ERP Software Starting Point

Transcription

1 White Paper ERP Software Starting Point A Guide to Overcoming the Common Pitfalls and Fears Facing Decision Makers in the ERP Selection Process White Paper by: JOBSCOPE Software Jobscope Corporation

2 1 ERP Software Starting Point Executive Summary Today, many manufacturers are facing the very real threat of financial loss and stagnant growth during an increasingly unsteady economy. Instead of taking action to combat the very real economic threats they face, businesses are completely paralyzed with the fear of purchasing and implementing an enterprise-wide resource planning software system. Maybe they have been bitten in the past by poor software and bad implementations, or simply too scared to change the way work is done. Choosing the right ERP software for your company is a serious, lengthy, and essential business decision for all executives in today s fast-paced marketplace. Having the right system in place can lead to business growth and economic success, while selecting the wrong solution could wreak financial disaster. With the right ERP software in place, businesses can experience significant revenue growth; 300% or more over a 5-10 year period. This guide covers many of the common pitfalls and fears that decision makers face during the ERP software selection cycle, and is broken down into five main categories: 1) Cost understanding the true ROI 2) Time facts and myths 3) Implementation a plan to succeed 4) Support a plan for the future 5) Vendor Selection relationship trust These five areas will govern most of your time as you navigate your way through the ERP selection process. Understanding the business value to each of these key areas will help you create a more informed decision for your business, and your company s future. This white paper will provide several questions that your small to mid-size business should ask itself and the ERP software vendors, as you navigate your way through the selection process.

3 2 ERP Software Starting Point Contents Executive Summary... 1 Contents... 2 Cost... 3 Time... 5 Implementation... 6 Support... 8 Vendor Selection... 9 Additional Resources... 11

4 3 ERP Software Starting Point Cost Arguably the most prominent fear of purchasing ERP software is cost. This is of course very understandable considering the price tag (ranging from tens of thousands to millions), and the unknowns that go into such a purchase. After all, why should your business spend so much money for new software, when it has been operating without it for years? To overcome your fear of ERP software cost you must: Consider ERP Software as Capital. This may seem like a small difference, but it is very important for the way that you will psychologically approach ERP software. Since control of capital is the primary means of creating wealth for your company, this is a very important distinction to make. But this United States government Section 179 Tax Deductions can save as much as 35% off your ERP software purchase. isn t just a mind game; even the United States government recognizes ERP software as capital in their updated Section 179 Tax Deductions (which could save you up to 35% off of your ERP software purchase). To learn more, visit Do Your Research. Now that you re considering ERP software as capital, it s important to treat the potential purchase like you would any other capital investment for your business. Identify the factors that you would consider for such a purchase - what will the ROI be, what are the upfront costs, how will this improve my day to day operations, etc., to determine if the purchase is necessary. No vendor or RFP sheet will be able to tell you where your economic benefit will be better than you can. If you have not first identified the specific areas that you are looking to improve, then you will not be able to determine how much an area has improved afterwards. Understand the ROI. It is easy to get lost in all the percentages, numbers, and dollar signs that you will hear and read about when considering purchasing ERP software. While these numbers might serve to give you guidelines for what you can expect in return from your investment, the biggest ROI of any ERP system is the one form of capital that you can never create more of - time.

