Too many companies are downsizing without giving considered thought to their business systems some even being left to pay double licensing fees once they have laid off staff.
The fact is, most companies are not looking at their business systems (including ERP) when they are making staffing decisions, explains Andre Coetzee, MD Of Cubit Accounting and Payroll Software.
"³Whether it is because they are panicked into making decisions, or simply being naïve, we are seeing companies getting stuck with too many user licenses and redundant architecture. We are even seeing ERP systems that are now useless because the staff that missed the axe don¹t know how to operate the systems."
After a retrenchment many organisations find that they are left with non-refundable software licenses. This is because many vendors offer "evergreen" solutions which allow for growth, but not user shrinkage.
Similarly, companies are often left with excess leased lines, redundant hardware and business overhead costs that do match the amount of workers employed.
However, none are as potentially damaging as companies which embark on a rightsizing exercise only to find that they are suddenly lacking the IP to deliver work-critical functionality on the existing (or downscaled) business systems.
"We have experienced at least three instances in the last three months where companies have told us that they laid off staff that were responsible for exporting data with the necessary figures trapped in the system. Downscaling can be particularly tricky when it comes to payroll functionality," Coetzee adds.
It is imperative for operational managers to conduct forward-looking exercises to ensure that they have re-evaluated new requirements against old systems. Some of the quick checks include:
* What is the total annual cost of operating/owning the present system including the underlying software, databases, operating systems etc?
* Can the user licensing be reduced and what is the Rand and Cent effect of such a reduction?
* Can the underlying software user licensing be reduced? What is the rands and cents effect of such reductions?
* After staff retrenchment would the present ERP and business system be operable by the remaining staff or is there a business case for bundling of workflow in a simpler/other ERP system?
* What is the rands and cente value should the SMME sell the existing ERP and business system to another company?
* What is the rands and cents value should the SMME sell excess computer servers and reduce network expenditures, how would this affect the existing ERP and business system?
* Does the type of process reductions advance cost saving changes to electronic documentation systems in other ERP solutions?
"If companies want to ensure job security for the remaining staff, they should be assessing all the implications of downsizing before they even begin the process. Sustainability means making sure that productivity isn't compromised," Coetzee adds.