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Posts Tagged ‘ERP software’

Recently, another reseller (and good friend) who uses a trusted third-party to host about a dozen of their accounting software clients mentioned that most of those clients’ systems were down — for the third time in about as many months, including two in the past couple of weeks.  Down as in, they-can’t-do-business down.

For various technical reasons, none of the clients could access the business management software they rely on to invoice clients, ship product or generally run their business.  For the third time.  The cause of failure differed each time, but really… does that matter?

I’ll tread cautiously here.  We’re not luddites.  Quite the opposite in fact.  After all, we provide sophisticated software systems and custom-tailored business process improvement services to a wide range of small and midsize manufacturers and distributors.  It’s all we do, and we’ve done it for nearly thirty years.  It’s mission critical stuff.  So we understand.

And we too believe that ultimately, hosted solutions ‘in the cloud’ are destined to be the future of most computing.  It will evolve, just like the electrical capabilities of a century ago evolved into the grid we know today.

But then, there’s you.  Our typical client, or prospective client, with a business to run.

When those dozen-plus clients of our friend went down, there was little anyone could do.  And mind you, among a growing array of cloud providers, the one they relied on in this case was a good one, trusted, with experience and lots of other clients.  Still, it happens.

I didn’t press for full details, but I know that some of those clients flat out lost business, could not invoice and/or could not ship.  It was lost business.  Maybe lost customers too, we don’t know.

But we’re all wise to remember a simple fact: the cloud is just some other guy’s computer.  And computers fail.  The fact that you have no idea where that guy’s computer is doesn’t make it any more helpful or secure.  Now, the reason we’ll all migrate there eventually is because multi-point, colocation redundancy with rapid fail-over switching will become commonplace.  Eventually.  (This still won’t solve the problem of giving you cheap software that’s customizable to your requirements – but that’s a subject for a whole other post on the limitations of multi-threading and multi-tenancy.)

But had those servers and software been located at the client’s own site, redundant backup and power generation to a known server in a nearby location (like, just down the hall…) could have prevented this.  Now imagine that you’re a manufacturer, and your shop-floor terminals that drive all your day’s production are now also dependent on that same cloud.  So when you’re down, you not only can’t sell, you can’t make, either.  That’s ‘down’ with an exclamation point.  And a lot of people on your payroll just standing around, waiting.

A 2017 survey of over 300 companies by Colorado’s Panorama Consulting, Inc. tellingly revealed that cloud adoption for business management software actually fell compared to last year, with a decreasing percentage of adopters year over year.

The best advice for those intrepid pioneering customers is the age old adage: caveat emptor.  You know what they used to say about pioneers being the ones up front with arrows in their backs.

Cloud is becoming a very profitable endeavor for its biggest providers.  The deck is stacked in favor of a never-ending stream of revenues to the providers, and the race is on to be the biggest and the best.  Just ask Amazon, Microsoft or Google.

All these companies know that in the long run they will make a lot more money from these recurring revenue streams than they were ever able to make, and sustain, selling software the old fashioned way.

Just remember who’s paying them all those extra revenues.

 

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Last week we shared the findings of Panorama Consulting’s 2016 ERP Report in a post here.

Today we’ll take a quick second look at some of the trends they observed and conclusions they reported in a separate email accompanying their report which they shared recently with us.  We thought some were illuminating, and as ERP implementers, wanted to share them with our audience as well.  Here goes…

Their key data points looked like this:

YEAR COST % COST OVER RUNS DURATION % DURATION OVERRUNS % RECEIVING 50% OR LESS BENEFITS
2015 $3.8M 57% 21.1 Months 57% 46%
2014 $4.5M 55% 14.3 Months 75% 41%
2013 $2.8M 54% 16.3 Months 72% 66%
2012 $7.1M 53% 17.8 Months 61% 60%

 

And then, quoting Panorama directly, we thought their highlights were revealing…

  • On average, organizations spend 6.5-percent of their annual revenue on their ERP project. This is an increase since last year where organizations spent 5.9-percent of their annual revenue on their ERP project.
  • Consistent with previous years, 56-percent of respondents chose to implement on-premise ERP software.
  • Since last year, there has been a significant increase in the use of cloud ERP, from 11- to 27-percent. (But as noted last week, many of these purchased the software themselves and merely had it hosted by a third party provider – not a true ‘cloud’ installation.)
  • Since last year, the use of ERP consultants dropped from 77-percent to 68-percent.
  • In comparison to last year, there has been an increase in the percentage of organizations engaging consultants for planning and implementation, and a decrease in the percentage of organizations engaging consultants to assist in software selection.
  • Only 20-percent of respondents reported an intense focus on organizational change management.

