Decisions don't come much bigger. Stay with the business's existing ERP system or switch to something else? If the answer is 'something else', is that to be an upgrade to a newer version of the existing system, or a switch to something entirely different, in the shape of another vendor's offering?
Factor into the decision the very real risks that are involved with both courses of action – just Google 'ERP disaster' if you're in any doubt – and it's no wonder, perhaps, that so many businesses play safe by choosing to stay with what they've got. It might not be perfect, goes the logic, but at least it works.
"A change of businesses system is a very fundamental undertaking," warns Carl Tomlinson, principal practitioner at The Manufacturing Institute. "It really does need thinking through very carefully. An ERP system underpins the working of the entire business, and if it goes wrong, then the whole business comes to a stop."
The trouble is that the upgrade-or-switch decision can't be postponed indefinitely. Quite apart from the fact that few if any ERP vendors are prepared to support legacy versions of their software forever, there will inevitably come a point when an ERP system won't any longer be fit for purpose. It will still perform the tasks that it was originally intended to do, to be sure. But those tasks will have been supplemented by a long list of other required functionality, brought about by changes in technology, changes in your business, and changes in your business's competitive landscape.
Sometimes, the red flags are obvious. Perhaps your business has changed its business model, for instance – moving into engineered-to-order manufacturing, as opposed to building to forecast and selling from inventory.
And if your existing ERP system doesn't support your new business model, then you'll need to acquire functionality that does support the change. In the case of relatively minor changes to the business model – a move into aftersales field service, for example – then it may be possible to purchase an 'add-on' third party application. Otherwise, it's time to see if your needs can be met by either an upgrade of your existing system, or a switch to another vendor's offering.
Watch out for subtle warning signs
Sometimes, though, the warning signs are a little more subtle. 'Workarounds' are a classic sign of missing functionality, say experts, with employees maintaining spreadsheet systems or paper documents in order to achieve things that need doing, but which can't be done within the existing ERP system.
Finally, technology can be a trigger. Functionality such as e-commerce links with suppliers and customers, or website integration, may not have been seen as critical when the existing ERP system was acquired, but are increasingly important now. Again, workarounds and third-party add-ons can help to close the gap, but at the cost of an additional systems integration overhead.
In other words, whatever the impetus for change, there comes a time when the business needs to face up to the fact that the existing ERP system is overdue for replacement. But with what, precisely, should it be replaced?
Irrespective of whether the eventual answer is an upgrade to your existing ERP vendor's latest version, or a wholesale switch to another vendor, the starting point is the same, say experts: a clear vision as to what it is that the business wants, or needs, to change in the business processes that are built into an ERP system.
"Stand back, and think of the strategic purpose of the business, and the value that it delivers. Where does it compete and why? And then articulate clearly what it is that you want to change," advises Julie Fraser, principal at Iyno Advisors, and a former Cambashi consultant. "In other words, what exactly is it that you want to do differently?"
And, with the strategic direction set, it's time to undertake a thorough evaluation of your functional requirements. Here, says Peter Mroch, business development director for ECi Software Solutions' M1 manufacturing ERP system, the trick is to balance present-day requirements against requirements that are yet to emerge, but which might emerge, within the lifetime of the system.
"You don't want to move to a new system, and then discover that it's obsolete," he warns. "So think carefully not just about today's functional requirements, but also those that might be required in the future, bearing in mind that markets change, business models change and technology changes."
That said, anticipating change is never easy, warns Jonathan Orme, sales operations manager at Excel Computer Systems, developer of the EFACS E/8ERP system.
"It's one thing to say 'Be alert to the possibility of changes', and quite another to be able to make specific predictions – the changes that affect ERP systems, such as an altered business model, or a new technology, are difficult to predict," he points out. "So, in practice, there's a trade-off between a prospective system's degree of fit, and its flexibility. You may be better off going for an ERP system that offers more flexibility rather than one which is a better fit, but which has less flexibility."
And in any discussion of 'fit', remember that not all functionality ranks equally, stresses Hugh Williams, managing director of supply chain consultant Hughenden Consulting. In other words, a simple 'tick the box' exercise to compare systems' functions and features could well take businesses in the wrong direction.
"When specifying what you're looking for in a new system, it's vital to be clear about which functionality is critical to your business, and delivers competitive edge, and which functionality is useful, but not actually critical," he emphasises. "It's the functionality that is critical to your business that should be the deciding factor."
Moreover, he adds, be prepared to soften the emphasis usually placed on the need for ERP systems and pieces of specific functionality to have a good track record in your business's own industry.
"What you're really looking for is best practice, don't forget. And in newly-prominent areas such as reverse logistics, the companies making the running are rental businesses and fashion businesses so be flexible enough to recognise good practice that is outside your own industry."
That said, several industry observers point to a decline in the importance that manufacturers are placing on functionality, and functional fit.
Take a look at what really matters to you
"These days, most ERP systems do most things that most companies need in terms of functionality," says Steve Winder, vice-president for UK & Ireland at ERP system vendor Epicor. "So take a long, hard look at what else matters to you, such as the quality of information provision, and reporting."
Indeed, says Cindy Jutras, president at analyst firm Mint Jutras, fit and functionality used to override everything else in the minds of the respondents to her annual survey of ERP system selection priorities.
"Gradually, ease-of-use and user experience have been creeping up the list," she points out. "Why? It's the 'millennial factor': younger executives who want ERP systems to look like the consumer apps that they use. Granted, these people aren't going to be making the final decision, but maybe they soon will be."
That said, she stresses, when asked to nominate their single-most important priority, fit-and-functionality – including industry-specific features – trumps everything else. In other words, ease of use is a 'nice-to-have' selection priority, not a 'must have' one.
Even so, says Martin Bailey, marketing manager at ERP vendor 123insight, ease-of-use, in the form of system-specific training, remains a competitive differentiator in the case of 123insight's own ERP offering, where training is closely interwoven with the sales cycle.
"Typically, with other providers, you write a massive cheque to buy the system, and then begin the training, at which point you're committed. So if you find a showstopper part way through the training, it's too late. With 123insight, you do the training first and only after that do you actively subscribe to the system."
