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Posts Tagged ‘ERP’

We borrow today from a pretty basic but very worthwhile article penned by ERP consultants Panorama Consulting, in which they give company managers five good arguments for persuading those Powers That Be of the need to upgrade their frontline ERP systems – you know, the ones they run their businesses on every day.  We’ll reprise their five suggested pathways here today.  We thought their comments were smart enough and succinct enough to quote nearly verbatim, but to give due credit, you’ll find the original article here.

 

  1. Return on Investment. Executives need to see when, how and where a new system will start paying dividends. Collecting actual data on costs of time-consuming workarounds (e.g., one full-time employee spending x hours/week hand-counting inventory at $x cost) and showing how the system will increase efficiency and free up staff to generate returns via other efforts.
  2. Measurement Tools. People can be (rightfully) nervous about bloated ERP projects that suck time, energy and money and never meet expectations. Show that a new ERP system will have quantifiable results by identifying and describing key performance indicators of the project. Determine how success will be monitored throughout the implementation and beyond.
  3. Standardization Strategy. One of the great benefits of an ERP system can be realized via standardization across business units. Identify departments wherein standardization could be most easily achieved (human resources, accounting, customer service, etc.) and develop a strategy to blueprint processes in each of them. ERP consultants like can help you sort through “current state” processes to build the “future state” processes needed for enhanced business benefits and ERP system utilization. Documenting and mapping processes is essential prior to software selection.
  4. Change Management. Investigate and document previous training and organizational change management initiatives conducted by your company. What worked? What didn’t? What do end-users need to increase usability, or to save time or money? Create channels of communication with end-users to start achieving buy-in and determining change management strategies from the beginning. Document what they say and communicate it to the executive level.
  5. Total Cost of Ownership. Executives should have a clear picture of the total cost of ownership (TCO) for their purchases. Panorama suggests TCO should be quantified for at least seven years. Sounds about right to us. Executives don’t like surprises. Work with your consultant to determine the true TCO including licensing, resources, integration and customization.

All in all, doing this is not easy, but it’s actually very manageable when viewed as steps in a process.  You can do it, and a little help from your consultant will easily cap off a reasonable proposal if everyone keeps the end goal in sight and moves efficiently.  You won’t be the first, nor the last.  And early in the year is the best time to begin.

 

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Software implementations carry significant risks, including budget and duration overruns and implementation failures. As the folks at Panorama Consulting pointed out in a recent article, quite often, these risks can be mitigated with proper planning at the beginning of the project. Instead of making decisions based on fear, you should feel confident you’re addressing the potential pitfalls of ERP projects.  Here are six ways they propose to mitigate risk before beginning the software implementation process:

 

  1. Understand Your Business Strategy Objectives – Clarifying your business strategy requires collaboration among all stakeholders. During these discussions, define what customer success looks like and determine what’s working and what’s not. Most importantly, clearly articulate your objectives – do you want to create new business models or generate new revenue using ERP software? These discussions will help you achieve organizational alignment. Ultimately, executives and middle management should be aligned around what changes are needed to improve your organization’s competitive advantage.
  2. Set Realistic Expectations – ERP failure is often caused by unrealistic timelines and budgets. Understanding what benchmarks are realistic for your industry and company size will help you set realistic expectations. While you may need to adjust expectations throughout the project, starting with a realistic estimate will make these adjustments less surprising to executives.
  3. Prepare Employees for Organizational Change – It is human nature to resist change. Change resistance causes implementation delays, quality problems and reduced productivity. If employees don’t adapt to change, your digital strategy will not lead to lasting business transformation. Obtaining buy-in from executives first is a good way to obtain buy-in from team members and employees. If executives are excited for change, this attitude will be contagious. You can obtain buy-in from all stakeholders by communicating the nature of upcoming changes and the reason for change. Communication should be guided by a change management plan, which is informed by readiness assessments and user acceptance testing.
  4. Optimize Your Business Processes – An ERP implementation is a good opportunity to optimize your business processes. While most back-office processes can be optimized based on standard software functionality, some processes should be redesigned independent of software. Processes that provide competitive advantage shouldn’t be constrained by an ERP vendor’s “best practices.” Optimized processes help you develop demo scripts for ERP vendors to ensure they focus on your unique needs.
  5. Plan for Data Migration – With every software implementation, there is the risk that ERP software will not enable the organization’s strategic objectives. To mitigate this risk, reliable and actionable data is essential.  As soon as you select a software application, you should start preparing for data migration. Most legacy data is not ready for new systems. Data is usually spread across multiple sources with various structures and formats.  To account for this complexity, document and establish a data strategy. You also should define future nomenclature for items, item descriptions, units of measure, etc.  Successful data migration requires involvement from four key groups: data owners, the functional team, the data migration team and the project team.
  6. Limit Software Customization – Once you start down the path of software customization, it’s difficult to stop. Strong project governance and project management ensure the implementation team doesn’t over-customize the ERP software. Investing in business process reengineering also is a good strategy for limiting last-minute customization.

