Episode 4 – 2019 The State of the ERP Address
Time for Profit from ERP (MFX)
It’s ERPodcast the verbal musings of the Director of Consulting Services at Profit From ERP, Gene Hammons – Today it’s The 2019 State of the ERP Address – We’ll talk about new efficiencies driven by cloud ERP, increasing pressure on internal corporate teams taking on a new ERP projects, ERP platform diversity which means something for everyone, and we’ll cover the strategic impact of ERP and the core competency to be a technology driven company instead of an M&A target
If you Google ERP related queries, you’ll find a world of information – most of it written from the perspective of someone who’s trying to sell you their ERP software. Which, while that is informative to a point, it’s not always the point you were looking to answer.
So, our perspective.
We help client companies analyze, select, and implement ERP software as well as related operational software and mobile apps. Granted, software selection expertise does not translate into an accurate general overview of the entire ERP industry – what we do have is a specific, laser focused, examination of real world results from actual working companies.
We do selection/implementation again and again, for client after client. In a variety of industries, business lines and verticals. The commonalities of our clients are they’re already successful and growing, usually they’ve outgrown or outpaced the current system.
It’s gotten to the point where regardless if the cost seems huge, they know the effort needs to be undertaken –
Our consulting practice is designed to turn that around.
Instead of approaching the project as a huge cost, we look to the efficiencies – the productivity gains – the cost avoidance – the labor savings – the revenue increases – and we measure it all, as increased Profit – Profit From ERP.
Profit is the goal. ERP is the tool.
And while it’s not exactly a Congressional Proclamation, it’s definitely a real world perspective, it’s the 2019 State of the ERP address –
Welcome back to the ERPodcast, the 2019 State of the ERP Address – before we jump into today’s content, a bit of backstory.
Yes, I know there’s always a bit of backstory with me – but just this morning, I saw a pull quote from noted economist Thomas Sowell, who said “One of the most important reasons for studying history is that virtually every stupid idea that is in vogue today has been tried before and proved disastrous before, time and time again.”
So we don’t want to be angering Economists and we have a general policy of avoiding disasters – so let’s understand history driving today’s trends.
Trend #1 Cloud Computing Driving Efficiencies
In the early days of ERP, everything was modular to the extreme – you could buy a General Ledger or GL system from one company and tie that to an A/P or Accounts Payable system from another company. Today, all these modules have long been incorporated into different views from the same relational database, so any modern ERP will contain fairly complete financials.
Now if you’re working with a consulting firm that’s put together an RFP to send out to ERP providers, and on the front page of that RFP are questions that ask if the ERP package contains a GL, AP, AR, Purchasing and the like, there’s only two reasons – One, they’re using an old RFP form from the 1986 era of extreme modularity or two, they’re sending it out to ERP softwares that they have no idea or have never used that ERP – both big clues – take a hint.
The common model is completeness of base financial functions within a single database.
In the old model, only huge companies had the IT resources to keep all these different codebases integrated through upgrade roadmaps and changes in features – and with the changes to a single relational database, we moved to a single version of the truth – everyone agreed to give up the silos of information in sales, the mysterious costing spreadsheet of operations, – we put a single company on a single system.
Then came cloud.
Now, instead of an expensive middleware to integrate different systems, we have one single middleware for cloud-based ERP – the internet itself – the commonality of the internet is today’s middleware – it’s the one common communication protocol by which you connect all cloud-based software. And what this does – – it allows ERP to connect to operational software, whether it’s distribution, manufacturing or services – we now can have a best of breed solution in each area of our business.
It means the midmarket company can now compete on an analytics and technology basis formerly reserved for only the Fortune 500.
So we’ve gone from modular, multiple systems to single source accounting and ERP, and then back again to multiple systems in what we call component ERP.
Total costs have dropped substantially and technology is generations ahead – affordable ERP options are available for companies of all sizes – but with choice comes complexity – there are a lot of systems out there –
So how many ERP players are out there?