5 4 ERP Software Starting Point If you own a bicycle and upgrade to a car, the car won t put $50K-$200K worth of cash in your pocket after owning it for 8 months, but it will certainly allow you to get from NYC to LA a whole lot faster - 28 days to be exact. ERP software ROI works the same way - it doesn t place thousands of dollars in your pocket after 8 months, but it will enable your business to execute operations significantly faster - performing year end financials in 1 day instead of 2 weeks, cut labor costs by 75%, and increase company revenue by 300% over 8 years. Speed kills, and your newfound speed of business will help kill stagnant growth. Examine the Results. Before you make any major purchase, you typically want to know what other users of the product have to say about it. What was their experience like? What did they really love about the product? What did they really hate about the product? The fastest way to cut through all the case studies, whitepapers, and other criteria that vendors will throw at you is to find out what their customer retention rate is. If a customer is happy, they will continue to use a product through multiple life-cycles because they have developed a trust for the brand that they re using. Take Apple for example. How many people do you know that bought an iphone 3, iphone 4, that haven t bought the iphone 5 (or planning on buying it?). For the consumer, that s called customer satisfaction, for Apple, it s called customer retention. Trusted ERP vendors have customer retention rates that are at or above 90-95%, over a 15+ year period. If the vendor that you re talking with doesn t have any idea what their customer retention rates are, they probably aren t very good. This should tip you off immediately that customer satisfaction is probably not very high, and that you should steer clear of this particular vendor. Conversely, if customer retention rates are above 90-95% over a 15+ year period, you know that you are dealing with a well-respected vendor that should be capable of handling your business needs. Most businesses purchase new ERP or significantly upgrade their ERP every 4-6 years. Having retention rates above 90-95% over a 15 year period shows that customers have gone through several life cycles of the software and remained satisfied with the vendor and the results.

6 5 ERP Software Starting Point Time For years, businesses have been increasing the speed at which they do business through computers, cell phones, internet, laptops, tablets, , web conferences, ERP software, etc. While most businesses utilize all of the above to save them time, some are still very fearful of the time that it takes to select and implement an ERP software solution for their business. Below are the top fears and myths of time and how to overcome them. Our business is too busy to evaluate ERP software. This is a very common objection to beginning an ERP evaluation, we simply don t have the time to begin. Truthfully, there is never a great time to begin evaluating ERP software either your business is too busy and resources are thin, or your business is too slow and resources are forced to be thin. Rarely does that happy medium of success and timing present itself. Instead we try to convince ourselves that we simply don t have the time, but consider this: If you were on a rapidly sinking ship in the middle of the ocean, would you look at the lifeboats on deck and say, We know these boats would dramatically increase our chances of survival, but we don t have the time to untie the ropes. To overcome your fear of time, you must approach ERP software with a sense of urgency. If you don t, your business, like the ship, might be headed for an unfortunate fate. Make the time, do the work, and untie the ropes. ERP implementations take years to complete. Unless you have hundreds or thousands of locations, most small to mid-size ERP implementations are completed in less than 4-6 months. This obviously is a far cry from the 3-4 years that you hear from multi-billion dollar companies. Nationally, implementation times have decreased by 13% over a 3 year period. Panorama Consulting s independent 2013 ERP Software Report shows that implementation times have decreased by 13% over a 3 year period. This trend proves that ERP software implementations are getting faster, not slower.

7 6 ERP Software Starting Point So, what size is your business? Take the time to evaluate the scope of the project yourself, don t let the project just be dictated to you by your vendor. ERP implementations should always be performed as a cooperative initiative to achieve optimal results. It s not the right time of year to purchase ERP software. While it s true that businesses do typically ramp up ERP initiatives near the winter and spring, this does not mean that they are the best times to conduct them. These simply happen to be the times that companies realize that they should start an ERP initiative, because after peaking at their Q3 books they want to start saving more money. Remember the first point? The same applies here. Instead of waiting until the end or beginning of the year, consider starting your ERP software initiative in the summer and fall. Doing so will prevent your project from getting consumed with the other Q4 and Q1 projects that will be starting up around that time. While it s true that ERP implementations do take time, the benefits cannot be denied. Don t let the opportunity to own a life-boat pass you by because your business was too busy to cut the ropes. Make the time, approach it with a sense of urgency, do the work, and experience the benefits. Implementation We ve all heard the stories and read the headlines - Massive ERP Company Sued by ABC Manufacturing after ERP Implementation Went from 7 Months to 27 Months. The reality is, this is not the norm. However, that doesn t mean that you should ignore these horrible cases when they arise, but should instead study them to ensure that you don t suffer the same fate. Here are some helpful ways to avoid the pitfall of ERP software implementation failures: Ask for references to establish realistic expectations. In order to set up realistic expectations for how long an ERP implementation can take, ask for as many references as you can - before you purchase. The more information you can gather about businesses that are in the same industry, revenue size, and resource capability, the more accurate project time estimation you can receive. Don t listen to the ERP vendor s

