At an early age, we are trained to believe if something is touted as “too good to be true,” it often is. That longstanding mentality may be why small to medium businesses (SMBs) are hesitant to hitch their wagons to an Enterprise Resource Planning (ERP) vendor. We become wary when someone touts, “I’ve got the solution to handle all your needs!” But ERPs, especially cloud-based ones, can transform the way SMBs do business, and if SMB leaders want to step ahead of the competition, investing in an ERP system is the right thing to do. But how can one be sure the process will do what it proclaims it will do? Answer: by understanding the potential obstacles SMBs face when implementing an ERP system and overcoming them. Listed are the three top challenges businesses often face when implementing an ERP system and a way to prevail over each:
Limited Budget: Unlike large organizations, SMBs probably have limited capital and resources to implement an ERP system. If they view it as a cost, rather than as an investment, they may forego upgrading their current system or forego implementing one altogether. Their view is analogous to building a house: it will take twice as long as forecasted and cost twice as much1. As a result, “rather than upgrade to the right ERP solution for the business, they either go with one that doesn’t fit well with their business processes, or patch minor problems to their legacy system, or even keep working on Excel and Word (without any integrated management system).2”
Solution: Assemble a project finance team that works with IT to create a plausible budget for the ERP system upgrade or implementation. With the right team, strategy and scope in place on the front end, an ERP implementation can stay on time and on budget. Although each company will have different costs to factor in, the universal key ones are licensing and number of users, training and implementation, and maintenance and upkeep. Some companies may wish to work with a third-party consultant to ensure these costs do not overshadow their return on investment (ROI).
Change Management (Resistant Staff): No matter how positively an ERP implementation can affect an SMB’s processes, data and bottom line, if company users refuse to employ the solution, the investment is worthless3. Yes, an ERP implementation or upgrade will create a disruption within the organization. In many cases, “small businesses, especially those with 20 employees or less, have informal, undisciplined working environments and processes”; therefore, introducing an ERP implementation plan may make them feel their workflow will become more “rigid and procedural,” causing them to resist2. Also, employees, including those in the IT department may feel they have no time, training, or resources to invest in a new project; they are too busy trying to make the business grow. SMB executives often associate the word “complex” to an implementation project of this magnitude, especially if they do not receive enough guidance and planning time to embrace the change.
Solution: Either hire an ERP solution consultant or assemble an internal ERP team (that consists of not just executives, but employees from all departments) to create a change management strategy that readies both employees and executives for the implementation. If budget allows, having both a third-party consultant and an internal ERP team will yield even better results. This is a project that needs buy-in before implementation, not after. With a change management strategy in place, employees will be more receptive to change and will feel more empowered to use the new system.
Bad Data (Integration and Quality): A key step in an ERP implementation or upgrade is migrating data from multiple older systems into the new ERP database. But to transfer it, one must find it all, and depending on the SMB’s prior processes, important data could be buried in accounting systems, department-specific applications, or even located on spreadsheets or on paper4. And once found, how good is the quality? Are there duplicate versions of the same information? Inconsistencies in spellings and/or addresses? Inaccurate or outdated information?
Solution: Although this may be the most tedious process of a successful ERP implementation or upgrade, it may be the most necessary. Remember the rule “garbage in/garbage out,” and assign a data migration and cleanup team for all departments. These teams will help validate the data, clean out duplicates and obsolete information, add missing values, and edit inaccuracies. Also ensure that each team is assigned a specific data set; for example: you need a team to figure out the general ledger, one to detail the item master, another for your routings and bills of material, and so on. Finally, test the data and processes more than once before going live with the new ERP system.
Although ERP systems are finally accessible for organizations of all sizes, that doesn’t mean they come without challenges. But the benefits far outstrip the obstacles. Benefits such as instant access to authentic data, a smoothly run organization, better insight into your SMB’s needs, data-driven strategies and better operational decisions to name a few. Perhaps we should believe the hype: a new or updated ERP system is the solution to all our needs.
Cloud-based ERPs, more so than on-premises ones, can meet all three needs and all five criteria, especially value. A cloud-based software subscription, considered an operating expense, helps free up capital while giving a company the flexibility to meet evolving operational needs. With this switch in expense models, companies will have access to funds for expansion and new business initiatives, and they will respond to growth market opportunities more quickly.4
Cloud ERP systems can have a pivotal role in any size business. Just because a business has not yet achieved Titan status does not mean it can’t operate like one.
1. Key elements of a successful ERP implementation
2. ERP Implementation Challenges faced by SMEs
3. 3 7 Key ERP Implementation Challenges and Risk