ERP evaluation for Australian construction companies

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1 COMPLIMENTARY WHITE PAPER ERP evaluation for Australian construction companies (Choose right for maximised ROI)

2 ERP evaluation for Australian construction companies (Choose right for maximum ROI) EVALUATING FOR BEST FIT Evaluating enterprise resource planning (ERP) systems can be a daunting task. The system and vendor chosen is a strategic decision and can have a significant impact on the strategic future of your business and the extent of the benefits gained from your ERP implementation. However with many alternate providers to choose from, all sales people telling you theirs is best, and knowing that the Australian construction industry has its own requirements that differ from other industries, how do you choose a vendor that is best fit for you and who will deliver you the most benefit? Each person you ask (whether they are an ERP advisor, vendor, re-seller or even a work colleague) will be able to give you their long list of criteria they would use to evaluate ERP vendors. Each person will have a different suggestion and it can quickly become overwhelming. If you boil it all down however, a successful choice in ERP vendor will always take place by considering the categories below. 1. Software Fit - Functionality - Technology THREE CATEGORIES Software fit, supplier fit and ongoing fit are the three over-riding categories that need to be considered with any successful ERP evaluation. These remain the same for all industries, and the Australian construction industry and its sub-industries are no exception. Companies will start their search with a large pool of vendors, however, as you go through each category you will see fewer and fewer vendors able to meet your requirements; and of course, the best choice in ERP software will see the greatest return on investment achieved as demonstrated in the figure below and to the left. The order of the three categories illustrated is the very logical. If a software system does not meet your functional requirements, there is no point evaluating the potential for a long-term working relationship with potential suppliers. Likewise, if you can not see yourself getting along with the software suppliers far into the future, there is no point getting into the nitty gritty of costs, support and system maintenance. Considering Software Fit first is important because your company s functional requirements are also often the simplest to list and the most objective to base decisions on. How will this evaluation help me? Despite the visual simplicity of the diagram to the left, the process of evaluating ERP software vendors is by no means a simple or fast process. Next, we outline the considerations we recommend within each category. The end of the article contains a checklist to assist in the process for a typical Australian construction company. Decreasing number of vendors 2. Supplier Fit - Vendor - Implementer 3. Ongoing Fit - Support - Maintenance - Total cost of ownership At the end of each category section, we will link to the checklist associated. The checklist is structured around the needs of a typical Australian construction company to support your process of ERP evaluation. Top ROI & Sustainable Business We recommend you read each section and review the entire checklist before carrying out your evaluation.

3 STEP 1 - SOFTWARE FIT Software Fit is the category most people first think of when commencing a software evaluation. Within this category, it is very important to consider both how closely the vendors offering aligns to your software functionality needs and also any associated technology you may require. Software Functionality When it comes to functionality requirements, it is particularly important to ensure your ERP system is built specifically for Australian construction companies. Our industry has its own processes and requirements that are different to those of other industries and a one-sizefits-all software will not see you become your most efficient. Remember the Australian construction industry also has different requirements compared to American or European construction companies. Regulations and legislation are constantly changing and it will pay off for your business to implement a software system that stays up to date with these changes. Common functionality required by construction companies might include: 1. Functionality that streamlines your jobs and gives you control. Enabling full project control, cost forecasting, trackable cash flow, combine projects together for combined results, job budgets measurement, committed costs, actual costs and forecasts, generation of an extensive range of reports, and more. Functionality surrounding these components is often where the most significant return on investment with ERP s stems from. Having your projects streamlined, controlled and efficient means more profitable projects. 2. Accounts receivable functionality: Complete claims and invoices to satisfy a wide range of contract types, manage and control cash retentions, automatically print certificate documentation, set up recurring invoice schedules, process progress claims and invoices; and more. 3. Accounts payable functionality This functionality needs to meet your company s individual requirements. This could be anything between a very basic accounts payable system to a fully featured supply and sub-contract control system. May include a wide selection of creditor financial reports, support creditor invoice capture, have a disciplined invoice approval and release process, manage subcontractor retentions, produce the Business Activity Statement, and more. 4. Functionality for full control of your General Ledger This year and last year financial comparisons, definable accounts for documentary, transaction and sub account subtotalling and totalling, rolldown multi-branch recalculation and consolidation, recurring and imported journal options, and more. 5. Construction-specific payroll ERP should streamline your payroll, ensuring accuracy and significantly increasing the speed with which it is processed. Because of the integrated nature of ERP, realtime labour cost information should be available with payroll and labour costing accounted for in the GL. Matching of timesheets to awards to derive pay documentation will be streamlined, plus time and activity information for productivity analysis and invoicing support will be provided. Further to this, other common functionality required may include: Call out service jobs Fixed assets Customer and supplier relationship management Quotes and estimates Procurement Planned asset maintenance Inventory Document management Customised reporting capabilities. ERP should streamline your payroll, ensuring accuracy and significantly increasing the speed with which it is processed. Associated Technology When investing your money and time into an ERP system, it is imperative to ensure the technology required for your ERP is up to date and justifiable within your assigned budget. A good vendor will be able to demonstrate that they are utilising the latest that technology has to offer and how this will benefit your business. They should also be able to provide you with a technology road map, showing a clear plan of how the ERP system plans to keep up with technological developments to ensure you always stay ahead. Some ERP vendors continue to run their systems on out-dated technology which leads to two potential consequences for your business. Firstly, outdated technology can be slow and place limitations around the ERP s future development. Secondly, the cost to both initially purchase the outdated technology and then to inevitably upgrade to new technology when your vendor is forced to progress with the times can be crippling to a business already placing significant investment in the ERP itself. Before reading on, we recommend you familiarise yourself with some of the questions we have outlined on the checklist. It may help you think about the type of vendor your business needs and what else may impact the implementation. Access your Software Fit checklist here.