8 7 ERP Software Starting Point estimate, listen to their customers. If the clients consistently tell you that implementation times take 4-6 months, then you know what to realistically expect from them. Participate in the implementation plan. One of the worst things to do during the purchasing cycle is to simply sit back, take a hands off approach, and let the ERP vendor dictate to you what your implementation plan should be. Yes, the vendors are experts at implementing, but, they are not yet experts at your business, you resources, and your capabilities. Before you establish an ERP implementation plan with your vendor, ask them to walk the floor with you to help identify pain points and formulate your plan together. When both parties have worked on the plan, then everyone knows what the expectations are going forward, which is critical to keep the project on track. Count your resources, carefully. Before the project even starts, you must ask yourself; do I really have the internal resources available to devote to a 4-6 month implementation? If you do not set up a plan to continue to execute everyday work, in addition to the work of the implementation project, then one of two things will happen. Either your everyday work will slide, or the implementation work will slide. This is one of the biggest culprits of ERP Industry specialized ERP vendors implement 2-4 months faster on average. implementation project creep. However, if you have planned ahead of time and counted your resources, then you should have no problem finishing your implementation with the plan that you have both established. Have a backup plan. Even if you have established a realistic implementation time estimate though references, worked together to establish a project plan, and properly counted and assigned your resources, delays can still happen. What happens when the ERP implementation project manager gets the flu, gets hurt, or is otherwise unable to participate? Have you accounted for vacation, holidays, etc.? Creating a backup plan for these circumstances is critical to keeping the implementation on schedule. Make sure that as part of counting your resources, you have also established a backup plan internally, and with your vendor.

9 8 ERP Software Starting Point Support In addition to Cost, Time, and Implementation, another common pitfall of purchasing new ERP software is the on-going Support after purchase. Will there be any? What will it look like? What will it cost? How reliably and quickly will my questions or business issues get resolved? Here are four helpful ways to make sure that your business will have the on-going support that it needs to succeed: Test the support system prior to purchasing. How responsive and helpful will the support be? Find out for yourself. If the vendor has a number to call, or an address to use, test them out. Pretend that you have a critical business issue that needs resolving immediately, and see how long it takes to get to a resource that is able to answer your question. Do you get sent to a call center in another country? Are you placed in an extensive queue system? Or are you speaking directly with a knowledgeable representative that can answer your question immediately? Responsiveness in the sales cycle can sometimes translate to the support side, but not always. Test to find out. Ask important questions about your existing data prior to purchase. Will I be able to transfer over my old data to the new ERP software system? Most vendors offer data migration services for a fee. Since your existing data is one of the most important resources that you have as a business, make sure that you are very familiar with the process and conversion outline proposed by an ERP vendor, before you purchase. Make sure that the vendor will be able to handle all of your data, and not be outsourcing your data to another agency that isn t familiar with your business or business processes. Ask the ERP software vendor how they handle upgrades. Another important question to ask is, if we make customizations to the software, will those stand in the way of a future upgrade to a newer version? Some vendors charge upgrade fees, some don t. Some won t migrate your data to a new version for free, and some will. Also, ask if there is an additional cost for newly released modules or functionality. Some vendors include all current and future modules with your Most vendors only include 70-80% of core functionality with each software license. purchase, while others will charge for each current module and all new functionality. Most vendors only include 70-80% of core functionality with each license, meaning you will likely have to pay more for additional