Panorama’s 2016 full report is available here.

 

 

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panorama 2016Each year, Panorama Consulting releases its annual survey of responses about ERP systems from companies across the globe.  Their 2016 report includes results from 215 companies, ranging from small companies to multi-national organizations.

This year, their editors pointed to five conclusions which they thought “really stood out.”  We’ll reveal their findings in our post today.

  1. Business transformation is still not the top reason for pursuing ERP implementations. Panorama refers to this as a “flawed and myopic approach” to ERP.  They reveal that the #1 reason is “to replace the old system” and note that, while that’s not necessarily a bad thing, “it shows that too many companies are replacing systems because they have to – not because they want to pursue a larger business transformation.”  They further note that 18% did not improve business processes as a result of their implementation, and only about one in four “improved all of their business processes.”  (Most however did claim to improve “key” business processes.)
  2. Overall project costs and budgetary overruns are increasing. We should note that the respondents in these cases were pursuing projects in the $4 million or so range on average.  And while the raw costs were lower, the costs when ‘normalized’ for company annual revenue actually increased, with well over half reporting that they’d spent more than expected, another increase over last year.  Expanded scope, organizational issues and underestimated project staff needs were cited as the key causes.
  3. SaaS ERP takes a hit, on premise holds its ground, and cloud ERP continues its growth. On-premise systems held their own – despite what you may read in the press – at 57% of installations.  Cloud solutions rose to 27% but this notably includes companies that bought their own software and merely hosted it via an outside third party (We’d call that a SortaCloud solution).  Finally, the report notes, “SaaS solutions appear to be losing ground to the ‘best of both worlds’ benefits of having a third-party host a traditionally on-premise ERP system.”
  4. Project durations increased by 50 percent. Perhaps the most startling revelation according to Panorama was that implementation timelines among surveyed firms jumped from 14 months to 21 months.  This seemed to be a problem across the board, regardless to some extent of company size and complexity.
  5. Data issues are derailing implementation project plans. Data issues were the number one cause for implementation overruns.  The results highlight what many of us in the implementation business know well: there are many complexities and risks that go along with porting “dirty” legacy data into clean new systems.

The 2016 report simply amplifies the lessons learned in past years, including the fact that change comes slowly, both in terms of management thinking and project implementation.  The consolation prize may be in knowing that if any of the above characteristics describes your organization, well… you’re clearly not alone.

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WhitePaper2010_Cover5 years ago we first published a series of posts entitled “Software That Matters.”  It was an ERP implementer’s point of view, culled from long experience, on why and how to purchase a business management software system.  Later, we turned Software That Matters into a popular white paper that has since been viewed hundreds of times. 

After five years, we thought it was time for an update, to reflect lessons learned since then.  As it turns out, the vast majority of what we said then remains every bit as true today.  Still, five years is a long time… so we decided to carefully retrace our steps, re-edit our paper, add some comments and present it as a series of blog posts that will carry us through November, 2015.  We think that’s timely, as many companies at this time of year tend to reconsider the software they use to run their business — and how they might do better.

In our series we will again try to convey what’s important, what to measure, how to buy, what works, what it costs… and the many other business considerations required of this strategic investment, in what is probably the most important (and expensive) software a company will ever buy.  In other words, the Software That Matters.  

Today we offer our final post — #13 — in this series.  Our full series began here.  We hope you found these posts on ERP software selection of value and we welcome your feedback.  Thank you for reading.


 

Key Conclusions About ERP

Our purpose has been to set down in writing the fundamentals for how you know when you need an ERP system (or a new system)… its strategic importance… the key motivators that indicate the need for ERP… a few client success stories on ERP’s benefits… what it costs for software and services to get started… how to get started… key performance indicators… the importance of turning information into action… and what your business management system should provide.

