The cost of an ERP system software depends on many factors -- size of the company, number of ERP users, functionalities introduced to the work flow software, number of software modules implemented, condition of existing IT hardware and the ability level of the company's team. Costs can range from $25,000 to millions.
About 45% of buyers experience unexpected costs that had not been initially taken into account -- Why?
Critical Implementation Meeting: The company's team should meet with the vendor's Project Manager and know from the beginning who's assigned to what tasks for the company and for the vendor; critical timelines to be met and consequences of not meeting those timelines; parallel date; test date; and go live date. When a company does not meet those timelines it equates
to the allocation of additional internal resources (costs); lost time using the new ERP packages (ROI); and most importantly, a decrease in the momentum of implementing the new ERP software system.
Training Costs: Be sure to allow for sufficient training for your team. Ineffective training relates to lost functionality of the software and a poor work flow. Companies do not realize that with poor training they lose -- software is used incorrectly resulting in poor data. I see this often with ERP implementation in QuickBooks Premiere and Enterprise (mini ERP systems) users who state that they know the software but then never knew about Estimates, Sales Orders, Inventory classifications, Assemblies, On Line Banking, etc. What a waste of your software package!
Data Conversion: STOP! This is the biggest cost of any system. Do you really need it? Store the data in a place where people can refer back to it if they need it. Export the most often used data to some Excel spreadsheets and refer to it when you need to.
Integration Costs: How critical is it to "interface" with another system, application or function? And what is the definition of that "interface"? How will the data reach your accounting software, sync with the CRM system database, update the inventory and product information, or is it a simple journal entry in the General Ledger and it's really not interfacing all of the data?
IT Infrastructure Costs: Know the specs for your software, the capabilities your internal hardware, the cost to maintain the system internally and be aware of the fantastic outsourcing opportunities to have everything managed off site. Do the ROI and see for yourself.
Customization: Determine that there's a valid ROI before signing off on a customization. In addition, be sure to have a scope of work and hours allocated to the customization before agreeing to it.
KISS: Remember, keep it simple enough so that several people can learn the system. What if your key expert leaves? Don't make it too complicated.
Licensing: Buyer Beware!! There can be many license fees involved besides those of the ERP System Software -- SQL, Crystal Reports, Access, Third Party modules, etc. Get all of the details up front. The type of licensing -- packaged, concurrent, module-bases, site or location and subscription.
ROI (Return on Investment): What helps to define this?
- Inventory solution that reduces inventory levels.
- Inventory management and accuracy.
- Ship more orders and on time.
- Shrink the aging report for accounts receivable.
- Accurate data for margins, revenue, forecasts and budget.
That was our last blog on this ERP Systems series. We hope you enjoyed it and we would love your feedback!
Don't fall into the pit of making your ERP system software too complicated. Then you'll have to hire a team to use it effectively.
An ERP system software is primarily an integrated suite of modules and features that can encompass financial, production, services, human resources, payroll, time entry and CRM (customer relationship management). The software is dependent upon how your company work flow operates, how you would like to set it up and how it can be incorporated efficiently and effectively into the company's environment.
The modules your company purchases is dependent upon what is most important to the company's processes (this goes back to the beginning of our ERP blog series). 
Again, one word of advise as you continue the ERP research buying process ... Keep It Simple Stupid... the old KISS method still applies here. An ERP system too complicated can make your team's life miserable. Then what happens? Your team only uses 35% of the ERP system software you have, which is the national average.
Typically companies are examining a combination of financial management, manufacturing, project management, supply chain management, product life cycle, supplier relationship or customer relationship management (CRM) software ERP modules. Know what your team desires and understand the resources needed from the company (not just the vendor) in undertaking an implementation of any piece of the modular ERP software. There's a commitment required from the company and the vendor and the agreed upon combination equals success.
Industry Specific ERP software can be necessary. I spoke with a CFO from a large asphalt company the other day. They have two types of software they use -- bidding and order/job implementation. Due to the critical element of what can be missed in a bid for a highway or a bridge, there was an ROI (return on investment) for the bidding software they implemented and used habitually. On the other hand, if some customization is necessary, most softwares can handle that but beware that you own the code and that it is in a programmed language that can be integrated to other applications or services.
Next week .... cost!
Which ERP System is right for your business?
Sorry for the delay in continuing our ERP system software blog series. We've had many inquiries. Let's continue to the buyer stage and try to define "what type of buyer are you".
