ERP for SMBs

October 31, 2009

When considering ERP solutions, the key drivers are to spend sufficient time understanding the needs.  In fact, the very first question would be to assess if the business strategies are well established, and equally important, to assess whether the business processes and assumptions that drive the perceived need for a new ERP system are valid.  It is well known that a technology solution cannot fix an ailing business process, in fact, it will only make it worse.  This is important to SMBs considering an upgrade to their ERP system – if the issue is the business process, fix the process before embarking upon a upgrade.  Before embarking on the ERP system upgrade, it is imperative to assess the risks.  Risks are both intrinsic (internal operations, sales, marketing, finance, HR) and extrinsic (how they impact your customers and supply chain).  For SMBs also desiring to upgrade their ERP system, they must assess the existing software and really scrutinize whether the upgrade is going to bring the benefits that are desired. For example, one question to ask is whether a few customizations or enhancements or bolt-ins to the current software satisfy a majority of the requirements.

Assuming that there is a need for an ERP system or an upgrade exists, SMBs need to assess the true life cycle costs, benefits and risks of the upgrade.  It should be pointed out that the life cycle technology costs are but a fraction of the overall costs – the cost of implementing the change across the organization can be daunting.  A healthy bout of skepticism on the true benefits should be entertained.  More than 50% of ERP implementations according to researchers have failed to yield the promised benefits. 

Once the needs and benefits are established, from an IT Governance point of view, the mandate for an ERP system must come from the top and have complete support and cooperation of all key stake-holders.  ERP is not an IT driven, but a business driven project.  Selecting the appropriate vendor is a complex task.  It is best to bring an un-biased consultant to assess the product features against the needs to establish the degree of fit.  Simply attending vendor presentations is not adequate, as vendors attempt to change your business needs to meet their tool features.  

Implementation of ERP, is significantly more complex.  Most recommend an incremental approach as opposed to the big-bang to mitigate risk. Again, the critical aspect is having the business units manage the deployment, with IT just playing the role of a facilitator.

Advertisements