Enterprise Resource Planning: Expectations vs. Reality

Enterprise resource planning (ERP) software can be an extremely valuable tool for your business. It can give you an overview of the various processes and activities involved in keeping the company running smoothly on a daily basis, such as:

• Accounting
• Procurement
• Supply chain operations
• Inventory and order management
• HR administration
• Customer relationship management
• Compliance

By providing a single hub where different departments and business units can share and access information, ERP opens up many opportunities for collaboration, communication and increased efficiency in vital business practices.

However, it's also important to acknowledge that making the transition to ERP can be a complex and difficult process, with many pros and cons to take into consideration. Before going down this route, you should be absolutely sure that you're embarking on the journey with your eyes open and with access to as much information as possible.

Here are some of the key areas where your expectations of ERP could prove to be out of step with reality:

Cost

For many businesses, cost is the biggest reason not to adopt ERP. If you're looking at a product from a major provider like SAP, Oracle or Microsoft, for example, the initial license fee alone could run into five figures.

While very few companies would embark on a major overhaul of their fundamental software and practices expecting it to be cheap, it's important to do your research and be aware of how much you could end up spending on the shift to ERP. This includes not just upfront costs like the initial fee to license the software, but ongoing and indirect expenses like the time required to implement, maintain and adjust to the new system.

The financial considerations could be particularly significant if you have to think about hiring extra staff - such as ERP consultants or software training specialists - to ensure the transition goes smoothly. It's also possible that vendors will charge additional fees for software maintenance.

Ease and speed of implementation

ERP shouldn't be viewed as a quick and easily implementable solution that will transform how the business operates overnight. The reality is that adopting this approach is a serious undertaking - one that will take a lot of time, effort and commitment across the company to yield positive results.

The amount of time required to get ERP software up and running, combined with the costs and complexity of using it, has resulted in the technology acquiring a negative reputation among some organizations.

As business planning consultant David Hardstaff of DKNS Associates notes in a Sage report, managers often have specific requirements they want or expect ERP to fulfill straight away. Systems often need to be modified and customized to suit the needs of individual companies, which requires time and investment.

Before moving ahead with an ERP implementation, it's important to have a clear idea of what you expect the software to do and how much work will be required to achieve your objectives.

Combining old and new practices

Another key aspect of evaluating and introducing ERP software is thinking about how existing technologies, systems and working methods will need to change to get the best results from this new approach.

Adopting ERP is likely to require a complete overhaul of how the business is organized, how departments function and how people do their jobs. Employees who are happy using software and processes that have performed perfectly well in the past must be ready to leave these methods behind and embrace a new approach.

Reluctance to abandon existing practices will hold back your efforts to derive value from ERP, since it's highly likely that your legacy technologies will be incompatible with the new software. If you want your ERP journey to end in success, you should be willing to adopt an 'all or nothing' attitude.

User adoption

The most advanced and feature-rich software in the world will be of no use if you can't get people to use it. It's vital that the entire business is committed to adopting ERP and employees are aware that they’ll need to change how they work to help make it a success.

According to a Deloitte survey of chief information officers, the biggest barrier to ERP implementation is resistance to change (82%), followed by inadequate sponsorship (72%) and unrealistic expectations (65%).

Getting the workforce on board with the project is likely to depend on managers' ability to demonstrate how ERP can help people do their jobs. You need to show that this transition will ultimately help your staff be more efficient, productive and collaborative, but only if they're willing to play their part and commit to making the project a success.

If you come up against insurmountable opposition to the entire idea of ERP, you need to think carefully about whether it's the right option for your organization and your staff.