4 STEP 2 SUPPLIER FIT An ERP implementation is a strategic decision. In order to gain the greatest return on your software investment, it is necessary to find a supplier who is committed to working with your business for the long term and who is invested in ensuring your business growth. But how can you objectively evaluate a supplier fit? Below we list a set of what we consider to be ideals when making a software supplier choice. Of course, not all suppliers will fit all of these criteria; however by deciding which are most important to you and on which you are flexible, you can make an informed decision, narrow down your search, and be cognoscente of the criteria. Finally, before we get started, ideally your software vendor and implementer vendor will be one and the same. Sometimes this is not possible. We have therefore broken up the criteria in to two categories; these are Software Vendor and Software Implementer. Software Vendor Ideally... Vendor developed: o The software vendor would have developed their software system in house and will be the company that will continue to develop and enhance it into the future. By choosing a vendor who always has and always will be responsible for their own development, there will be more chance of your company having the ability to steer development efforts towards what you require and reaction time to changes in the industry will be much faster. Here for the long haul: o Technology is a fast paced industry where companies come and go quite rapidly. In choosing a viable supplier, it is suggested you look at how many years the supplier has been successfully operating, whether their technology platforms are up to date, and whether they have clear technology and strategic business plans well into the future. Outdated technology and unclear future plans can be an indication of disorganisation or potential problems within your supplier s organisation. Vendor size: o While taking our advice and opting for an industry specific, Australian provider may lend itself to a smaller vendor, it is still important to choose a vendor with a significant-enough number of clients in industries / sub-industries similar to yours. This shows that their offering suits businesses just like yours, and that you can expect that they can operate on a large enough scale to stay up to date while minimising costs for your business. Vendor compatibility: o Everything about ERP is strategic and long term. That is where the real benefits come from. Therefore, choosing a software vendor you get along with is imperative. Are you comfortable with the vendor? Do you trust them? Would you want the vendor as your own business partner? Would you say the vendor company has similar core values to your company? If the answers to these questions are no, we suggest treading wisely. Software Implementer It is imperative that your ERP implementation is done well if it is to achieve maximum ROI and adoption across your business. Ideally Deep industry knowledge o The best software implementers will have many of their implementation staff holding multiple years of experience working within Australian construction companies. This is beneficial because it means your implementation team will know your industry inside and out, will explain everything in a language that makes sense to your people and will ensure the software works exactly as it should to optimise what your company s needs within your specific subindustry. Also, if your implementers have worked in a construction company that has gone through an ERP implementation, they understand first hand how your people are feeling, where hurdles may be and how to get it up and running as fast as possible. Deep software knowledge o The implementation team set to work on your ERP implementation should have years of experience with the software behind them. The deeper their knowledge of the software, the better the end product for your organisation. Business process and best practice understanding o Your implementation team should be able to easily understand your business processes and should be able to clearly explain how the new software will work to optimise your processes. On top of this, they should be able to clearly explain how their ERP system is seeing your construction company employ best practices, good governance and enable sustainable business practices. Checklist Is your supplier committed to improving your business? Access your Supplier Fit checklist here.