We’ve covered a lot of ground.  While covering the broad spectrum of ERP in the small to mid-size business requires dealing in some generalities, we’ve tried to be specific as possible about why to do it and what a typical project might cost — of course, there is no ‘typical’ project, but our guidelines should certainly give you a few key objectives and a manageable budget from which to work.  A few key takeaways:

  • Remember, ERP is a strategic investment in your company’s long term health, even survival. Thus, it is a long-term business improvement strategy.  It is essential to sound growth.
  • You’ll know you need ERP if: You have information scattered across many independent ‘silos’… You frequently key and re-key data… You rely on spreadsheets to run your business… Different parts or your business do not have equal, common access to others… Information is hard to find, organize or retrieve… You don’t know what it costs to complete a project or build a product… You have no common database or history of projects, products, customers. In short, if you don’t have all your information under the fewest possible umbrellas, then you need to look into an ERP system.  How else will you be able to discover, report, and turn information into actions that lead to significant business improvement and growth?
  • Done right, ERP pays for itself – many times over. ERP will make you money.
  • Start small. Where possible, segregate one or two key functional areas for early-stage implementation.  Work from a project plan.  Review and assess regularly.  Build, a step at a time.  Remember, like continuous improvement (which ERP really is), it’s a process not an event.
  • Recognize the costs. Each project is unique, but a business in the $10 to $30 million dollar (revenues) range can get all the software it needs and a good foundation in services for around $100,000.  Again, user counts and complexity greatly affect the final figure.  But it’s a good starting point for a strong foundation that you can build upon for years to come.  You can probably even get started for less than that, but have realistic expectations.  Oh, and don’t skimp on training.  Scale back the scope of your efforts if need be, but don’t shortchange the very people who will make (and save) you money when ERP is intelligently implemented.  Train them well.
  • Your mother was right – if it sounds too good to be true, it is. Trying to go it alone or ‘do it on the cheap’ yields failure stories, not success stories.  Do your homework.  As W. Edwards Deming said: “It is management’s job to know.”  That’s how companies get to ROI.

 

 

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WhitePaper2010_Cover5 years ago we first published a series of posts entitled “Software That Matters.”  It was an ERP implementer’s point of view, culled from long experience, on why and how to purchase a business management software system.  Later, we turned Software That Matters into a popular white paper that has since been viewed hundreds of times.

After five years, we thought it was time for an update, to reflect lessons learned since then.  As it turns out, the vast majority of what we said then remains every bit as true today.  Still, five years is a long time… so we decided to carefully retrace our steps, re-edit our paper, add some comments and present it as a series of blog posts that will carry us through November, 2015.  We think that’s timely, as many companies at this time of year tend to reconsider the software they use to run their business — and how they might do better.

In our series we will again try to convey what’s important, what to measure, how to buy, what works, what it costs… and the many other business considerations required of this strategic investment, in what is probably the most important (and expensive) software a company will ever buy.  In other words, the Software That Matters.  

Today we offer post #12 in our series.  Our full series begins here.  We hope you find it of value and welcome your feedback.


 

Postscript: What about the cloud?

The cloud, which simply refers to software served up via the internet, is clearly the future of computing.  But what about today?  Like any technology provider today, we have our own opinions.  You should read others’ too and form your own conclusions.  And as famously noted long ago, “Follow the money.”

Realistically, the internet (i.e., cloud) will be to this century what the electric ‘grid’ was to the last: ubiquitous, always on, ever-ready.  (Except, of course, when it’s not.)  It’s still early days in the journey to always-on applications, but if you look closely, you see it already – in your phone and tablet apps, perhaps in your email or your picture sharing sites, in the voice over internet protocol for telephony or Skyping.  Apps served via cloud will continue to grow and improve over time.  Count on it.

But let’s start with the money.  For a few decades, companies that provided business software could reliably count on adding numerous new users annually.  Selling software to new users was, in itself, intrinsically profitable.  And for awhile, there was always a new customer to be found around the corner.  Predictably over time the share of new customers (i.e., first-time buyers) dwindled.  In the accounting software arena, which is at the core of today’s ERP systems, growing software companies could see a point of diminishing returns in which revenues would necessarily shrink as the number of new “customer adds” slowed down.

Eventually, to stem the loss, publishers came up with software maintenance programs – added revenue they could extract on an annual basis in return for keeping customers current on their software.  This annual revenue stream helped pay the salaries of their software developers while motivating publishers to continue to build new, improved releases.  The annual revenue thus earned helped offset some of the loss of dwindling “new” sale revenues.

More recently, as technology followed Moore’s Law in terms of dramatically increasing scale and capabilities, hardware prices declined and vast server farms and data centers began to proliferate.  Advances in both hardware and software began to make it possible to serve up applications to many clients on a massive scale.  Today, virtually any type of software you can think of is available in a browser-based, web-friendly manner.