For ERP systems the buyer types have been defined on the basis of the following: scale and complexity of business; modularity; and industry verticals. What does all of that mean?
Scales and Complexity of Business:
Elementary buyers are looking for simple ERP systems to meet their uncomplicated requirements. Usually the company is a growing mid-sized business and most requirements can be met with an out-of-the box ERP system that has minimal customizations. There may be some basic integration requirements and the business has limited IT support.
Enterprise buyers are focused on business complexity, integration, scalability and globalization. These buyers tend to be mid-size to large enterprises with highly complex business processes. A high level of customization may be required for their niche requirements. Sometimes an in-house IT expert is required.
Modularity:
Suite buyers look for a complete ERP suite having all modules -- financial, production/business, and CRM (customer relationship management) to execute business processes across all departments. This type of buyer realizes the long-term strategic investment for the company.
Module buyers usually seek two or more ERP modules that can automate business processes for two or more departments but not the entire organization. This type of buyer is more price sensitive and is looking for short-term productivity gains. There may be significant integration with systems in other departments.
Industry Verticals:
Sector-specific buyers have industry-specific and specialized needs that cannot be met by generic solutions. The company may be governed by stringent regulations or compliance.
What type of buyer are you?
Next week -- ERP System Modules and Features
What ERP System is the right fit for your company?
As promised, we are continuing our series for ERP Systems. This is our second install of the ERP blog with more to come regarding purchasing, implementation and unexpected costs, open source, industry specific and ERP buyer survey comments.
10 Steps to Buying an ERP System Software
Enterprise resource planning software is an integrated information management system involving financial and business software for all industry segments.
1) Do we need an ERP System? Assess your existing business processes from ALL departments to identify whether there is a need for an ERP system software. Implementing an ERP system is a long-term strategic decision for the company and it alters the work flow of your company.
2) What are the goals and objectives for the selection? After you meet with all company department managers, you'll be surprised to find that not everyone has the same requirements for ERP system software but they will have some very specific "must haves". Know what those are! Realize that there is not an ERP software package that can meet ALL the business requirements of a company or industry segment. I had a client that approached me at the Rockford Chamber's Manufacturing Expo and he stated, "I haven't found a software that can do all of what I want it do." That's right, there's not a "magical" software out there. Sometimes the solution is to fix some internal work flow issues.
3) Form an evaluation process. Either have a company committee research what is out there that meets your requirements or hire a consulting firm to do it. Usually, it's a combination of both - functional experts from different company departments and an outside consultant.
4) Define product requirements. Don't make it too difficult. Define the simple first. Is user friendly the most important? What is the skill level of your team using the software? Is inventory your biggest headache? You can purchase the best industry specific software in the world, but if it's too difficult to use, to set up and to manage then the ROI (return on investment) is not there.
5) Develop a pre-evaluation selection criteria. Select the top 3 ERP packages for final selection that meets the critical business needs, matches the skill level of the users and implements the business model work flow for the company.
6) Check out your peers and competition. What are some of the financial and business software packages they are using? What do they like? What do they dislike?
7) Final 3 extensive research. Schedule the real time software demos (NOT a power point) for the final 3 ERP system packages. Be prepared ahead of time with the specific functions and reports that you would like to see.
8) Know the history. How long has this ERP system software been around? How many times has the company been purchased? How much "red tape" do you have to go through to get the answers for fixes to software development problems that may occur after an upgrade? What language is this ERP system written in - how many platforms?
9) Flexibility. How easy is it to interface with third party softwares? Do you own the Source Code after you pay for a customization? Will the customization perform easily after an upgrade?
10) Vendors. Pick a vendor who can work successfully with your company's team. You have to be confident that they can carry through the implementation. Each company has its' own culture and not everyone can successfully work with that culture. Finding the right relationship and commitment is key in a vendor relationship. How long has the vendor been around? Check out their references.
Next week we will slide into third base with our ERP System Modules and Features.
For the small to medium size business, financial/production software, or ERP systems should not be made difficult. Some ERP systems (Enterprise Resource Planning) create complexity and duplication of effort. Really, it should not be that difficult. Who said an ERP system had to be complicated? People seem to think that an ERP system is unaffordable and hard to set up and implement. This shouldn't be the case.
Eight Warning Signs
- You can't get your data out. You know it's in there but you have to pay some programmer to build you a report to receive the data in some type of format that you can actually use.
