ERP considerations for midsize businesses

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“In today’s business world, if one were to ask what is the most popularly

referenced term, the answer would be ‘ERP’. Be it a desktop solution vendor,

a half-baked back-office functional developer, or a multi-national solutions

vendor - they all refer to their solution being an ERP. So what is an ERP, really? Enterprise resource planning (ERP) is an enterprise-wide information system designed to co-ordinate all the resources, information, and activities needed to complete business processes such as order fulfillment or billing. It is in this context that the insights provided by Oracle Group Vice President and General Manager of Oracle’s JD Edwards EnterpriseOne and Oracle’s JD Edwards World, Lenley

Hensarling, in this article becomes consultative and informative to the business world”, said Country Manager for Sri Lanka and Maldives of Oracle

Corp. Dr. Vickum Senanayake.

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Regardless of language, culture and industry, the business needs, goals and challenges of midsize organizations are remarkably similar.

Every day midsize companies strive for a solid financial foundation, high customer satisfaction and positive business growth. It doesn’t matter if the company is focused on a local market or competing across oceans - the fundamental components of midsize business success are universal.

How decisions are made regarding cash flow and resources access/utilization will determine if a midsize business will thrive, just survive or die. When these decisions are coupled with global economic and environmental challenges, the selection of a firm’s business data, information and process infrastructure is significant.

Over the past four decades, ERP systems have evolved from isolated back office accounting systems to enterprise-wide solutions which today touch not only every employee, process and asset in a company, but reach outside the firewall to customers, prospects, suppliers and partners.

With the right ERP system as the backbone for a midsize company, operational, manufacturing, distribution and engineering systems can be integrated into one cohesive and productive environment across complete value chains.

When businesses are first formed, they often start with simple financial and process systems which typically utilize a combination of paper documents and electronic spreadsheets. At the next phase of their business growth these firms typically incorporate an off-the-shelf software with features to handle accounting, payroll and some asset management.

Growing companies rapidly exceed the capabilities of these simple packages and find themselves with a haphazard mixture of data and processes managed with paper filled file cabinets, spreadsheet and one central, but disconnected, general ledger solution. The only point of integration is casual email used to pass around spreadsheets and seemingly random orders, inquiries and reports.

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When companies realize that this type of disparate infrastructure is inhibiting growth and causing costs to spiral out-of-control, they consider implementing an ERP system.

The transition to ERP for midsize companies is often the catalyst for faster growth and improved profits. The key to making this transition successful is careful ERP consideration.

There are hundreds of ERP systems available today, and midsize companies often only have one chance to make a good decision - the wrong decision can potentially sink a company. During a selection process, midsize companies should carefully consider additional factors in addition to checking functionality and reference lists:

1) Vendor strength - ERP software providers need financial and human resource functionality to not only support current releases but to invest in new technologies and capabilities through research and development, craft new releases and develop next generation products.

2) Vendor growth - When companies gain new ERP customers they also increase their annual maintenance revenues. This generates an annuity for product development and support. ERP companies with little or no customer growth are risky for long-term viability.

Besides the vendors stated commitment to the product, continued marketplace success for a product provides insurance for midsize companies invested in ERP.

3) Partner strength - Even though many ERP solutions are very robust with extensive features and capabilities, no ERP vendor can do everything. Take a close look at their partner ecosystem - from resellers and system implementers to independent software/solution vendors and process/business consultants.

The strength of this ecosystem is a good indicator of the independent commitment to the ERP solution since partners have to make their own judgments about the value and viability of a particular software package.

4) Globalization capability - Even if a midsize business is not competing globally today, it is comforting to know an ERP system has language and country localization capabilities with dedicated resources working to stay current. If a business expands beyond its borders, an ERP solution in place with globalization features simplifies international expansion.

5) Technology pace - Even when economies struggle, technology moves forward.

Since ERP systems were first rolled out, computing has evolved from mainframes to client-server to the web.

Midsize businesses need an ERP vendor with a track record of aggressively embracing new technologies with pathways for moving customers forward.

6) Technology choice - Midsize businesses need flexibility not only in their daily operations, but in meeting their technology needs. ERP vendors should support a broad range of platforms, so any midsize firm can optimize their infrastructure selection.

7) Technology standards - Standards lower long-term ownership costs. ERP vendors should embrace open standards wherever possible.

8) Product investment - The ERP vendor should document the investment they have made in their product since the first release. Vendors should provide documents that list added and improved features and functions between their first and current releases. Stagnant products and lack of functionality completeness highlight vendor weakness.

9) Industry capability - Some industries need specific functionality to supplement core ERP capabilities. Awareness of how an ERP vendor addresses your industry’s specific needs is crucial.

10) Integration approach - Other software can compliment ERP solutions. Understanding how an ERP solution integrates to a diverse range of products not only helps midsize firms with current infrastructure needs but provides insight into how a vendor is looking forward to address application directions. A vendor may also provide some of these complimentary solutions; this strengthens consideration of their ERP package.

11) Ownership costs - Understanding the total cost of ownership, from initial deployment to ongoing maintenance, training, staffing and hardware needs, helps midsize firms make a cost-effective selection decision.

12) User organization - Strong, functioning independent user groups are important for an ERP product line’s health and future. With user groups, customers provide a collective voice to a vendor which helps drive product futures and improvements to current code.

Choosing an ERP system is a great opportunity for any midsize company to deploy a new platform for growth and success. Midsize firms need to make their ERP selection with careful consideration, taking into account where they are today, where they want to be in the future, and the changing landscape of technology.

A well-developed ERP decision brings enormous opportunity to any midsize business interested in growth and profitability, regardless of location and industry.