There are several good sites to get an idea of how many choices you have in ERP systems – say you’re in Construction and you want to know the various kinds of accounting software that are available to run your business. Capterra.comcompiles ERP systems – they have over 700 different business categories and under Construction, you see 50 possible choices for accounting software. Some good, some not so much – but all of them are working for some construction company somewhere – and one might be right for you? But how do you know?
Another website we really like, G2 Crowdrelies on a crowd of software reviewers, companies actually using the ERP software to post reviews and recommendations – you’ll find over 400 ERP platforms ranked and listed.
I like G2 Crowd’s approach to user reviews, but you also need to take some issues with a grain of salt. For example, one reviewer complained the ERP screens were too confusing and had so much functionality you could get lost looking for what you wanted. Well, yes. That’s true, it’s also why, when properly implementing that same ERP software, you’re supposed to go in and simplify each users’ views – so Margie in AP sees only what Margie needs to do her job – the rest of the fields are still available, they’re just not presented to Margie – it’s called workflow simplification and it’s part of every project we implement – but of course, we don’t know who or how the system was implemented in this particular reviewer.
ERPfocus.comalso has a great deal of ERP listings as well as some great content on how to manage your project. Of course, at Profit From ERP we’re in the business of hands on helping with the same issue, but with ERPFocus you can get a really good idea of some of the challenges you’ll face in an ERP project. And full disclosure – ERP Focus awarded our genehammons.com website the #3 Independent ERP Blog worldwide back in 2014.
So in all, there are thousands of choices for ERP
So, there’s maybe 500 viable choices for ERP today. Probably the top 50 ERP platforms have 85% of the marketshare.
There’s probably a few hundred up and coming ERP providers – some of whom may emerge as viable alternatives in the days to come.
So there’s some risk with smaller ERP companies – not that risk can’t be mitigated but you need to know what you’re getting into.
The main point is, there are ERP systems of every size, shape and price range that you can imagine. The trick is, finding the right one that will make your business more productive and understand that picking the top marketshare ERP package won’t necessarily fit your business model exactly – for our clients – we let the Requirements drive the decision.
So that’s State of the ERP 2019 Trend – practically any ERP package will fit somewhere and there’s a lot of diversity in the ERP industry from thousands of choices.
The Next Trend we see is There’s more and more responsibility thrown on the internal ERP Teams than ever before – more required of client companies who don’t always have a lot of experience implementing critical ERP software.
Let’s get into that
Over the past few years, Made for Cloud Software has developed some distinct advantages. Let’s look at a past ERP selection project for an air ambulance company. A traditional ERP, Microsoft Dynamics GP– the former Great Plains was competing with a couple of made for cloud ERP packages, NetSuite, Acumaticaand Intacct.
It really doesn’t matter what the names were, just know it was traditional ERP versus made for Cloud ERP. It could have been the same with dozens of others.
One, the traditional software was written and released in the early 1990’s. Our Cloud ERP players were written in the late 90’s and really gained traction post 2000’s. You’ll remember the internet came of age 1996 – so the cloud programs have both a ten-year newer technological advantage – AND – they were created for the connected, internet world. Traditoinal ERP, any older, more mature technology may have advanced features newer platforms haven’t caught up with.
So at this point, both cloud and traditional software are still in the race.
The next step – we get to cost estimates. With all ERP there’s a software cost, the cost to license the software and there’s an implementation cost – the cost for the partners to install, configure, set up, integrate and train the users.
And here’s where we need to talk about made-for-cloud and cloud – two different things.
Made for cloud is generally multi-tenant. It’s one instance of software that many companies or tenants subscribe to. Multi-Tenant. So if you’re going to go with Sage Intacct, there’s already an instance of Intacct running in the cloud with plenty of other subscribers using that instance – your companies’ environment is completely secure, no one else has the possibility of accessing your data, it’s already up and running but it still needs configuration.
