP? The intention of the blog is not to stop you from your ERP initiative – on the contrary, this is just to point to some tasks that sometimes get overlooked. There is always great new technology out there and you should have an educated advantage over your competitors.
The questions that should be asked are, “Do I need a new ERP? does my company require processes not currently covered in the current system or do I need technology that enhances my position in the market? Is this new technology/feature supported with the current ERP?” When you can answer these questions, then making the decision will be easy.
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