Select an ERP System – Part 5 – Saving Money and How to Pay For It.

Select an ERP System – a free series to guide you. 5 – Saving money and how to pay for it.

This is part 5 of a series of blogs designed to help you choose and implement a new ERP system.

 

In this blog, we look at how you can save money on the system but also warn you why potential suppliers might choose to walk away. Previous blogs covered the selection process, ballpark costs implementation and basic checks and are available at our blog page.

 

Once have chosen your solution, when you buy that solution can have an impact on the price you pay. It’s important at this stage to understand the psychology of the ERP vendor. I don’t mean the reseller here, I mean the company behind the software. Whether you’re SAP, Microsoft or Sage, the name of the game is sites – the more the better!

 

This is because the first year value of the sale pales into insignificance against the ongoing revenues that can be generated from updates e.g. more users being added, updates to the software and, most importantly, annual support revenues. So, the supplier will regularly offer incentives to potential customers to buy the licence but generally never offer a discount on the ongoing support charges. When is this most likely to happen? As you might find in any retail environment, as the end of a quarter, half year or at the company’s year end. So, if nobody offers you a deal, ask!

 

Other reasons for suppliers offering delas might be because you are a charity or because the competition on a particular deal happen to be viewed as someone they particularly want to target.

 

Most ERP resellers can access finance for you and most like to do so, for two reasons. The obvious one is to ensure that lack of money doesn’t stop the project proceeding. The second is that the finance company will check out the customer’s creditworthiness and will quickly advise the reseller if the potential customer has money problems. The reseller can then avoid wasting time on a project doomed to failure.

 

Finally, don’t forget that many local business gateways or enterprise companies can offer support in the form of grants for the training, consulting and/or development costs associated with the project. The main criteria here will be the extent to which staff will be retained or more staff employed; or that the system will allow the business to sell more products outwith its current geographical area. And, speaking to these funders is another excellent way of confirming whether your potential supplier has a history of delivering cost-benefits to its customers.

Select an ERP System – Part 4 – Some Basic Checks

Select an ERP System – a free series to guide you

This is part 4 of a series of blogs designed to help you choose and implement a new ERP system.

In this blog, we look at some of the basic checks you should carry out before engaging with your potential new ERP supplier. Previous blogs covered the selection process, ballpark costs and implementation and are available at our blog page.

It’s important to think of your potential new supplier in terms of the likelihood that they can be a positive business PARTNER. The partnership element is key, as trust on both sides will be hugely important. How comfortable do you feel with them?  Is this a company you feel you can work with for many years to come?

There should be clues early on in your discussions. Do they talk down to you? Use jargon? Or do they demonstrate understanding? Suggest alternative ways of solving your issues? Ask them how many customers have been with them for more than 5 years? 10? 20? And what is the percentage of customers who renew their support annually? The answers to these questions provide a useful insight into the way the supplier looks after their customers.

All of the above assumes you’ve actually visited the supplier’s offices. Don’t be so impressed by the website that you accept an on-site demo and never visit the supplier’s premises or meet with ‘rest of the team’. There are a number of virtual resellers these days who have no real office and a constantly changing team of contractors who may implement and support your system. That can keep their costs down but you have to consider whether that’s the type of supplier you want.

Check out their financial status. This is so easy these days with sites such as Companies House WebCheck and Duedil offering low cost ways of reviewing accounts, credit history, owners, court orders and so forth. There’s no excuse not to have a decent handle on the likely longevity of your potential supplier.

A key consideration is knowing who will implement your system. I alluded to this as an issue with smaller ‘virtual’ companies above but it’s equally important with larger companies. It is not uncommon for organisations to lead the presentation with their best people who, once the order is signed, and never to be seen again. So, that nice chap who really seemed to understand your business and demonstrated superbly how the system would deliver all those valuable benefits is actually based in another part of the country and only comes out for demos. The implementation team, sadly, are all young graduates learning their trade… on your implementation!

Also, be careful what you sign up for. It can be tempting to sign up for a long-term support deal at a tremendous rate, only to find the support is poor and you’re locked in for three years! Why commit until you’ve experienced the support?

You might think that many of the above issues can be squared away by reference visits but again there is scope to get this wrong as well. Check that the reference is someone who the supplier did actually implement the system at, and not just a site they now support. Equally, be alert to the ‘reference site’ that gets used all of the time, perhaps because they benefit from lower or zero support rates. Ask for an extensive list, identify sites similar to your own and approach them for a reference.

How to Select an ERP System – Part 3 – Implementation Costs

In parts 1 and 2 of the series, we looked at the selection process and ballpark costs. In this 3rd part, I’d like to consider implementation issues and, in particular, how the user can contribute to the process and save costs.

There are some basics which are often forgotten.

First, make sure that the project team is representative of the business users. Too often the MD says “This is how we do things here” only to find later in the project that the users at the sharp end have a wholly different way of processing data.

