Selecting an ERP System for the Modern Business World
Business leaders have always had to face the winds of change but 2023 brings combined challenges, the likes most have not seen in their lifetimes from inflation and recession concerns to rising interest rates and bank failures to supply chain and labor woes to digital transformation to shifting customer expectations.
Legacy enterprise resource planning (ERP) systems -- a critical component of business operations, efficiency, and growth – are under pressure to stay relevant by providing the capabilities and technology to keep pace with the evolving business world.
“Many organizations are depending on ERP systems to manage an increasingly complex business environment -- and are demanding functionality to handle new issues. Yet they remain yoked to outdated infrastructure models and legacy ERP software,” wrote Jim O’Donnell in TechTarget in January 2023.
O’Donnell acknowledges that the cost and complexity of upgrading ERP systems can be a hard sell but that analysts say that “new functionality and integration with outside systems will help ERP systems meet the changing needs of their customers.”
ERP Systems are More Critical Than Ever to Business Success
ERP systems can be even more critical to business success in challenging economic times.
“Going back to blocking and tackling this year is on the minds of many chief operating officers and other C-suite leaders as they navigate possible recessionary times. The operational strategy should be front and center of this year’s approach, and smart leaders will be focusing on people, process, and technology as their objectives,” says Hise O. Gibson, senior lecturer of business administration at the Harvard Business School. “The reality we have learned over the past two years is that similar to supply chains, the process has to be reliable and responsive.”
The basic functions ERP systems perform are only becoming more important over time as the software incorporates collaborative and intelligent functionality.
“Leaders tend to silo operations and strategy, but in 2023 and beyond, they’re not mutually exclusive. Whatever the long-term vision is strategically, leaders need to operationalize it to drive revenue,” said Gibson.
The Pitfalls of Selecting a New ERP System without Help
Even for those who have selected an ERP system in the past, a whole lot has changed since they last made this important decision.
For starters, Oracle estimated before the pandemic that the average age of an on-premises ERP system was approaching 20 years, and two decades ago business in the cloud was just lifting off.
While cloud-based ERP systems have gained traction, moving from just 6 percent of ERP software deployed in the cloud in 2017 to 53.1 percent in 2021, that leaves ERP system decision-makers looking at an entirely new playing field.
Selecting the right ERP system will only get more difficult as the ERP software market continues to grow by leaps and bounds with the worldwide market at $50.45 billion and projected to more than double to $117.69 billion by 2030.
“Going through the ERP selection process alone is not wise,” said KnowledgePath (now RubinBrown) Partner, David Warford. “Even if you have selected a system in the past, the industry has changed, your business has changed, and you risk resulting in an inadequate ERP system that frustrates users and limits the operational capabilities of your organization.”
Two ERP Salesmen Walk into a Bar …
Andy Pratico in his “How to select your ERP without losing your mind (or your job)” tells an old software joke: “They say the difference between an ERP and a Car Salesperson, is that the car salesperson knows he is lying.”
While that might call for a rimshot, there is some truth in the humor that reviewing ERP systems is not an everyday task, and gatekeepers that rely solely on ERP sales reps and their demos for guidance could be setting themselves up for failure.
“All “sales demos” look great. If they didn’t, the software company would go out of business,” writes Pratico. “Salespeople or professional demonstrators are trained to present their software to appear as easy as possible. The truth is it is impossible to know how easy the software is until you have been using it for over 12 months.”
The goal for a company evaluating ERP systems is to avoid being put through the wringer of the rinse-and-repeat sales cycle of discovery, demo, proposal, and close.
You can’t blame any ERP systems sales reps to have their own company's best interests as their top priority, which is why it's prudent to set up an evaluation and framework to identify which EPR vendor has the best solution available based on factors such as:
- Your industry
- Your functional needs
- Your technology needs
- Your budget
Working with a Non-Biased Partner to Make ERP Decisions
By working with a non-biased, vendor-agnostic partner, companies can avoid “buyer’s remorse” when selecting an ERP system.
An experienced advisor can help you and your executive team to suffer from failed ERP implementation.
“Poor project management, inability to manage implementation costs and duration, internal resistance to new systems, software integration issues, and poor data quality are all common ERP challenges,” says Oracle. “These problems stem from unclear ERP implementation goals, choosing the wrong ERP vendor, and purchasing software that's not right for your company.”
Pitfalls, according to Oracle, with ERP system implementation can include:
- 50 percent of ERP systems fail the first time around.
- Most ERP systems implementation cost three to four times what was initially budgeted.
- Implementation takes 30 percent longer than anticipated.
- 51 percent of companies experience operational disruption when they go live.
- System modifications to improve needed usability cause overspending 65 percent of the time.
KnowledgePath works with all the top ERP vendors and systems. Contact KnowledgePath today for guidance in selecting your next ERP system or your very first ERP system.