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.

The Cloud is coming.. really!

A recent article in an Irish newspaper reported on a ‘stramash’ (Scottish for ‘bust up’; I don’t know the Irish equivalent but I’m sure it’ll be something similar) in the council chambers of a small county in the south of Ireland.

The head of business development was being castigated as an ‘Eejit’ (no explanation necessary, I trust) for suggesting that the council should invest heavily in cloud computing. His reasoning was simple as he explained to fellow councillors, “This county is covered in clouds for most of the year so there’s not much investment needed and it’s also going to raise our environmental credentials with the green lobby!”

Now, I will swear to you that I did indeed find this on a BBC news website, I bookmarked it and I sent the link to a few friends including, unsurprisingly, a very good Irish friend who works in IT. He scoffed that it could not possibly be true and then triumphantly emailed that, having tried the link, it didn’t work. Sure enough, when I did as well, the story had been pulled. So, someone somewhere had managed to fool the BBC. Shame, but what a great story though.

When it comes to cloud, I’ve not been as great an advocate as our Irish friend (see past posts) having spent much of my time dismissing the annual hardy perennial IT industry story that ‘This is the Year of the Cloud’, particularly as it relates to accounting software. However, shock horror, I do think we may actually be getting there.

Why?  Firstly, because the software industry wants it to happen and when the big boys decide this is the way forward for you and me, they generally get their way – eventually. It has taken longer than they would have hoped but I shall quote that old mantra ‘It’s the economy stupid’ by way of explanation. Slowly but surely, as the recession weighs over us, users are waking up to the fact that they can avoid upfront costs, expensive IT staff and constantly trying to manage upgrades, backups, anti-virus etc by shifting to a cloud model. And, so long as the costs per user per month keep falling, that shift will build into larger and larger numbers.

To date, the major take up has been in the less than 5 users sector where many are abandoning their old Sage solutions and either adopting Sage’s own cloud-based software or defecting to a number of lesser known newcomers who are under-cutting Sage. Those newcomers often have the advantage of offering a solution that was built exclusively for the web and is simpler to use. They have also been designed to overcome many of the pitfalls that arise from logging in to a system that’s remotely located who knows where. And, the final nail in the old guard’s coffin, many have a ready-made converter that takes your existing Sage data and painlessly transfers it to your new cloud solution.

What will bring along the new wave of larger users is similar price competitiveness and both Microsoft and the hosting companies appear to be recognising this. So, when users can buy a Microsoft Dynamics solution such as NAV (‘Navision’ in old money) for similar prices to the new kids on the cloud block, and combine it with a range of integrated and compatible Microsoft software, then we have a game changer. Later this year, NAV2013 is launched, and a huge amount of time, effort and Microsoft’s dollars has gone into ensuring this is a comfortable web experience. Add to the mix products such as Office 365 and CRM online, which integrate to NAV, and we have a very rich web experience on our hands.

Meantime, the hosting companies in the UK are also embracing the commercial realities of the situation by offering prices that reflect a sincere desire to see that this may yet be the year of the cloud. Indeed, one or two software resellers who dived in a little too early and had their fingers burned have abandoned their own hosting environments and signed up with the major hosting companies, it being so much more cost-effective.

So, a reality check, a recession, a desire to play catch up in a market that’s running away from them and a desire to establish a long and healthy pipeline of regular payments have all combined to offer larger accounting software users a more compelling proposition. When Microsoft launches NAV2013 later this year, expect to see a major step change in the number of users adopting the cloud platform.

As the kids used to say “Are we there yet?” Not quite but it is coming ever closer.

Cloud Computing – 3 key things customers and suppliers need to understand

A recent masterclass by industry guru Guus Krabbenborg issued a “wake-up call” to Microsoft ERP resellers identifying 3 issues that they must get their heads round now, or risk extinction in the long run. Whether or not we agree that ERP solutions are heading to the cloud just as quickly as Microsoft would like us to think, the issues are worth considering by us all, INCLUDING customers:-

1/ The big upfront licence fee will disappear and be replaced by a monthly subscription thereby causing an dip in reseller revenues (and, by default, easing the cashflow of the customer).

Is that really a huge disaster for the reseller and great news for the customer? The revenue from licences, over the typical 5 – 7 year life of an ERP system, represents quite a small percentage of the total cost of ownership. Savvy customers measure TCO not initial cost. However, Krabbenborg argues that the nature of the system delivered might affect this. So, read on..

2/ Mainstream customers will expect a generic system that does most of what they expect from an accounting solution and crucially, where it doesn’t, they will expect to just work around these deficiencies. Thus revenues a reseller expects from the associated services necessary to deliver a fully-fitting solution will also dip (and customers will pay less for their system, again).

The counter is that actually maybe they won’t! Customers are a lot more demanding of their computer systems than they once were. They know that changes can be made; they’ve been getting it done for quite a few years now. We installed our first NAV site in 1996 and EVERY site since has had changes to suit the customer’s own business model. Why would they accept compromise now? But Guus has some thoughts on this as well, so read on again…

3/ Non-mainstream customers, i.e. those is specialist areas, will demand industry-specific solutions that suit their business and won’t require change. An off-the-shelf solution for EVERY conceivable industry. So, even in such vertical markets, revenue streams will dry up as the customer logs in to his fully-functional industry-specific solution (and, once more, pays a lot less for the privilege).

Hmm – we do a number of vertical solutions such as hire, professional services, log management and builders’ merchants and while we would love to think we’ve covered all the bases, that’s just not realistic. EVERY customer, in each industry vertical, has their own ideas on how their business works. Now you can either say “No, this is what it does, live with it” or provide chargeable services to deliver exactly what the customer wants. Customers will make up their minds.

Lots to think about.