ERP: Is it Dying or Thriving in 2019?
If you’re a controller, CPA, or anyone else who needs to have a comprehensive understanding of business operations from start to finish, you know how important it is to have up-to-date, accurate, and actionable data.
You might also realize that when you’re growing, certain pieces of software that initially met your needs will eventually fall short of what you require. That’s typically when you would consider moving to something like Enterprise Resource Planning (ERP) software. But is that still the next best step?
Every few years a slew of articles come out claiming the death of ERP solutions, or at least asking the question: is it alive or is it dead?
It seems like a question worth asking. With new technologies constantly being introduced to market, and integrations becoming easier than ever, it’s not surprising that business owners are looking for best-of-breed solutions that are less all-encompassing and more cost-effective.
Are you Asking the Right Question?
There’s one fatal flaw with the question “is ERP dead”, and it’s that ERP is most certainly alive and well. It’s an enticing headline, but the fact of the matter is the majority of organizations are either implementing ERP software or have completed an implementation. So, what’s the big deal?
While ERP is still widely used, the traditional ERP system isn’t the only option at your disposal. It’s adapting and changing to the needs of the market and the capabilities afforded by the latest developments in technology.
So, the real question isn’t “is ERP dead”, but more so “what is the current state of ERP software, and is it still a viable option for your business in 2019?”
Another way to put it: what’s changed, what’s stayed the same, and what does it all mean for you?
How Has ERP Stayed The Same?
Ultimately, using an ERP is about empowering every member of your team with information. It’s about providing clear visibility and control – from marketing and sales to operations and leadership. It’s about ensuring every decision you make is as well-informed as possible, so you can move forward with confidence.
That goal hasn’t changed. There needs to be control over what hits the books and what is reported to different members of your organization. ERP is still geared towards reducing time spent on tedious, repetitive, and error-prone tasks; reducing unnecessary costs; growing revenue; and ultimately, improving quality and customer experience.
Any business owner can agree on the importance of those goals.
The Importance of Process Analysis
If you’re looking to upgrade to ERP, it’s likely you have a proven process or workflow that makes day-to-day operations possible. And while it isn’t perfect, it’s getting the job done. But when was the last time you really audited that process, taking stock of the things it accomplishes, the places it falls short, and the areas that are most mission critical?
Considering these things has always been important, and no matter what system you put in place, that necessity hasn’t changed. Whether done internally or with a partner, you need to assess your system in terms of…
- Where you are
- What gaps exist
- What your top priorities are
Doing so will give you the opportunity to identify what aspects of the ERP will enable your business to continue operating with as little disruption as possible, while also finding inefficiencies that you’ve never been able to address before.
How Has ERP Changed?
Most ERP software is fully integrated and uses a single user interface, ensuring all your data is connected and updated in real-time. This helps with keeping information accurate and consistent, empowering you to make well-informed decisions.
Unfortunately, a single ERP system cannot meet all your business needs. Certain aspects of the system may not fit your processes perfectly. And in the past it may have been incredibly difficult, if not impossible, to connect specialized systems with your burgeoning ERP software.
Both integrations and customizations can now solve this problem. As businesses grow, the control offered by ERP solutions at the core with carefully considered best-of-breed systems best relieves the most common growing pains.
At the same time, an amalgamation of specialized systems does not replace an ERP system’s usefulness. While the barrier to utilize specialized systems along ERP is reducing, and systems are being built with integrations in mind, managing a broad suite of integrations is a challenge and needs to be carefully planned.
Reporting & Data Warehousing
In the early days of ERP, the system was the master record and stored in a relational database, so it became the go to place for putting data critical to reporting — transactions, sales, purchase orders, journal entries, AP/AR, etc. Reporting on this data was easiest if it was in the ERP system, so everyone tried to stuff everything in.
This caused an issue though, because as the ERP system attempted to collate all this data, the size of the datasets exceeded the processing power of available servers. There was an excess of data in the system that didn’t need to be there, too many processes that didn’t belong in ERP, and too many people with access. This increase in size and complexity resulted in maintenance that was too cumbersome and expensive.
Years of data added up to millions of transactions, and trying to process that data caused the rest of the ERP system to virtually come to a halt. So everyone else trying to enter purchase orders, shipping updates, invoices — all incredibly important to keep the business running — couldn’t do their jobs.
