The mere thought of installing a business application, such as an enterprise resource planning (ERP) system, is enough to set any financial or IT manager’s heart racing. The prospect of the time and money spent planning, installing and taking a new system live is a complex process filled with risks if not executed properly and by people with the right skills.
Once installed correctly, however, business applications deliver significant benefits to companies, helping them to streamline and run their operations according to global best practices, hence their popularity. However, careful thought is required before embarking on an ERP journey.
Steven Hobbs, MD of Blue Pencil Consulting, says that most companies take the advice of consultants and salespeople when making the decision as to which application to install. Often this advice is given knowing the people who will make the decision and tailoring the solution to their personal biases instead of in the best interests of the company.
“This almost always leads to poor software decisions based on price, and does not take into account all the relevant factors a company needs to consider,” adds Hobbs. “Failing to do your own research with regards to your own requirements, as well as with regards to what solutions are available, is a recipe for disaster.”
Hobbs adds that the total cost of ownership (TCO) is one of the factors often overlooked. Most companies look at the cost of the software, hardware and the installation and assume that is all that will be included in the total bill for the system.
“Another overlooked factor is the return on investment (ROI) the system will deliver,” notes Hobbs. “Examining what you want to get out of the system after a certain period of time also informs the decision maker of what to buy.”
When these two factors are considered at the start of the project, they influence the decision-making process as well as the implementation and roll out of the system to users.
If businesses want users to process transactions faster and with fewer errors, which leads to a lower cost per transaction for the company, one of the factors to consider and budget for is training.
“Training is normally seen as an inconvenient expense or something to placate staff with, but if done correctly it can have an enormous impact on the ultimate effective use of the system and the productivity of users,” Hobbs says. “So while the training budget can push up the initial cost of the project, it can dramatically improve the ROI down the road.”
While training may be accused of increasing the TCO of the project, people often do not consider the long-term costs of lower productivity, errors and poor employee morale due to their being unable to do their jobs effectively. There is also the hidden cost of users helping each other, which often leads to some people spending more time lending a hand than doing what they are paid to do.
Making the right decision as to the implementation methodology will also have significant cost and time implications. Enterprise application company SAP, for example, has developed tools which assist customers in the rapid installation of the application, shortening the go-live date to as little as eight weeks in some instances.
“While an ERP installation is complex, the crucial stage is the planning phase where decisions that will have a long-term impact are made,” states Hobbs. “Once again, proper research will allow managers to make the right decisions that will result in the optimal deliverables for the life of the software.”