5 STEP 3 - ONGOING FIT Your new ERP system needs to be considered as a key component of your organisation. Like a machine, it will need maintenance, upgrading and care and taking this approach to your ERP will see it become an everimproving and evolving tool for your company. Saying this though, how well your software vendor can support, maintain and enhance your system, and associated costs, can make or break your company. Therefore, while Ongoing Fit is the final evaluation category, it remains a significant consideration. Having minimal downtime, questions answered fast and changes made quickly can have a huge impact on your company s productivity and profitability. Support Ideally... Guaranteed call back time o Just as a good pit-stop team can be the difference between first and second place, having minimal downtime, questions answered fast and changes made quickly can have a huge impact on your company s productivity and profitability. A guaranteed amount of time within which you will get an answer to your support query is rare in the ERP industry but is very important for your business. Some vendors are known for leaving their clients support queries for days at a time! At the other end of the spectrum, some offer a guaranteed 2 hour support turnaround and an average time of 45 minutes. o It is important that you evaluate and understand the impact delayed service calls can have on outcomes crucial to your daily and weekly process delivery. Exceptional support personnel o Even with a guaranteed support turnaround time, if the support person on the end of the phone doesn t have the knowledge or experience to be able to answer your query, you are left in the same position. On the other hand, if you are talking to a support person who is a specialist in your ERP, who has worked in your industry and knows it inside and out, you will get the best answer every time. Support outlet that suits you Support may be offered over the phone, online (through , webinar with screen sharing, webchat etc), or in person (at your office or at the vendor s / reseller s office). Each type of support is costed differently and each suits different situations. What s important is to ensure your vendor offers the types of support your organisation will find most useful. Maintenance Ensure you know about Upgrade costs o All good ERP vendors will put out annual software upgrades and year-end updates to ensure alignment with any new taxation regulations. This will incur a fee and it s important to know approximate costs surrounding this service. Upgrade inclusions o If you re paying for it, annual upgrades and enhancements need to be value-adding for your organisation. Ideally, ERP vendors will get clients input into designing the inclusions for upgrades. They will combine their technology expertise with your industry expertise to ensure their software is always leading edge and improving in the areas of most interest to you. Upgrade protocol o Upgrades can be disruptive. It is important to have an understanding of the downtime to expect, what will be involved in running your upgrade, whether you can run it internally or if it must be completed by the vendor (which will incur a fee) etc. Good vendors will be able to show you previous upgrade documentation and packaging so that you will know what to expect. Some vendors will even make weekend support available so that your company can arrange to upgrade on a weekend and avoid disrupting the company. With research proving that actively measuring ROI leads to significantly improved business results, would you risk going with a vendor who has never considered measuring this important outcome? Help Text to self help o Help Text / FAQs throughout the modules within the system is the most basic form of support. If it has been done well, Help Text can solve many queries immediately and cut back support costs and downtime.