Traditional ERP, on the other hand, is made to install on servers at your offices. A single tenant – you – a single company user – your company.
So in a brand new implementation, there’s more to the setup, more to the configuration –
Think of it this way. Made for Cloud is like a downtown skyscraper – you rent out a floor, and there’s some construction, configuring offices, reception, conference rooms to get everything the way you like it – but the structure is already up and running.
Traditional cloud is starting from the ground up, clearing the land, pulling permits, pouring foundations – it takes a while longer. And for software consultants, the hourly rate is $175 to $225. So time is our budget enemy.
While our cloud programs were projecting a 3-4 month implementation – traditional ERP schedules were 9-12 months. And traditional ERP cost $200k more. Given we’d not identified any Requirements requiring the traditional ERP features, they were pretty much out of the running.
And we’ve seen this in project after project.
The software companies have seen it too, and now, almost every major traditional ERP package is available in a cloud version.
But they’ve missed the point – simply moving a traditional ERP to a cloud platform is not the same as a multi-tenant cloud skyscraper – it’s still Traditional ERP, only on a cloud – you still have to build that platform from the ground up, only in the cloud instead of your server environment.
So there’s still the same amount of work as the normal 9-12 month implementation.
It’s a problem.
But some companies are taking steps. Microsoft Dynamics ERP is taking two of their ERP platforms, NAV and AX, and creating new cloud versions, adding some features from Dynamics CRM, specializing for certain functions like sales, customer service, retail, project service – and so on.
So now Microsoft Dynamics NAV is being marketed under the name Dynamics 365 Business Centraland in the early releases it’s priced as a replacement to QuickBooks, that is, very inexpensively. Except the reseller channel – the companies that sell and install Microsoft ERP still make their living off those 9-12 month implementations we were talking about earlier for Traditional ERP – yes, it’s a cloud delivered system, but not made for cloud, multi-tenant ERP.
So a recent client looked at Business Central and the software costs were under 10-thousand for the first year – but the implementation from the local business partner was $67-thousand – just the same as a traditional NAV project.
Microsoft is on the right track, working to compete with the made for cloud ERP products – and let’s remember, the whole Dynamics 365 concept was launched in April of 2018 – we’re not even a year into it.
But in practice, the reseller partners aren’t competitive – yet.
Our research has uncovered a new master reseller team who’s working with partners to deliver targeted, quick implementations priced at $3,000, $12,000 and $20,000 – a far cry from the previously quoted 67 grand.
Now, how will all this work? These are prepackaged, limited scope, best practices quick implementations. They will get you up and running on Business Central with basic training. Your people start to work with the new tool and teach themselves the finer points of how to use it. There’s basic training – but this isn’t a comprehensive launch. And how will it work? The jury is still out. There’s not many folks live at this point.
Which makes our point, Trend #3, More is required of your internal ERP team than before. The success of the project is up to you.
Overall, we see is made for cloud ERP – the NetSuites, Acumatica, Intacct, and other emerging offerings – they will continue to lead the pack in both technology and affordability of implementation.
We see efforts by Microsoft, other Sage products, Infor and many others to bring traditional ERP to the cloud, but as of yet, none have solved the cost disadvantages of long, complex implementations.
Understand we’re not recommending only made for cloud ERP – there are business requirements and market segments that rely on features only found in very mature Traditional ERP software – there are lower cost programs – many reasons to include several ERP options in your selection process.
And in closing –
The Profit From ERP concept helps your internal team – one, by bringing the experience of over 400 ERP projects – Two, by detailing and managing a tried and true methodology – the same steps and processes used by the most successful ERP adopters and Three – bringing a comprehensive, strategic approach to continual technology improvement designed to create productivity, efficiency and Profit From ERP
Feel free to reach out – contact us at Info@ProfitFRomERP.comfor a free, high level ROI assessment for your business. What that includes is a brief phone discussion, to let you know what to expect in terms of possible ROI or the Return on Investment our past clients had with businesses similar to yours – we’ll give you some planning guidance on how long the selection and implementation process usually takes, some preliminary budgeting guidelines so you’ll know what to expect and what possible ERP vendors you might end up considering.