Nowadays it’s too easy to combine data from different systems to accept this type of inefficiency. Using something like a data warehouse, or even something as simple as Power BI, allows you to put business logic in the aggregations so that it’s easy for your users to create, analyze, and report on KPI’s for the most critical information.
This also makes it possible for companies to run endless queries on the database without slowing down the rest of the system.
There has been a significant shift in the last year from on-premise ERP systems to cloud-based systems.
With that change comes a paradigm shift in how ERP is customized and developed, and how you buy.
- Using the cloud means that initial costs are lower, thanks to lower upfront licensing costs, lower upfront hardware costs, less IT labor costs to maintain, and more inexpensive upgrades. However, it’s important to consider the long-term implications of using a subscription-based payment model.
- Using the cloud has encouraged simpler and more straightforward implementations, but only if you maintain realistic expectations throughout the project.
- When you’re on the cloud you don’t have total control over updates, so you’re forced to stay on top of small, incremental changes, but this eliminates the big-bang upgrades found in on-premise deployments.
- A cloud-based ERP system is designed with integrations in mind, but also limit some customization options. Think about it: if Microsoft is going to support 1000s of ERP cloud clients, they can’t allow the poorly written code of one system to bring down the other 999.
Thanks to the proliferation of SaaS products and the advent of the cloud, the cost of software products is dramatically decreasing. Buyers have noticed this, and as a result they’re demanding less expensive ERP implementations.
On top of that, as business owners become more familiar with different types of software methodologies their mindsets shift on how to implement software for their business.
Waterfall methodologies used to reign supreme, which offered little flexibility and required everything to be built sequentially. During implementation you’re bound to discover needs that you didn’t address when originally planning the project. Using the waterfall methodology, you may be unable to address those needs without spending exorbitant amounts of time and money.
Other methods like agile are bleeding into ERP, which encourage getting to a simpler solution faster, followed by iterating repeatedly to drive continued improvement. This makes it easier to address problems and unknowns as they arise, which are often inevitable when implementing a system that is so critical to the operations of the business.
Using an agile methodology also gives you more control over cost. You can regularly assess which components of the system are most critical and prioritize those over less significant features. You can also shift the focus of the project with more ease, so you don’t spend inordinate amounts of time making progress on something that is either inefficient or inconsequential.
Keeping up with Compliance
While we can simplify our ERP deployments with integrated systems and data warehouses that provide appropriate visibility, it’s imperative that businesses record data with the proper controls to meet compliance bodies.
ERP has always made meeting compliance far easier than manually tracking data through spreadsheets and external databases; the challenge is keeping up with requirements as they change.
Think about something like the growing complexity of tax laws for organizations doing business online, or the importance of acquiring certain certifications to ensure your customers are comfortable doing business with you. Such conditions introduce new data that you didn’t need to track previously, or new ways of tracking existing data.
While an ERP is still an extremely useful tool for satisfying these requirements, you need to ensure you’re aware of what standards and rules you’re responsible for meeting and whether your existing system accounts for them.
If you’re planning on implementing ERP or actively involved in an implementation, make sure your partner is aware of what compliance bodies you should satisfy and is building the system with those needs in mind.
Where Does That Leave Us?
ERP looks a lot different in 2019 than it did just a few years ago, but don’t let that fool you – it’s not only alive and kicking, it’s evolving to match the technology and needs of today’s users.
In summary, we know the following is true about ERP in 2019…
- The goal of ERP hasn’t changed, and the importance of auditing your existing system before implementing ERP is just as significant as it was thirty years ago.
- Technology has had a big impact. Better integrations means you can use highly specialized systems for certain processes, but it’s critical to balance that with the overall complexity of orchestrating several integrations. Cloud-based systems have also made it so fewer specialized people are required to manage the system, customizations must come with best practices in mind, and upgrades are released on a continuous basis.
- Business owners want the simplest implementations possible, but no simpler — they must meet regulations and improve operational efficiency while keeping cost and complexity as low as possible.
Now, let’s ask the most important question: what does all of that mean for you?
Ultimately, it means you need to do your due diligence before implementing ERP. You need to assess your current system to find out where you’re at; understand the technology at your disposal and how to balance using that technology with the capabilities of your business; and conduct comprehensive research to ensure you choose a partner that will deliver a minimal viable product as quickly as possible without compromising your needs.