6 Total Cost of Ownership Like any project, an ERP implementation can quite easily run over budget. It is very important to understand the total cost of ownership for the long term and these costs can be very different when comparing vendors. Some of the costs are listed below. Some costs to consider going forward include Cost of training o We hear about it time and time again company s do an in-depth ERP evaluation, choose a vendor, implement and then it ends up failing. The issue here is people. Training of the new software system is of paramount importance to the success of your ERP system. If users are not trained to the point where they know exactly how to use the system to get the information they need efficiently, they become frustrated and begin to think the system is no good. This can see hundreds or thousands of dollars of investment become useless and old processes reverted to by your staff. Training is imperative and therefore knowing the cost of such training is very important for both the implementation and going forward in terms of refresher courses, new functionality and new staff inductions. Return on investment (ROI) o Ultimately, the reason for implementing an ERP system is the gain a return on your investment. In some cases this can be seen immediately, however in almost all cases the significant return on investment occurs over some time. Ask your potential vendors how they plan on working with you to track this. If this question takes them aback or if they aren t 100% sure on how to answer it, chances are they don t usually measure the ROI achieved by their clients. With research proving that actively measuring ROI leads to significantly improved business results, would you risk going with a vendor who has never considered measuring this important outcome? Training options o Not all businesses are the same. You may have multiple offices, offices in remote locations, staff overseas etc. Your vendor should be able to offer you training options that can cater to these differing needs in a cost effective way. For example, live online training may be an option, training videos may be available, pre-recorded webinars / webcasts may be available. Ensure you know your options with your implementer / vendor as sending a trainer to multiple remote locations to do in person training can quickly add up especially if a more cost effective way is available. Consulting Services o As your company progresses, grows and changes, your software needs to remain exactly what you need to maximise your competitiveness. Some specialist ERP vendors offer consulting services that capitalise on the vendor s industry experience and software knowledge to assist in enabling your strategic plans, growth plans, change plans etc. Consulting services can utilise the data you collect in your system to determine best courses of action in terms of re-structures, growth, joint ventures etc. It is therefore important to know what kinds of services potential vendors can offer, the cost of such services and the success rates the vendor has had with previous clients who utilised these services whilst undergoing change. Checklist Will the ERP system you have chosen continue to be an ever evolving tool for your company? Access your Ongoing Fit checklist here.

7 IT S OVER TO YOU Ok, so that was a long and detailed list. Understanding and prioritising the above criteria however will lead to an informed ERP decision and maximised results in terms of return on investment and long-term functioning of your business. Having read this article and familiarised your self with the checklists you should now be best placed to begin an evaluation process. The checklists are designed to support you in the ERP evaluation process from your initial exploration of software needs right down to signing up to your chosen software. The checklists will assist you to prioritise in terms of your business needs, rate potential vendors against them and then objectively compare each vendor both overall and by category. From the team here we hope the experience, knowledge and research put into this document assists you to choose and implement the ERP system that will see you achieve the maximum return on investment and competitiveness in the industry with the minimal disruption to your business. If you have any questions about the information covered here, please do not hesitate to contact our team of specialists on or at

8 CHECK LIST Below is a checklist you can use to objectively rate potential ERP vendors on the previously described criteria. Apply a weighting to each criteria in terms of how important it is to your business needs for improved accuracy. The highest scoring vendor overall may be the best fit, however it is more useful to use this checklist as a guide to inform your purchase decisions. Good luck! SOFTWARE FIT (>> back to article) Criterion Weighting 1-5 in importance to your company Performance 1-5 in how satisfactorily the ERP under evaluation meets this criterion Score Weighting multiplied by Performance Australian made Australian owned Designed specifically for the Australian construction industry Job streamlining functionality (Easily captures forecasts, subcontract assessments, head and subcontract variations and back charges) Accounts receivable Accounts payable General Ledger Construction-specific payroll Services functionality Fixed assets CRM and SRM Quotes and estimates functionality Procurement Planned asset maintenance Inventory Document management Customised reporting (Inc. Balanced Scorecard & corporate forecasts) Up to date technology Technology road-map Information security Documentation of business processes Total

9 SUPPLIER FIT - Vendor and Implementer (>> back to article) Criterion Weighting Performance Score Vendor and implementer one and the same Vendor developed system Proven vendor / time in industry Large enough vendor / solid client base Vendor compatibility / key staff get along with vendor Implementer has deep industry knowledge Implementer has deep software knowledge Implementer has business process and best practice understanding Total ONGOING FIT (>> back to article) Criterion Weighting Performance Score Support has a guaranteed call-back time Exceptional support personnel Help Text embedded in ERP Multiple support outlets available Upgrade costs are satisfactory Upgrade inclusions known and satisfactory Upgrade protocol reasonable Cost of training known and reasonable Variety of training options (online, in person, videos etc) Consulting services and cost known and reasonable Return on investment measurable and satisfactory Total OVERALL TOTAL (Software, supplier and ongoing fit totals)

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