In some respects, Enterprise Resource Planning (ERP) software can be compared to the central nervous system. Just as the human nervous system links all parts of the body to the brain for centralised functioning, a company’s ERP software manages the business functions within a centralised and integrated system. It functions as a brain for an organisation, analysing all the data and inputs coming in from a myriad of sources.
An ERP system allows an organisation to take advantage of a suite of integrated applications to streamline and automate their business processes, which in turn helps create leaner and more efficient operations. It provides complete visibility into core business processes and optimises systems through superior resource tracking and reporting, database management, data sharing and improved overall information systems.
In other words, ERP is the basic building block for companies to digitally transform themselves. Market forecasts indicate that the digital transformation market will grow from US$290 billion in 2018 to US$665 billion by 2023, with a compound annual growth rate (CAGR) of 18.1 percent during the forecast period.
This growth is being fuelled by the digitalisation of business functions to serve changing customer preferences and enhance operational efficiency, something that only a good ERP system can do. It is thus imperative that organisations, irrespective of their size, evaluate and install a good ERP system or upgrade their existing ones to meet changing customer requirements.
An ERP system stores all entered data into a single database and this eliminates the need to duplicate data. All departments can work with the same data or information and this leads to more efficient outcomes. ERP software brings together customer management, human resources, business intelligence, financial management and inventory and supply chain management.
ERP Vendors In High Demand
According to a report published by Allied Market Research, the global ERP software market was valued at US$35.81 billion in 2018 and is projected to reach US$78.40 billion by 2026, with a CAGR of 10.2 percent from 2019 to 2026.
The need for operational efficiency and transparency in business processes and the rise in demand for data-driven decision-making are expected to fuel market growth. The surge in the adoption of cloud and mobile applications is also expected to drive ERP software market growth.
For Small and Medium-sized Enterprises (SMEs), a good ERP system can act as a force multiplier that allows them to compete with bigger players. With more than 90 percent of companies in Singapore falling in the SME bracket, there is a good demand for ERP systems as these companies rush to become digital businesses. Many Singapore ERP implementation vendors, including SAP partners, offer solutions specifically tailored for SMEs.
While an ERP rollout can provide many potential business benefits, it can also be a risky proposition if not managed properly. For example, ERP projects can cost more than budget and take longer than expected to implement. They can also cause operational disruption and employee resistance.
Businesses assume the most risk when they approach their ERP project from a technical perspective instead of business perspective. This is because there is a need to align the technology with people and processes within the organisation. One cannot improve customer experience if employees do not know how to perform optimised processes. It is useful to remember that the second biggest risk after implementation failure is an ERP project that has a very low return on investment (ROI).
An organisation’s executive leadership needs to keep in mind that installing an ERP solution is not like buying a new server and attaching it to the network. It is a complex and costly investment that would be amortised over many years. To get it right, organisations need to find the right ERP vendor and systems integrator who not only understands the product but can also work with the company’s team to ensure the success of the implementation.
An ERP Specialist That Understands Your Business Objectives
The ERP vendor needs to be familiar with the requirements of the business processes and requirements of specific industries and have the experience of working with other companies in a particular industry.
It is also important to establish clear objectives and goals for the ERP project to ensure successful implementation. These objectives and goals need to be set by the top management, which also needs to ensure full support, involvement and participation. This is because executive involvement reflects the degree of importance placed on information technology by the CEO. Interestingly, top management executives’ age and functional background has been found to be significant factors for an ERP implementation’s success.
Once a clear objective and roadmap has been established, there is a need to decide on an ERP specialist or systems integrator who can fulfil the company’s requirements. The right ERP specialist will work with the organisation to develop a deployment plan, manage the implementation project and provide ongoing long-term support.
While it goes without saying that thorough knowledge of the software is essential, the ERP specialist also needs to understand how the new ERP solution will integrate with the organisation’s existing systems and processes.
What To Ask When Hiring Your ERP Partner
To ensure the right ERP vendor is selected, organisations need to approach the problem in a systematic manner – by ensuring they have critical questions for the systems integrator or ERP specialist.