Second, customers tend to be over optimistic about how much time and effort they can put into the project. Take a good look at things like holidays, other projects, is this the busiest time of the year… and so forth.

BUT, remember that you don’t have to wait to the start of your financial year to go live on the system. If anything, that’s a terrible time because there is so much else going on. Pick a quiet (or the quietest) time.

AND, if you have taken more time than you expected to reach that crucial decision on which system to implement, be flexible about you ‘go live’ date. It would seem obvious to all that you have less time but it’s amazing how many businesses are determined to stick to that original date.

Third, it’s YOUR project and not the supplier’s. I have blogged elsewhere about suppliers who hijack the ownership of the project, move the goalposts and end up costing you more. Stay in control and ensure any changes are your changes. This does mean that you need to stay 100% involved and don’t allow the supplier to dictate the project direction.

What will implementation cost?

As a rule of sum, expect to spend the same amount of money on the implementation as you spend on the software. But you can save money in a number of ways.

Don’t be precious about some of the requirements. Always consider the cost-benefit. Is it really that important? Most suppliers will say something can be done but a good supplier will point out the cost and question whether it’s justified.

If you have a lot of staff, consider ‘train the trainer’ as the way forward for training users i.e. a select group of staff are trained, and then pass on that training to the majority. We had one customer recently where a very large number of users were given training by viewing a webinar recording of the training. This also means that new users can be pointed to this as part of their induction.

Take responsibility for data cutover and reconciliation. We provide our customers with spreadsheets formatted with the appropriate columns for customers, suppliers, open invoices and so forth. It’s always a great way to ‘cleanse’ your data as well. Compare deleting an old customer from a row in a spreadsheet with deleting the record in an accounting system. The latter can be time-consuming or even impossible in many systems.

Reconciling financials, customer and supplier balances by checking the trial balance on both systems and comparing aged debtor and creditor reports will save cost and ensure comfort that everything is as it should be.

The Changing Face of Navision through the Ages.

Many people are surprised to hear that Microsoft Dynamics NAV is not far from reaching its 20th birthday here in the UK!

At Turnkey, we have been selling Navision since 1996 when the first ‘proper’ Windows version appeared in the UK. A small team of people in Borehamwood led by Yash Nagpal, and supported by the likes of Sandy Giddings and Hynek Muhlbacher, had believed enough in the product to take on the established UK players from scratch.

Things were a little erratic at the time. VAT didn’t really work properly. You didn’t ask for remittance advices (not needed in Denmark apparently) and all of the training material featured Danish Kroner and was delivered by European trainers. There was a sense that we were all at the start of a rather exciting journey with an incredible new product.

Along the way, Navision (UK) cashed in its chips with the Danish owners in what turned out to be the first stage of the process of the Microsoft acquisition Those of us who were lucky enough to be successfully selling the product at the time benefitted from the incredible generosity of UK MD Yash Nagpal who rewarded his loyal partner base with trips to Thailand (regrettably work commitments prevented me attending so my wife gallantly went along instead) and, perhaps the best of all, a 10 day whirlwind trip around the best that India had to offer. The latter trip included visits to all of the major sites, participation in an elephant  polo match and an overnight cross desert camel ride.

Screenshots of the product through time show how much the product has changed but it’s a credit  to the original development team that the underlying functionality remains much the same. And, of course, the products great strength has always been its inbuilt development toolset. Who knows how many exceptional systems have been built over the years with that fantastic product.

Here are a few of the screens which illustrate the development so well:

Navision circa 1996 – not quite the look and feel of Windows-

NAVISION 1996

The Windows-like version was originally called Navision ‘Financials’ but then had a brief period, for no apparent reason, as Navision ‘Attain’ -

Attain2

The influence of Microsoft was apparent in this first new-style release post their acquisition. The Outlook style interface -

NAV5

And finally, we moved to the ‘Role Tailored Client’ which originally saw the light of day in NAV2009 but has been finessed into NAV2013 -

NAV2013RTC2

Sadly, Yash is no longer with us but many who knew him were pleased to hear that he was indulging in one of his passions, golf, at the time of his passing. I’d imagine he would be proud to see how far the product has come from its humble beginnings in Borehamwood all those years ago.

How to Select an ERP System – Part 2- Ballpark Costs

Continue our series which started with ERP Selection Part 1 – the Selection Process

Ballpark Costs 

Once the suppliers have been provided with the essential information, it’s not unreasonable to ask for a ballpark figure for the cost of the proposed solution. This is a win-win in that neither side wants to waste the other’s time going through lengthy demos and detailed scoping exercises when the likely cost of the system is so far away from what the business is likely to spend.

Costs should normally be split between the upfront capital cost and the on-going annual support cost. But, remember that support will usually also be chargeable in the first year. If the system is being hosted, it should still be straightforward enough to do some number crunching to create a cost over, say, 4 years for comparison.