But does that mean it’s right for you… or that you’re ready for cloud?  Much has been written about the pros and cons of cloud.  Here’s what we think you need to know.

  • The cloud is already great for a number of applications including email (a lot easier than running your own Exchange Servers), files sharing and storage/archiving, sales automation and even light duty accounting systems – especially when you’re fine with an out-of-the-box solution.
  • Cloud will save you money on hardware, at least in upfront costs. With cloud, you’re paying someone else an amortized cost essentially to rent their hardware.  In the long run it adds up, but if you’re faced with immediate server and workstation investments, you can eliminate much of that initial cost.
  • The world is moving towards a cloud-based “rental” model – slowly. Again, follow the money: cloud purveyors have two goals: your monthly revenue stream, and locking you in for the long haul. The more you begin to depend on them, the more you will depend on them.
  • Remember, with cloud, you pay every month: for the hardware, the applications, the business software, the middleware layers, the services, the operating system, and on and on. You pay by the user, by the month, for the services proffered.  And you’re never ‘done.’  Do your homework, and your own math.
  • By contrast, if you buy the hardware and software upfront, you pay once (or over a period of time if you lease) – but at some point (just like a car), it’s actually yours. If you’re the type who buys a car and pays a few years on the note and then keeps driving long after it’s paid off, then you appreciate this kind of thinking.  You know it saves you money, and gives you ownership, in the long run.
  • The promise of cost-savings in the cloud architecture (besides the hardware savings of renting someone else’s) lies in the concept of multi-tenancy wherein one software application serves many customers (tenants) or companies; and multi-threading, in which a single processor can push out multiple threads of instructions, potentially leading to faster overall program execution at lower cost. It’s a single instance of software licensing running multiple customers, all managed from a single location.  This is ideal in a situation where you – and all the other companies on that system – run mostly identically, with no need for unique customizations for example.
  • On the downside, when the internet is down at your location – for any reason – then you’re You can back up power with a generator, but there are no internet generators. If your shop floor production is depending on it, this could be a problem.  A very costly problem.  If internet reliability is a problem at your location, this needs to be considered.
  • Customizing your software and its internal processes to match the unique requirements of your business tends to run against the multi-tenancy grain of the cloud. If your software requirements are different from those of the other tenants, then you likely require a separate instance of the software.  This is especially true in customized environments like manufacturing and distribution, to name just two.  And that creates issues (read: costs or capability) in the cloud.  Those customizations are very often one of the keys to what makes your company unique, your service better, or your margins better.  Without them, you’re not entirely you.

So as you do your due diligence, be sure to take a hard look at the numerous pros and cons of the cloud.  Ask questions and seek a variety of viewpoints.  Work with your providers and consultants to determine the deployment method that works best for you, both now and in the long run.  You only want to make this decision once.

We’ll wrap up our entire series on Software That Matters with some “key conclusions” in our final post, next.  Stay tuned, one more time…

 

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WhitePaper2010_Cover5 years ago we first published a series of posts entitled “Software That Matters.”  It was an ERP implementer’s point of view, culled from long experience, on why and how to purchase a business management software system.  Later, we turned Software That Matters into a popular white paper that has since been viewed hundreds of times.  

After five years, we thought it was time for an update, to reflect lessons learned since then.  As it turns out, the vast majority of what we said then remains every bit as true today.  Still, five years is a long time… so we decided to carefully retrace our steps, re-edit our paper, add some comments and present it as a series of blog posts that will carry us through November, 2015.  We think that’s timely, as many companies at this time of year tend to reconsider the software they use to run their business — and how they might do better.

In our series we will again try to convey what’s important, what to measure, how to buy, what works, what it costs… and the many other business considerations required of this strategic investment, in what is probably the most important (and expensive) software a company will ever buy.  In other words, the Software That Matters.  

Today we offer post #11 in our series.  Our full series begins here.  We hope you find it of value and welcome your feedback.


 

What Your Business Management System Should Provide

In our prior post we looked at the criteria for Key Performance Indicators – the benchmarks a company uses to monitor how well they are turning information into action.  Continuing here, we can look again to comments of Alexandre Attal, of Sage Software, and blend these with the lessons we have learned over many years and clients.  These KPIs for turning information into action are never the same across any two companies, though many companies do have similar needs.

It all boils down to what your technology should provide to your company.