The first is the obvious one on how many successful ERP installations the systems integrator has undertaken, given that such implementations can be a complex and often unpredictable undertaking. Since no two ERP installations are alike, the greater the number of successful implementations the systems integrator has implemented, the better chance that they have the necessary expertise to improvise and fix any hurdles that may arise.
There is also a need to pay attention to the systems mentioned by the systems integrator. If the organisation is thinking of implementing an SAP-based system and the systems integrator has more experience in Oracle or another competing product, it may be a good idea to look for alternative vendors.
The systems integrator needs to be quizzed as to what its plans would be to ensure a successful ERP implementation. While all vendors will have a ready answer to this question, it is important to sift through the responses to evaluate if they have a proper project management plan that fits the requirements. There should be a significant amount of change management built into the ERP reseller’s plan as it must be assumed that not all parts and employees within the organisation will adapt to the new system in the same manner as others.
There will be training and specialised implementation requirements and the systems integrator should be up to the task. Since ERP systems are designed to integrate systems and processes across multiple departments and entities across the organisation, implementation requires substantial change management both from the vendor as well as customer side. Engaging a vendor with experience in this aspect is always helpful.
Another important question to ask is how the vendor will ensure the project comes to an end in time and within budget, while ensuring customer satisfaction.
Organisations should check with the vendor to find out if they offer fixed-fee billing as this would eliminate uncertainty in the project cost. Also, customer satisfaction should be a major priority of the vendor and there should be regular exchanges with the vendor to ensure that the ERP solution is designed to specific requirements and is on time and budget.
When considering the right ERP software to integrate and streamline the organisation’s financial, human resources (HR) and other processes, SAP is an option that many companies will frequently come across. For well over a decade, SAP has been an ERP system of choice for all types of industries. This trend is expected to continue in the coming years.
Buyer Beware: Things Do Go Wrong With Systems Integrators
Whether led by well-known SAP partners and systems integrators or smaller systems integrators, botched implementations do happen and have the potential to be detrimental to an organisation.
As a result, when considering systems integrators, it is important to gain a balanced perspective of their failures along with their successes. Learning from previous failures can help avoid making the same mistakes. Also, challenging the systems integrators to detail how they will ensure a successful implementation can reveal information that could later be implemented into contractual language that holds them accountable.
Once a decision has been taken on the vendor and ERP software that would be implemented, it is useful to remember that the actual cost of ERP software is only a fraction of the total implementation cost. Most of the cost goes into retraining and other human resources functions to ensure that the new software provides adequate ROI.
Enterprise systems for larger companies tend to cost more than niche software. However, even the larger vendors offer point solutions that can be implemented individually. Companies can save money by only implementing the functionality they need, instead of implementing a full suite of solutions.
Maintenance, customisation and resources are other costs to consider. There is a requirement to budget for data migration, implementation and business process re-engineering. While ERP solutions are expensive, cost shouldn’t be the main concern when deciding whether to initiate an ERP implementation as they can be recouped within three years from the business benefits that the new system accrues.
Your ERP System Implementation Is A Marathon, Not A Race
Developing a long-term relationship with the implementation partner is important. One way to do this is to cultivate a culture of trust with the systems integrator. One should Ideally trust them until they give a reason not to, and if a reason arises, one should investigate to see if it was an honest mistake or a flaw serious enough to require changing partners.
A systems integrator should become a partner with whom information and resources that will save a great deal of time and money can be shared. Trust must be a two-way street and the systems integrator also needs to show the same level of trust. One of the biggest appeals of working with an implementation partner is the possibility of developing a long-term relationship with that firm.
Working consistently with a partner that one can trust reduces the amount of time required for employees to learn new systems or establish new relationships. This makes it easier to keep records of projects and information. This, in turn, saves the company time, money and hassle.
Finally, one needs to remember that ERP software implementation, like any other technology, is not a one-off affair. As technology improves and business requirements change, there is a constant need to upgrade technology and employee skills. It is a journey that never ends; the organisational mindset needs to adjust accordingly.