Few enterprises look forward to updating their ERP. It is hard work, not leading edge, and rarely enables the business to increase sales. Here's what you need to know about the new breed of ERP and how to ease the process when you've decided your ERP system needs an update.
The trouble with traditional ERP
ERP systems have a reputation for difficult installations. By the time they are finally operational, it is fairly common for implementation to have taken longer and cost more than originally planned. Over time, software from the major ERP vendors has become bloated as it has expanded to support virtually every industry and to accommodate almost all possible business process variations.
Even when the initial installation is on time and on budget, it is usually followed by a major new release shortly after the first implementation is stable. Although many enterprises skip releases, at some point the customer will be faced with another large, complex project to remain on a supported release.
Fortunately, most of the more recently developed ERP software is easier to install and use.
5 design principles for a new breed of ERP
A number of new ERP vendors have created what Gartner calls “born in the cloud” software. Other vendors with a long history offering ERP software now have cloud offerings after completely re-architecting major modules. Most of these new offerings have adapted the following cloud design principles to a software category that has had little innovation for years:
1. Redesign from the ground up. Without the need to support obsolete business processes or legacy code, designers are free to learn from industry experience. Security, separation of duties, newer standards and more recent legislation are incorporated in the initial design and not bolted on later. This allows designers to create straightforward business processes and a cleaner code base with easier implementation.
Mobile first. Under this approach, the first version is designed to operate on the smallest screen that will be used. The small screen, combined with the need to make the app operate when connectivity is poor, forces designers to eliminate complexity and create highly functional user interfaces.
Training costs are minimized by an intuitive interface that requires only rudimentary instructions. Most developers follow Android and iOS design guidelines for navigation, status boxes, headers, button styles, etc., making learning a new app fairly easy and limiting the need for training to business process changes.
Mobile first promotes self-service, reducing administrative overhead. Mobile apps allow the individual closest to the situation to handle it directly without a data chauffeur. An HR app could enable all employees to maintain their personal contact information. Other apps could allow supervisors to approve vacation requests from their phones or travelers to take pictures of receipts and file expense reports without returning to the office.
Mobile apps also appeal to a younger generation of workers who expect to be constantly connected through ever-present mobile devices, and organizations that offer this kind of constant connectivity will find it easier to attract the best talent.
2. Single code base. Supporting all customers on the same code improves software vendor efficiency. All effort is directed towards improving the software; no time is wasted adding features or patching security bugs in old releases. This lowers vendors’ cost structures, often allowing more competitive pricing.
3. Operates in the cloud. A number of vendors have stopped offering software for customers’ servers. Without access to the source code, customer programmers cannot modify the package. Software that can only be configured is sometimes considered a limitation, but it prevents enterprises from creating future problems through ill-advised special features. In addition to reducing potential programming cost, cloud software also reduces the cost of massive infrastructure upgrades common with many on-premises ERP systems.
4. Frequent small updates. Cloud software relies on regular small upgrades. While many are transparent to users, some will require configuration changes after analysis by the internal business process team. In the absence of the major software updates common with on-premises ERP, reimplementation is rarely required and only caused by major acquisitions, divestitures or business model changes.
How to ease your ERP update
When your enterprise requires an ERP refresh, taking the following actions will make the update process less onerous:
Investigate software capabilities carefully. Most newer ERPs are flexible enough to handle virtually all common business processes within the scope of the product offering. However, since few newer ERPs are customizable, if your organization contains individuals who assert that certain business processes cannot change or that the new reports must reproduce current reports, defer the selection until the issue is resolved.
Even if political issues are not a concern, consider a small pilot to allow the evaluation team to analyze the software’s capability thoroughly. Pilots help build consensus and cloud software makes them easy.
If the evaluation team eventually concludes that the software does not support some business critical process, acknowledge that this ERP won’t work and seek a different solution. Don’t waste time designing a workaround.
Refresh the applications architecture. Cloud based ERPs use APIs as the primary means of passing data between the ERP and other systems. Be sure your applications architecture is current; this will be critical when establishing linkages to ancillary systems. While it may appear obvious, a surprising number of IT groups rely on tribal knowledge, rather than clear documentation, to maintain these links.
Prepare to update the disaster recovery plan (DRP). Review the availability section of the cloud provider’s SOC 2 to understand their recovery services and scope. If you use a single cloud provider, with a comprehensive DRP, you should be able to rely on the vendor for a portion of your DRP. By contrast, coordinating recovery procedures and data across different cloud vendors can make the DRP very complex.
Engage in the evaluation. Many newer ERP vendors attempt to sell around IT. They assert that that the system is so simple that a business analyst can configure the system without IT support. If anyone in your enterprise has concerns about IT’s ability to deliver, political rivals may attempt to relegate IT to a secondary role. When this happens, critical infrastructure, data rationalization, security, and linkages to other systems are easily overlooked.
One enterprise ignored IT’s warning that spotty cell service in parts of Haiti, Chad, and other troubled areas would frustrate users of the new ERP. In order to gain user acceptance, executives were eventually forced to acquire satellite phones for selected individuals.
Insist on a robust organizational change management program. Organizational change management is important with any new system and absolutely critical with the newer ERPs. Many enterprises reduce or eliminate training, arguing that intuitive software eliminates the need. However, new ERP systems are usually accompanied by changes in delegation of authority, metrics, centralization/decentralization, etc. Most people find these changes disconcerting and demand to know how the system will impact them.
Newer ERP systems address many of the complaints that have dogged older ERPs for years. Prepare now before your ERP is ready to be upgraded or replaced. Study the market to understand the advantages and disadvantages of the different vendors. Position IT as a thought leader to ensure it is part of the selection and implementation team. Effective ERPs are a foundation system for virtually every enterprise. If IT’s role is limited during the ERP program, it will be difficult for IT to have a leadership role with other critical business systems.