At the least technology must provide three characteristics to improve your performance.  Your technology (i.e., your ERP system) should…

  1. Reduce time and costs
  2. Interoperate across locations, functions or departments
  3. Improve the customer experience

A good, integrated ERP solution will therefore provide all of the following:

  • Access to information, from executives all the way out to the field
  • Dashboards
  • Flexible reporting
  • User-level security of information
  • Ease of use

An effective ERP solution is integrated so as to provide:

  • A common data repository of key information from key functions
  • Accuracy and timeliness of data
  • A less cumbersome method by which to manage & support operations
  • The ability to take action, through features like event triggers and alerts early in the monitoring of a process, benchmark or action item
  • Customizable portals for every level of employee — whether this is a ‘dashboard’ or a ‘role-tailored client’ in which each key user has his or her own unique view of what matters to me when they log onto their system each morning.

And finally, the result of this integrated ERP approach reveals the specific items upon which the company can take action, such as this short list of examples:

  • Identifying customers who have cut back on orders to offer incentives to buy
  • Monitoring inventory levels for critical products to react promptly if levels fall too low
  • Viewing the financial health of the business before the books are closed
  • Planning the manufacturing cycle with access to orders, ship dates, lead times and finished goods – in other words, true MRP
  • Proactively informing customers about order status, automatically (no more chasing down orders every time a customer calls!)
  • Automated, timely alerts on customer credit-limit issues
  • Knowing which jobs, projects and/or customers are profitable – and which are not.

So let’s wrap up this series on the fundamentals of ERP deployment.  But just before we do, we’ll have a few words about today’s latest buzz word, the Cloud, in our next post.

 

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WhitePaper2010_Cover5 years ago we first published a series of posts entitled “Software That Matters.”  It was an ERP implementer’s point of view, culled from long experience, on why and how to purchase a business management software system.  Later, we turned Software That Matters into a popular white paper that has since been viewed hundreds of times. 

After five years, we thought it was time for an update, to reflect lessons learned since then.  As it turns out, the vast majority of what we said then remains every bit as true today.  Still, five years is a long time… so we decided to carefully retrace our steps, re-edit our paper, add some comments and present it as a series of blog posts that will carry us through November, 2015.  We think that’s timely, as many companies at this time of year tend to reconsider the software they use to run their business — and how they might do better.

In our series we will again try to convey what’s important, what to measure, how to buy, what works, what it costs… and the many other business considerations required of this strategic investment, in what is probably the most important (and expensive) software a company will ever buy.  In other words, the Software That Matters.  

Today we offer post #10 in our series.  Our full series begins here.  We hope you find it of value and welcome your feedback.


 

Key Indicators: Taking Action

Our own experience with deploying ERP solutions dovetails nicely with a web presentation given a few years ago now by Alexandre Attal, then an ERP executive from one of Sage Software’s many ERP divisions.  The topic was “How ERP Can Translate Information into Business Success” and Attal was addressing the area of performance indicators and business intelligence.

In other words, in gaining all this information from a modern business management system… What’s important here, what do I do with it, and how do I manage this data?  Some key takeaways…

You have four key questions to ask yourself:

  1. Do you have the right data to make the best decisions?
  2. How confident are you in the accuracy of data?
  3. Do different departments have conflicting data?
  4. How up to date is your information?

Each company has to work through these questions as they plan and then execute their ERP deployment, until executives feel confident that the answers are, for the most part: Yes; Very; No; and Current.

In the last analysis, we are looking for the Key Performance Indicators that will lead to improved measurement (or benchmarking) and then improved performance.

We start with: What are we measuring?  This is the DEFINITION phase.  Here it is important not to get bogged down in details.  Don’t use metrics made to make you look good – the goal is improvement.  Take a customer-centric point of view.  What’s important to them? Track that.  And finally, take a look at new ways to measure.

Next: What data should we use?  This is the COLLECTION phase.  The data should be in a centralized repository.  The information you track and analyze – and upon which you will base your final judgments about where to act – should be based on information derived from data entry that is easy to enter in order to ensure the most reliable results.

Then: What are we looking at?  This is the EVALUATION phase.  Don’t get bogged down arguing results.  Analysis requires understanding of the definition of the various Key Performance Indicators – make them clearly defined and easy to use, so you can focus on action.

And finally: What do we do now?  This is the ACTION phase.  Remember, the goal is action – information alone will not improve performance.  This requires continuous measuring.

We’ll look next at some conclusions from this line of thinking, notably, what your business management system then should provide.  Stay tuned…

 

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