There are three things synonymous with enterprise resource planning solutions (ERP): They transform a business, they are devilishly complex to roll out, and they cost a lot of money.
The business transformation part is why businesses take the journey, but the time and cost of rollout usually gives pause. Is more efficient operations worth the pain of ERP implementation? The answer usually is Yes, but the cost and implementation headaches keep many businesses from adopting an ERP or upgrading their aging system until it is absolutely necessary.
This ERP implementation cost-benefit analysis is a thing of the past, however. Cloud-based ERP has greatly reduced implementation headaches, and putting in a new ERP system also no longer is the capital expense it was in the days of hulking on-premise systems. Even small businesses can now afford the business transformation that comes from ERP.
Here are five ways that you can make ERP more affordable for your organization.
Trick #1: Choose Cloud ERP
Cloud-based ERP, like all cloud solutions, is a more affordable way to buy software. Instead of having to purchase a software license and the equipment that will run the solution, cloud ERP is purchased as a monthly subscription that can expand and contract based on company needs.
With the cloud, businesses also don’t have to invest in maintaining the system since the vendor handles upkeep.
“What really attracted us to the software was that it was in the cloud,” says Eric Johnson, vice president of operations for Countrywide Tire and team lead for the company’s rollout of ERP solution, SAP Business ByDesign. “We were tired of the headaches of hosting our own server in our office, having to do maintenance, and worrying about downtime. So that convenience of having all that managed by SAP was a big bonus for us.”
Trick #2: Avoid Custom Code
One of the easiest ways to spend too much on an ERP rollout is through the creation of custom code to tweak the system for company-specific processes. Most business needs can be met by ERP without custom code, both by choosing a flexible ERP solution and by fitting businesses processes to the methods already built into the system.
“SMBs don’t want a custom solution,” says Grant Fraser, ERP industry veteran and CEO of Navigator Business Solutions. “They want something that’s off-the-shelf so they can implement quickly and get back to doing business as usual.”
Skipping custom modifications has been really valuable for Countrywide Tire, according to Johnson. In the past, the company would heavily modify their ERP system. But with this latest upgrade they did not, and that cut both costs and headaches.
“Every time we did one of those modifications, we'd have to pay for them to study and make sure it wouldn't interfere with anything, and then you have to pay for all the programming time,” notes Johnson. “To date, we haven’t really made any modifications to the system. Because of the flexibility, we don’t have to do the kind of modifications we did on our past system.”
Click here for more on Countrywide Tire’s ERP journey.
Trick #3: Use a Prepackaged Solution
Even with cloud-based ERP out of the box, configuration still is necessary to fit the system to a company’s business processes. A third way that businesses can make ERP more affordable, however, is choosing a prepackaged industry solution that comes pre-configured for a given industry.
These prepackaged solutions are a solution-in-a-box, already set up for a given industry and requiring much less configuration. This saves money.
“We do what we call ‘standard implementations,’” explains Fraser. “What vertical are you in? Ok, we’ve got three flavors you can choose. Pick that and we will implement your ERP that way, with off-the-shelf best practices, and we will get you up and running with roughly 60 percent of the cost and 60 percent of the time.”
Trick #4: Adopt Best Practices
Speaking of best practices, a business also can cut the cost of ERP implementation by adopting industry best practices both around implementation and configuration. While it is tempting to assume that a company has unique backend system needs, most of the time this isn’t actually the case. By going standard through the adoption of best practices built into an ERP system, rollout is cheaper and faster.
“Our suggestion is to start with a good platform that does business processes in a standard way and is complete unto itself,” says Fraser. “Then, if you need an advanced forecasting system, for instance, integrate that into the system.”
This is exactly what Rothy’s did when it rolled out an ERP system for its fast-growing shoes business with the help of Navigator guidance.
“I think we got really great advice,” says Ulion Riebe, Rothy’s head of finance and a project lead on the company’s ERP implementation. “They didn't let us gloss over any details that we needed to focus on.”
Trick #5: Roll Out the System in Phases
A final trick for making ERP implementation more affordable is breaking down a rollout into phases. This is a best practice for reducing implementation complexity as much as it is a cost-savings maneuver.
When Rothy’s rolled out its ERP system, the company made the strategic decision to start with implementing it for core operations, then at a later date moving on to using the software for its manufacturing facilities in mainland China. It also skipped rolling out many of the functions it knew it would use later, taking a piecemeal approach to keep down costs and scope.
“We don't use the whole SAP Business ByDesign suite-in-the box,” says Riebe. “But having access to the modules that we can turn on whenever, and just not have to worry about a whole new integration, is huge.”
This phased approach made the company’s rollout simpler and less costs. For more on Rothy’s ERP rollout, check out this case study on the company’s ERP journey.
Putting a new ERP system in place doesn’t have to cost millions of dollars. By using these five tricks, companies large and small can greatly reduce the cost of ERP implementation.
Time to update those stereotypes about ERP costs.