By Adam Drewes, KOPIS, GM of ERP Division
Note: Kopis is a Gold Infinity Partner of the South Carolina Association of CPAs
If you are a controller, CPA, or anyone who needs to have a comprehensive understanding of business operations from start to finish, you know the importance of up-to-date, accurate and actionable data.
You might also realize that as you grow, 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 ask the question – is ERP alive or is it dead?
It remains 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 a fatal flaw with the question, “Is ERP dead?” ERP is most certainly alive and well. It’s an enticing headline, but 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 technology developments.
The real questions should be, “What is the current state of ERP software, and is it 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 mean for you?
How ERP has 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 toward reducing time spent on tedious, repetitive and error-prone tasks; reducing unnecessary costs; growing revenue; and, most importantly, 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. It might not be perfect, but it’s getting the job done. Yet when was the last time you really audited that process, taking stock of what it accomplishes, where it falls short, and the areas that are mission critical?
Considering these things has always been important no matter what system you put in place. Whether done internally or with a partner, you must assess your system in terms of:
- Where you are
- What gaps exist
- What are your top priorities
Doing so allows you to identify what aspects of the ERP enable your business to continue operating with as little disruption as possible, while also finding inefficiencies you never addressed 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. 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 can relieve 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 planned carefully.
Reporting & Data Warehousing
In the early days of ERP, all the data handled by the system — transactions, sales, purchase orders, journal entries, AP/AR, etc. — were stored in a relational database. Reporting on this data remains valuable, so companies started building simple dashboards in order for partners to more easily analyze their information.
This caused an issue, because as the ERP system attempted to collate all this data, the size of the datasets exceeded the processing power of available servers. 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.
Thus, anyone else trying to enter purchase orders, shipping updates, invoices — all incredibly important to keep the business running — couldn’t do their jobs.
Enter data warehouses. By transferring the data stored in the ERP to a separate server instance, called a data warehouse, companies could run endless queries on the database without slowing the rest of the system.
An added bonus? Data warehouses can query any database, so you can pull in data from other sources to slice and dice your data in different ways and further inform your decisions.
There has been a significant shift in the past year from on-premise ERP systems to cloud-based systems.
A 2018 ERP Software Report by Panorama Consulting Solutions found that in 2017 only 33% of organizations were deploying ERP based on cloud and Software as a Service (Saas) solutions but in 2018 that figure jumped to 85%.
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 limits some customization options. Think about it: if Microsoft is going to support thousands of ERP cloud clients, it can’t allow poorly written code in 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 and are 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 such as 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 system components 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 inefficient or inconsequential.
Keeping up with Compliance
While we can simplify our ERP deployments with integrated systems and data warehouses that provide appropriate visibility, regulations continue to force businesses to 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 regulations as they change.
Think about something like the growing complexity of tax laws for organizations doing business online. Such changes 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 regulations, you need to ensure you’re aware of what regulations you’re responsible for 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 regulations you must meet and that the system is built with compliance in mind.
Where Does That Leave Us?
ERP looks a lot different in 2019 than it did a few years ago, but don’t let that fool you – it’s alive and kicking. More than that, it’s evolving to match the technology and needs of today’s users.
Summary: We Know the Following is True About ERP in 2019:
The goal of ERP hasn’t changed. The importance of auditing your existing processes before implementing ERP is just as significant as it was 30 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 that 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. Implementations 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 this mean for you?
You must perform your due diligence before implementing ERP. Assess your current system to find 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 who will deliver a minimal viable product as quickly as possible without compromising your needs.