Critical considerations for selecting and implementing an ERP platform
September 2020 Footnote
Editor's note: Updated August 31, 2020
As organizations seek to improve operations and increase efficiency, many are considering implementing or replacing an enterprise resource planning (ERP) system — and for good reasons.
The right ERP system can indeed enhance performance across the entire organization and provide an outstanding return on investment. However, choosing the wrong ERP platform or failing to implement the platform correctly can lead to costly and disastrous results. In this article, you will learn about five critical considerations for selecting and implementing an ERP platform — factors that could mean the difference between failure and success.
Distinguish between ERP myths and reality
ERP applications are certainly not new, yet many myths regarding ERP remain. Moreover, too many decision-makers do not understand the fundamental concept of ERP. One of the myths surrounding ERP is that these applications are “just” accounting software when, in reality, ERP extends to virtually all aspects of managing an organization.
Because of the far reach of ERP within an organization, integration
across virtually all departments are two of the most critical aspects of a successful ERP implementation. More specifically, a successful ERP implementation — one that is providing the expected ROI — will facilitate data integration across the entire organization, virtually eliminating redundant data entry and leading to more timely and accurate reporting. Likewise, the “right” ERP platform for an organization will facilitate automating many functions previously performed manually.
Given the integration and automation aspects associated with ERP, you should carefully consider existing workflows in your organization relative to the capabilities of the ERP platforms you are investigating. One of the myths that persists about ERP is that your existing workflows will not need to change. However, the reality is that in almost all situations, existing workflows will need to adapt to be able to take advantage of the potential benefits associated with integration and automation. Failing to do so will almost certainly lead to an ROI that is less than expected.
Base your decision on needs, not features
In today’s world of feature-rich applications, it is far too easy to focus on the volume of features available in an ERP platform — many of which may not apply to your organization. Instead, focus on the specific needs of your organization, instead of all the features offered by an ERP platform.
To illustrate, ERP platforms in general offer features in at least the following four areas: accounting and financial management, human resources management, customer relationship management, and supply chain management. If you are considering implementing an ERP platform in a service-oriented business, then features related to supply chain management are inconsequential. These features should not factor into the decision-making process for the simple reason that these features are not relevant to the organization.
Consider the potential long-term implications of cloud computing
Cloud computing — first described more than 50 years ago — is now mainstream and certainly has carved out a role in the world of ERP platforms. In today’s market, many ERP platforms are now cloud-based, and that number continues to grow — and for good reasons!
One of the potential benefits associated with cloud-based ERP platforms is that they can be less costly than traditional, in-house implementations. Because the service provider typically performs all the processing and data storage on its cloud-based devices, cloud-based ERP reduces the organization’s need to buy new hardware. Further, the subscription fees associated with cloud-based ERP platforms typically cover ongoing services such as maintenance, updates and backups, so the subscribing organization does not pay additional fees for these services. And, with no software to install on local computers, implementation times can be significantly less with cloud-based platforms, compared to traditional client-server implementations.
Another driver associated with the growth of cloud-based ERP platforms is that these services can provide levels of features and functions that might otherwise be beyond the reach of many small and midsize organizations. Emerging businesses find that they can reap the rewards of ERP if they choose a cloud-based deployment because of the reduced — if not eliminated — need to purchase and deploy new hardware, and because there are no significant upfront capital outlays for software. Otherwise, these benefits might be beyond the financial reach of these organizations.
Automate, automate, automate!
Another critical consideration regarding successful ERP implementations is to take advantage of automation at every opportunity available. Remember that one of the key drivers behind moving to an ERP platform is to facilitate automating as many business processes as possible. Automation helps to improve efficiency, speeds business cycles and ensures consistency in processing specific transactions or events.
Some common examples of automation available in many ERP platforms available today include:
- Programmatically matching purchase orders, receiving reports and vendor invoices.
- Processing requests from team members for vacation and other paid time off.
- Establishing credit limits for customers and processing requests for increases in these limits.
- Automatically entering repetitive transactions into the accounting component of the ERP platform.
- Generating, publishing and distributing routine reports to team members.
In each of these examples, by taking advantage of the automation capabilities of the platform, you can realize the benefits of efficiency, consistency and timeliness.
A growing form of automation appearing in ERP platforms is robotic process automation (RPA). RPA tools can, among other things, automatically analyze a scanned document, extract relevant details from that document, and enter those details into a database. For example, RPA can automate the process of entering invoices received from vendors into an ERP platform’s accounting function, thereby reducing the amount of clerical time otherwise consumed by this task.
Identify and plan for training needs
Implementing a new ERP platform in an organization represents change and, let’s face it, humans are often resistant to change. Change brings uncertainty and fear of failing. Moreover, in the context of implementing an ERP platform, change brings about new ways of working and replacing familiar processes with which team members are comfortable. Therefore, to help ensure a smooth and successful implementation — one in which the expected ROI materializes — ensure that all team members receive the training that is necessary for them to embrace the new platform.
Be sure to incorporate into the budget for your ERP implementation adequate resources — both time and money — to thoroughly train all team members in the aspects of the new platform that pertain to their specific job responsibilities. Further, recognize that there will likely be an ongoing training need extending perhaps for up to a year after the initial “go-live” date. If these training needs are not met, many team members likely will revert to inefficient manual processes to get their jobs done, and the promised ROI of the new platform will not materialize.
Leverage ERP to better your organization
In efforts to become more competitive, more efficient and more profitable, organizations of all sizes are considering implementing ERP platforms or replacing their existing ERP platforms. The promised benefits of ERP — including integration, automation and efficiency — can lead to an outstanding ROI, but only if the implementation is successful.
If you are considering a move to ERP or if you are considering replacing an existing ERP platform, carefully weigh the five factors outlined here before you make any commitment or purchasing decision. By addressing these factors upfront, you will maximize the chances that your organization will receive all the expected rewards associated with ERP. Best of luck!
Tommy Stephens, CPA, CITP, CGMA is one of the shareholders in K2 Enterprises. At K2, Tommy focuses on creating and delivering content and is responsible for many of the firm’s management and marketing functions. You may reach him at email@example.com, and you may learn more about K2 Enterprises at www.k2e.com.
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