Magnus Meier
I see it frequently in my line of work: A rising company is so focused on the day-to-day work of developing new products and services, exploring new markets, expanding its workforce, and serving a growing customer base that it overlooks the bigger-picture, longer-term needs of the business itself.
That’s often the case when it comes to IT infrastructure. Company leadership is so bent on growing and scaling the business — usually for all the right reasons, I’ll add — that they miss or ignore the signs their company’s business software is in urgent need of an upgrade. As a result, a reliance on spreadsheets and disparate, non-integrated systems creates and reinforces inefficiencies that hurt the business in myriad ways.
Replacing siloed systems
If you believe your company is headed down this path, don’t fret. You already have taken the critical first step toward addressing these problems by recognizing that the culprit isn’t people, but rather the non-scaling, siloed systems you’re asking them to use.
Now company leaders have a choice: stick with the status quo and watch the company and its people continue to bear the burden of unwieldy technology or commit to finding a better way of doing business under a single system of record for managing core processes, including finance and accounting, human resources, manufacturing, procurement, supply chain and so on. This better way forward often entails finding an enterprise resource planning system — a software package comprised of integrated modules or business applications that talk to each other and share a common database.
How do you know the time has come for your business to consider an ERP system? If any of these 10 telltale signs ring true within your organization, it could be time to make such a move:
1. Mounting Costs:
The systems you have in place are expensive to support and maintain. Vendor support for the software is spotty, pricey and often unhelpful. Expensive, often unstable custom software integrations are required for systems to talk to one another. Ultimately, the company ends up throwing good money after bad to maintain a counterproductive tech status quo. As a result, you’re losing ground to competitors that have more mature business systems.
2. Information Silos:
Data and the insight it yields are scattered, obscured and difficult for people to access. This lack of timely, trusted, and accessible information stifles strategic dialogue, planning and collaboration within and across teams. This makes sustaining a cohesive, collaboration-driven culture very difficult.
3. Suspect Data:
The “garbage in, garbage out” adage applies here. People don’t trust data because it’s stale, error-prone or poorly formatted. There’s no single, reliable source of truth within the organization, and no guardrails to encourage people to be good stewards of data.
4. Obstructed Visibility:
Departments and teams lack insight into activities across the business, making it exceedingly difficult to track the progress of a customer order from initiation to fulfillment and delivery, for example.
5. Burdensome Business Processes:
Heavily manual processes curb productivity and force people to waste valuable time on repetitive, unnecessary tasks, keeping the business from being as nimble as it needs to be. Invoicing is slow and error-prone, for example, hampering cash flow.
6. Overreliance on Gut Instinct and Guesswork:
In the C-suite and across the business, decision-makers lack fresh, accurate and timely data as well as intelligent modeling and data analytics capabilities to provide them with real-time insight into metrics and KPIs. Tactical and strategic decisions thus are based on putting a finger in the wind rather than using analytics capabilities to provide optimized pricing recommendations for a product or service, for example.
7. Subpar Customer Experiences:
Customers must struggle through multiple systems and touchpoints with your company to get the information and answers they seek, while your employees have difficulty providing customers with real-time information about orders, requests, etc. Your brand image suffers as a result.
8. Tech Frustration and Overload:
Employees grow disenchanted with the company’s systems and tech tools, so they develop time-consuming work-arounds or avoid them altogether. Not only does this create business inefficiencies, but it also leads to the subpar employee experiences that make it hard to attract and retain talent.
9. Missed Opportunities:
Salespeople miss cross-sell and upsell opportunities because they lack the full picture of customers — timely insight into purchase history, preferences, eligibility for rebates and the like.
10. Knowledge Seepage:
Valuable institutional knowledge is leaking irretrievably from the company because there’s no system for capturing, storing and socializing it across the business.
If issues like these have surfaced within your organization, it’s probably time to consider upgrading to a modern ERP system befitting a growth-minded business. And so your ERP journey begins in earnest, with a whole new set of questions to answer, including whether to buy an ERP solution that comes with standardized, default elements so you don’t have to reinvent the wheel, or to invest in a heavily customized system.
Deciding between standardize and customized ERP
If your business depends on highly differentiating processes and capabilities and non-standardized technology, if demonstrating tech thought leadership is a big strategic priority — and if it’s clear after a careful analysis that the expected benefits of a heavily customized ERP system will far outweigh the costs — then custom could be the best option. But that approach can come with drawbacks: resource dependency and staffing effort; high project, administration and infrastructure costs; extended project duration; an inability to leverage prevailing tech standardization trends; and risks related to regulatory compliance and security.
Pursuing a more standardized ERP system, on the other hand, may be the best option for companies that rely on non-differentiating or commodity processes for functions like HR, finance and accounting, and that see the appeal of using proven technology with extensibility. With an ERP system that comes with standardized best-practice processes, companies will tend to benefit from lower resource dependency and staffing effort, lower total cost of ownership, accelerated deployment and time-to-value, built-in regulatory compliance and security features, the ability to leverage standardized processes, and automatic access to product innovation/upgrades. As for drawbacks, going with a more standardized, less customized system could require a heavier lift with change management. It also may mean sacrificing control over functionality, software releases, and the overall solution roadmap.
If, after weighing the pros and cons, you decide pursuing a standard ERP system is the best route, you’ll face more questions:
⦁ What to look for in the solution itself and the vendor that provides it?
⦁ How to ensure the transition goes as smoothly as possible?
⦁ And how to maximize the value of the ERP system on an ongoing basis?
In the weeks ahead, we’ll tackle these issues in parts 2 and 3 of this series in Digital Commerce 360.
About the author:
Magnus Meier is the global vice president for wholesale distribution at SAP. He’s also a senior lecturer at Texas A&M University, where he teaches the “Digital Distributor” course in the Master of Industrial Distribution program.
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