Costs would cover –

Software licences – remember that you might save some money by differentiating full and occasional discrete users; by delaying the rollout of users until needed; or delaying some extra cost modules that won’t be required until later in the project;

Services –these cover Installation, project management, development or customisation, changing document layouts e.g. invoices and purchase orders, integration e.g. to your bank, data cutover of customers, open invoices etc., training and assistance on the ‘go live’ day.

These will be guide costs and guide days. Remember that you shouldn’t complain if fewer days are spent than were budgeted in one area e.g. training if more days were spent elsewhere on the project. Suppliers are being asked at an early stage to provide a ballpark only. Generally, barring a major change to the requirements provided to assist with the cost, the overall figure should be within 10% or so of the final quote.

Another area to seek guidance on is infrastructure. If you need to replace or upgrade any of your equipment such as PCs, laptops, servers and communications, that can be quite a significant sum. Make sure what you have can support the proposed new system or establish a cost to upgrade.

You should also have an indicative annual support charge for software (and infrastructure, if required) and understand fully what is covered. Be wary of signing an extended support deal, e.g. three year, just because some advantageous terms are offered. You will not have experienced the support yet, so committing to a long term deal could prove foolish. Many such contracts are difficult to break.

How to Select an ERP System – Part 1 – The Selection Process

The number one rule is Identify What Makes Your Business Different. There are so many high quality ERP systems out there that do pretty much the same thing. You buy something, you add a margin, and you sell it. You want to record the purchase, manage the stock, record the sale and show the profit in your accounts. Your choice is not what software, just where to find the best combination of price and reputable supplier.

However, it will all go horribly wrong if you haven’t pointed out the differences about your operation. Perhaps you need to sell the item but record serial numbers, or monitor expiry dates, or immediately create a service record and remind the customer that maintenance work is essential within 12 months, or…or…or. If you haven’t listed what you think are your uniques, you can end up in trouble. That’s why it’s often the second time user who gets it most right, having found the glaring functionality holes in their first software selection. So write down your ‘uniques’.

Second, never assume. It’s so common for businesses to upgrade their system and find that things they relied on in the first system, and assumed would be there in the ‘upgraded’ system, are not! This even occurs when upgrading with the same supplier to a new release of that supplier’s software. So write down what you like about your current system and would be reluctant to give up (and anything you hate and are happy to lose).

Third, there are presumably a number of reasons for upgrading. You have a list of things you feel are missing and will be an essential part of your shiny new system. So write down the new functions you’re seeking.

Fourth, prioritise. Some of your requirements may be available bit at extra cost. If potential suppliers know what’s most important, they can point out the additional cost of some of your less important requirements. That way, you can apply some simple cost-benefit analysis and decide whether the extra cost is justified.

Finally, analyse your users. You should split your users into those who need full and unfettered access to all parts of the software – the accountants, the order processing team, the production manager etc. – and those who have a simple functional requirement – entering PO’s for approval, updating project costs, booking stock in and out. It is increasingly common for software suppliers to offer two flavours of user – full and ‘light’ or ‘limited’. The latter can be bought at a fraction of the cost of the former and offer serious cost savings.

 

Next time – Ballpark costs.

Are some ERP suppliers crooks?

I recently read a very interesting post entitled “Are Some ERP Consulting Firms Crooks?” (see article here). It was aimed at those consultants who are employed, ostensibly, to provide arm’s length, independent advice to businesses but who shamelessly take advantage of their client’s limited knowledge. People who are looking for help to choose and install a new ERP system find themselves conned as projects take longer and cost much more than originally stated.

 

But many of the points ring true for the scenario where the client is looking to do their own system selection and invites a few ERP suppliers to tender. In such a situation, the customer is relying on the potential provider to be upfront and honest, and offer useful advice. Clearly, they will also attempt to sell their system, but acting in a professional, consultative manner is a great way to win business.

 

Sadly, I often see the opposite happen. There are the resellers who field their best consultant to charm the customer and present the product brilliantly; and post-order, for those consultants never to be seen again. Or those who offer a terrific annual support rate which locks the customer in for 3 years – and only then does the customer discover that the support isn’t that great; and seems to come with lots of options for you to be charged extra!

 

However, the customers themselves are often their own worst enemy. Not so long ago, I was asked to tender for a system. The proposed final solution was going to be such a compromise that I felt compelled to write a summary of the likely failings and suggest that they reconsider their approach. But no, the Director was adamant that this was how he wanted it to be. Result – a very expensive system that delivered only a fraction of its capabilities. We, by the way, politely withdrew from the bid.

 

What’s the lesson to be drawn? In my view, references are everything. Whether it’s a consultant assisting the business to implement or a supplier offering up advice on how they would satisfy your requirements, speak to their past clients. And, one other thing.. another reason that the article branded some ERP consultants crooks was their ability to put forward ‘tame’ clients who would confirm how great they performed. So, don’t just accept the first reference given, check out a few.