- Upgrades are costly, time consuming and disruptive. If you haven't applied your software upgrade because you are afraid it will wipe out all of the customizations you paid for, then you are missing out on functionality and technology improvements that could help your business run more efficiently.
- Disaster recovery plan involves tape back ups. Back ups should be easy, not a headache and worrisome. Yet, we always hear the stories about how the back up never took place, we couldn't restore our data from the previous back up, and now we have lost over a weeks worth of data transactions. Ouch! With virtualization, there's no need for tape back ups any longer.
- Hardware costs increase every year. Can you say SaaS, Cloud, Virtualization ....
- High renewal fees. What's the ROI (return on investment)? Has it been worth it in the past? How can we lower these? Do we need that many users or applications?
- Can't access data easily when traveling. The system is too clunky or too costly to access remotely.
- Vendors or Customers cannot interact with the system. The is very important to grow your business and become more efficient.
- Costly training for new employees. Is the ERP system difficult to learn? It shouldn't be.
DataCraft implements user friendly ERP systems software. Give us a call. We can help.
P.S. Stay tune for three other blog series regarding ERP systems.
What ERP System is right for your business?
Don't be confused when you hear QuickBooks and ERP system in the same sentence. QuickBooks Enterprise is not to be confused with QuickBooks Pro and Premier.
The QuickBooks Enterprise Solution has been an affordable solution for our customers this year. It really is a mini ERP system that supports financial, manufacturing, supply chain, professional services, inventory, funding, time entry, and many other work flow processes. It has been a great economical solution for our customers' pocket books. The renewal fees are low and the software is affordable. QBES Brochure_10.pdf
(You recall that last week we referred to the definition of an ERP solution. )
The Intuit Solution Provider Program has enabled DataCraft to help grow local small and mid-market businesses through the sale, implementation and service of Intuit solutions in the manufacturing, distribution, professional services and not-for-profit industry segments. The implementations helped the owners of company's examine their accounting services, business work flow for the software and payroll service outsourcing.
The mistake that is made with QuickBooks Enterprise (QBES) is that companies hire an individual/company that is capable of installing the software but does not have QBES application set up and implementation knowledge; or the company/individual are accountants who may have some knowledge of set up but are lacking in the experience to fully understand the work flow of the software. Be careful!
Since 2008, DataCraft Inc. has been an Intuit®Solution Provider serving the Northern Illinois and Southern Wisconsin area. Intuit Inc., the publisher of QuickBooks®, is the leading provider of business and financial management solutions for small and mid-sized businesses, consumers and accounting professionals.
Next week .... what is overlooked in most QuickBook Enterprise implementations?
Find the right small business Enterprise Resource Planning ERP software system and accounting software for your business. Download the Software Selection Guide.
We receive this question a lot from our current and prospective ERP system clients. First let's define ERP and then let's discuss the key issues overlooked and the social issues surrounding ERP implementation.
The term ERP (enterprise resource planning) applications used to refer to the manufacturing industry. Currently, ERP systems cover the core functions of a business whether they are manufacturing, non-manufacturing, not-for-profit or government. ERP system software can apply to a broad spectrum of industry segments.
ERP packages usually encompass accounting (or financial functions), payroll and production functions (manufacturing, supply chain, job cost, warehouse management, inventory management, estimates, human resources, service fees, sales order, CRM, etc.). Ideally, an ERP system delivers a single database for the data in all of the software modules. There are many free web site services out there that will evaluate various ERP systems for you. Remember, those services also receive advertisement dollars. DataCraft has performed an evaluation within our software selection guide.
Some key issues companies or executive committees overlook when evaluating an ERP implementation:
- What is the skill level of my existing team in regards to software?
- What resources will be required from my team for the implementation?
- What are our expectations for testing and going live with the new software?
- Is it cost effective to perform a data conversion? Options -- only bring over critical customer data and open transactions. Refer to all history in the old database.
- ERP systems do not have to be expensive. There are plenty of economical ERP software systems out there that range in price from $3,000 - $25,000.
Social issues (yes, I said social issues) uncovered when implementing an ERP system:
- There is no "magical" software. If you have problems with your current team members or departments working in harmony, you will continue to have those problems. Fierce conversations are needed here.
- Set up of work flow in the software is critical, but don't make it too complicated!! Keep it simple!
- Don't spend a lot of money on a customization because that is the way you've always done it and even though it's inefficient you are going to keep on doing it that way. Nuts!
What ERP Software system is best for your company? Download the Software Selection Guide