We think these tips are a good foundation for looking at your ERP project, and encourage all purchasers to think them through early and often.  History will then be on your side.

 

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8 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.  

Now eight years later, we thought it was time for an update, to reflect lessons learned since then.  (We also did a 2015 update three years ago.)  Much of what we wrote then remains every bit as true today.  But we decided again 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, 2018.  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.

 

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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8 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.  

Now eight years later, we thought it was time for an update, to reflect lessons learned since then.  (We also did a 2015 update three years ago.)  Much of what we wrote then remains every bit as true today.  But we decided again 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, 2018.  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.

 

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.  And make no mistake, cloud in the ERP space is growing rapidly, even though on-premise solutions still make up the largest share of sales, for now.

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 a while, 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 by going with a cloud solution.
  • 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.
  • Also a plus with cloud: updates are frequent, built-in, and often automatic.  If you’re running a vanilla version of the publisher’s software, upgrading becomes a fairly easy, and regular, matter.
  • 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 down.  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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8 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.  

Now eight years later, we thought it was time for an update, to reflect lessons learned since then.  (We also did a 2015 update three years ago.)  Much of what we wrote then remains every bit as true today.  But we decided again 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, 2018.  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.

 

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 more words about today’s latest buzz word, the Cloud, in our next post.

 

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8 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.  

Now eight years later, we thought it was time for an update, to reflect lessons learned since then.  (We also did a 2015 update three years ago.)  Much of what we wrote then remains every bit as true today.  But we decided again 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, 2018.  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.

 

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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8 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.  

Now eight years later, we thought it was time for an update, to reflect lessons learned since then.  (We also did a 2015 update three years ago.)  Much of what we wrote then remains every bit as true today.  But we decided again 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, 2018.  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.

 

Start Small and Discrete

Having deployed a couple hundred accounting or ERP systems over 30 years, probably our most important recommendation on the matter can largely be distilled down to the one simple principle summarized in our headline above: start small and discrete (whenever you can).

Prior to ERP purchase and deployment, the wisest course is always to engage in a discovery process (or needs analysis, or business process analysis – they go by many names).  During the discovery process, pain points are identified.  How those pains affect others in the company should also be identified.  Bottlenecks and redundancies are uncovered.  A basic workflow is flowcharted that boils down to: How are things done now… and how should they be done in the future?  This by the way is also the foundation of a process known as Value Stream Mapping.

As you move through the discovery process, you’ll find various business process/problem areas that need to be addressed, improved or corrected.  Your job is to pick out just the one or two areas, departments or pains that warrant the most immediate attention.  These are the areas usually best suited to become the first phase of your ERP deployment – after all, they should be among the most urgent.  Solve those, and you will see some immediate ROI, a good benchmark for success and for continuation of the deployment.

The task at hand is to identify the obstacles and their potential solutions, and map out a project plan that addresses and resolves them.  The tasks should be confined to the one or two project areas that will initially be addressed.  For example, it may be that the company needs to deploy ERP across many functional areas including some or all of… the front office, billing/purchasing, payroll, order flow, customer service, warranty and returns, production, shipping, warehouse management, and so on.  Nonetheless, the prudent course is to pick just a couple – say financials and order processing for example – and start there.  You can’t always do it this way, but it’s the safest route when able.

This ‘small and discrete’ project approach will yield several benefits:

First, it gives project stakeholders on all sides a tangible, realizable goal to work toward.  Everybody knows the goal, though not everyone is affected (only the departments in question) and frankly, there’s less to go wrong.  The likelihood of bringing the company ‘to its knees’ due to a dramatic changeover is minimized or eliminated.  Besides, with a well-defined project plan, transition damage should be largely nullified.

Second, it gives you a chance to evaluate your provider.  Before committing to the whole project, you’re committed to only part of the project.  Also – worst case scenario — it’s easier to pull the plug on a small, phased project than on a large and sprawling one.

Third, it mitigates, or at least spreads, project costs.  While you’re usually going to buy substantially all the software modules up front, you are only committing to a manageable slice of the services at the outset.  Moreover, services are typically paid for as you go, so you’re spreading your costs over the timeline you define.

Fourth, it gives you the opportunity to celebrate small victories, while laying the foundation for rollout to other departments in a positive light.  When you change business management systems, everyone is watching, even the people not immediately affected.  Early successes make subsequent departmental adoptions that much easier.  Next we’ll look next at benchmarking steps, that is, how to know when you’re making progress.  After all, you cannot improve what you do not measure.

Next up: turning data into intelligence.  The Key Indicators you need to have before taking action.  Stay tuned…

 

 

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