10 9 ERP Software Starting Point modules to cover the other 20-30% of what you need. These are important questions to have answers to, before you need an upgrade. Find out what services are offered to ensure future business growth. Simply purchasing ERP software doesn t ensure business growth without goals, guidance, and direction. Is there a plan in place for you to connect with other users? Does the vendor offer a platform for users to voice their opinions and suggest improvements to the ERP software? It s going to take an ongoing relationship with your vendor to help make you successful. If the vendor that you select doesn t sell modules in piece-meal, but instead gives you all of the functionality, then the relationship that you ll have with the consultant will be much more amiable - you won t be getting a sales pitch all the time, but real, quality help and insight. Vendor Selection An equally important piece to identifying the risks and rewards of Cost, Time, Implementation, and Support, is actually choosing the right ERP software vendor for your business. This is not something to be taken lightly, as you will be married to your ERP vendor as long as you run their software. Before you select the ERP vendor that you feel is the right fit for your business, here are a few helpful things to keep in mind. Look for a vendor with a focus on your industry vertical. If you are a manufacturer of ball point pens, look for a vendor that has an industry focus on repetitive manufacturing. If you are manufacturing custom, highly complex machinery, you would want software specialized for engineer to order manufacturers. It s helpful to find a company that has focus, versus a solution that can have a focus. If everyone at the company is knowledgeable about custom manufacturing, then they will be able to provide better business support for you than the alternative. If you need a can opener, do you want a real can opener, or the one on your Swiss Army knife? Dig up the honest truth. Type in the vendors name in Google, followed by the word lawsuit and see what shows up. Not every company is as reputable as they seem, or as kind to their customers as they claim, so it is well worth it to spend the time to look in the ERP vendors closet to see if they are hiding any skeletons. If a company has been around for 30+ years without one, they would be a reputable company to deal with.

11 10 ERP Software Starting Point Find out if you are dealing with a software company, or a software acquisition company. A software company cares deeply about their product and the services they offer to their clients, because they ve put their name on it. A software acquisition company cares about growing their portfolio of products, and the revenue they provide to their investors. Check to see if the software has changed names recently, or has been bought out by someone else, etc., as these are signs of a software acquisition company. A true software company will be deeply invested in their software because they created it, and they will care much more about the relationships they have with their customers, because the only investors they have are their customers. Are they easy to do business with? Something that can often get lost in the comparisons of functionality vs functionality and spec vs spec when comparing software is the actual company behind those software offerings. When you get a proposal from an ERP vendor, it shouldn t be complicated. If you re having trouble navigating the ins and outs of a simple proposal, this could be indicative of the experience you ll receive when you have a support, contract, upgrade, or data migration question. If the relationship starts off feeling complicated, you can expect it to stay that way. Software experts should be able to deliver a smooth experience across all aspects of your purchase, from sales, to implementation, to on-going support. Make sure that the vendor you select can handle all of these areas with ease.

12 11 ERP Software Starting Point ERP Software Starting Point JOBSCOPE Corporate Headquarters 355 Woodruff Road Greenville, SC Phone: Fax: About Jobscope Jobscope was established to develop manufacturing ERP software to meet the requirements of job-based manufacturers [Engineer to Order (ETO), Make to Order (MTO), Maintenance Repair and Overhaul (MRO), Job Shop, and Government Contractor manufacturers] that were not being met by traditional manufacturing software solutions. Jobscope's founders were hands on manufacturing managers and software developers. They realized that companies manufacturing custom products or providing contract services were not well served by any of the ERP software packages at the time, and created JOBSCOPE ERP. For more than 30 years, Jobscope has been providing best in class ERP software to thousands of manufacturers worldwide. To learn more, visit Additional Resources JOBSCOPE Manufacturing ERP Software Brochure JOBSCOPE Manufacturing ERP Software Demo JOBSCOPE ROI Calculator JOBSCOPE Case Studies JOBSCOPE Success Stories