ERP Selection Tips for Mid-Market Companies

Choosing an ERP system is one of the most strategic decisions for mid-market companies and their CEOs face a significant dilemma. Should I choose a system for today, or for how my company may look in 5 to 10 years? Should I go for a full system or start small with a limited number of functions? Should I try to cover 100% of my needs or only aim for a fraction of them? Do I have to cover all my requirements with one single system? Should I go for a comprehensive, full function system requiring a 12-18 month implementation, or for a simpler system with fewer functions that could be implemented in weeks? What balance will get me the best return on my investment?

Rather than continuing to come up with relevant questions (you could go on and on), we suggest reversing the thought process. Rather than trying to solve all your outstanding issues with a new system (usually it would replace something already used), think about how to improve what you already have. The principle behind this approach is that sometimes in terms of ERP, in aiming for the best, we ignore the ‘better’ solution.

The value of an ERP system lies in its integration across a company and the data gathered when using it. So why not start with a modern solution, well integrated and covering 80-85% of your functional needs? We all know that the last mile is by far the most costly and surely the one that has the most problematic ROI. So why look for perfection when 85% would help you make a giant step towards efficiency? Go with as standard a system as you can to start with. Implementation will be very significantly reduced, both in terms of cost (three to five times cheaper) and duration (up to 10 times faster, in a matter of weeks). This properly integrated system will immediately make your processes more fluid, improve cross- functional collaboration, reduce operating costs and most importantly, help you understand what you really need for the next step.

One of the biggest mistakes mid-market companies make when implementing ERP systems is attempting to replicate existing processes within a new system. This implies significant tweaks in the ERP through customization. On top of making your life miserable for future upgrades, this also changes the way your solution behaves and you won’t benefit from all the best practice that has led to the development of the built-in processes. Performance can also be dramatically reduced and future evolutions will be more difficult to leverage. Implementing a new ERP system is a great opportunity to re-think your processes.

Step back and try to honestly define what makes you better and more competitive than your competition (at the end of the day, this is what counts) and you will probably end up with two or perhaps three processes that are really distinctive. At most 5% of your system will recognize this difference, not 50%!

So go for standard solutions and then, after a period of usage (say 9 to 12 months), make informed decisions on where to put your investment to differentiate yourself in the market.

When that’s done, make sure you have as many people as possible using your ERP system. ERP is not a specialist play, it’s not only for accountants or plant managers. Everyone, one way or another, should use the system starting with you. Why is this so important? Your ERP system will be your decision making tool and based on the collected data you will run reports, analysis, or even simulations. These activities will really bring value if your database truly represents your business. To get there you need to ensure everyone contributes to it, the experienced and the non-technical alike. You can even open your system to those outside of your own organization who also contribute to your business. Your customers, your partners, and your suppliers can definitely enrich your data set, which will help you make better decisions.

Integration is key. Integration means encouraging people in different functions to work together. This will open up a new field of efficiency – collaboration. ERP will help you organize the social nature of your business and support a better, more natural and organized way of collaborating for greater efficiency, better problem solving, but also to promote innovation.

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This entry was posted in April 2013, Enterprise Resource Planning (ERP), Newsletter. Bookmark the permalink.

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