But let’s talk about ROI for a second.
Our free, high level ROI assessment is the first step – should you engage our consulting services, we’ll get into a whole lot more detail, more specifics, exactly how and when your technology project will pay for itself – that’s what we call the Cost/Revenue Model and that concept brings us to our final trend.
If we’re really going to create ROI – return on investment with ERP, and we are – that means within a certain timeframe, the ERP project will pay for itself through cost savings, cost avoidance, revenue enhancement and so on.
A happy ending, right?
No, it’s a happy beginning. The final 2019 State of the ERP trendline we see is successful companies leveraging technology projects strategically for continual growth.
So let’s say you have a very old ERP system or something you’ve outgrown and you go through a replacement ERP project that ends up with the typical 3% ROI – that is, 3% more bottom line profit through efficiencies and productivity increases –
We’re saying you set aside some of that 3% to take the next technology step – maybe it’s BI, Business Intelligence to make better marketing decisions or CRM to bump sales, perhaps a mobile app that allows your customers to enter orders quicker and easier – whatever makes sense – whatever will pay for itself many times over
The idea, if we can continually generate ROI with technology projects that pay for themselves and continually generate more profit – why would we stop? We wouldn’t. By the time we’re rolling out and going live with our ERP project we’re already doing business analysis and building a Cost Revenue Model to start evaluating our next software selection and implementation. Granted, the next project won’t be as disruptive and comprehensive as ERP, and it will usually involve a different implementation team – so we don’t run the risk of employee burn out.
It’s something to start thinking about today – we’ll go into more detail in an upcoming episode of how every company should be a technology company.
Just begin to start realizing what can really happen with ProfitFromERP
So that’s it, our 2019 State of the ERP Address – we hope you stood up and cheered at the appropriate times
Just to recap
- We covered the new efficiencies driven by made for cloud ERP,
- We talked about increasing pressure on your internal ERP team and how ERP success depends more than ever on that internal team
- There’s huge ERP platform diversity which means something for everyone, at almost every price point
- And we briefly covered the potential for strategic impact with ERP and how ROI and ProfitFromERP is your roadmap for continual growth.
So thanks for listening – we encourage you to subscribe at Apple Podcasts and like the podcast – that helps us with future rankings
Next week, if all goes according to plan –– We’re opening things up with some special guests on the next episode of ERPodcast, from Profit From ERP – I’m your host Gene Hammons, wishing you – a profitable day today, and a more profitable day tomorrow – with ProfitFromERP.
Trends and Tracks
- Driven by the efficiencies of multi-tenant cloud systems, all ERP providers are responding with efforts to cut the time and cost involved with implementation.
- In all cases, this throws more responsibility onto the internal Project Team – a team that generally has little to no experience implementing a new technology
- Made for cloud does not eliminate the diversity and breadth of ERP providers – traditional on-premise solutions offer features that fit often critical business requirements
- The time, talent and resources it takes to implement ERP are greater than ever, but so are the potential rewards – the strategic application of technology represents tomorrow’s market leaders, avoiding technology costs is the quickest way to merger-bait.
- We can do more with component ERP than ever before – but it’s not a ‘solution sale’ it’s development of a core competency (see the white papers) But again, this is up to the companies’ management philosophy.
The time, talent and resources it takes to implement ERP are greater than ever, but so are the potential rewards – You can do more with component ERP than at any time in the past – and compete with larger companies who are spending much more on Tier One software. It just takes a history of experience and knowledge of today’s trends.
So today, while it’s not exactly a Congressional Proclamation, it’s definitely a real world perspective, The 2019 State of the ERP address –
©Rolling Thunder Studios
Author: Gene Hammons, MBA