You should be able to explain how the investment in a new system makes business sense.
Some investments, like a machine that make croissants automatically, are easy to explain. Investments in business infrastructure, such as a new ERP, accounting or CRM system, are harder. The pay-off from these systems is a combination of some clear cost savings, and benefits from new capabilities, which are less clear but more important.
The new platform is a necessary enabler of future investments: like the foundations of a house: the foundation doesn't keep the rain out, but you couldn't have a roof and walls without it.
The value of the new system comes from a combination of those four points, and you'll need to exercise judgement. It's hard, but we strongly recommend that you at least estimate the potential upper and lower range over the lifetime of the new system, which you should set to be between three to five years for an established SME.
The era of the one-size-fits-all system is coming to an end. The rapid move towards ecommerce and mobile devices was the first wave, but the integrated cloud revolution will keep rolling on. Already, few businesses of any complexity are well served by choosing one package. We'll be blunt: GrowthPath does not believe in the promise that one system will meet all your needs. You either face serious compromises or expensive customisation. Just because your current IT is a mess does not mean you have to replace all of it at once. In some cases, the broader functionality of traditional monolithic ERP systems is ok, but in other cases it's clearly a step backwards.
Unfortunately, many vendors in the SME market are not genuine system integrators; they are usually resellers of a small range of monolithic packages. Their incentive is to sell as many modules of functionality under their package. While they may claim that the monolithic approach avoids the "synchronisation" factor, they are usually more complex to configure, and they have a much smaller ecosystem of auxiliary applications, such as online marketplaces, CRMs and 3PL integrations.
A typical smaller SME in Australia may have a legacy finance system: often it's MYOB. These entry level systems offer very little extra functionality and they are very hard to integrate with other systems. A typical SME is using a number of additional systems (stock, POS, CRM and online, say). And these additional systems are not connected. It's a big mess, but trying to replace all of these systems with one single solution is usually good to be true. While it will solve the mess, you end up with a one-size-fits-all approach. This doesn't matter much for producing a P&L, and it may not matter much for basic warehousing: these are back-office processes that are generic. But the closer you get to processes which touch customers and your special ways of doing things, the more the compromises will hurt, because you will trying to fit generic solutions onto processes which express your point of difference. As well, most efforts to link with innovative cloud apps will require custom integrations, since the market share is too small to attract developer interest.
The alternative to replacing this with a monolithic package is integration, because it allows you to find software products which do specific things closer to your needs. Rather than asking your accounting system to also be your CRM, you choose a decent accounting system, and then go shopping for a CRM which is right for your business. This has always been possible, but until cloud integration technologies emerged, it was expensive to connect products from different vendors. So expensive, that it was actually not affordable for many businesses.
Cloud integration has radically lowered the costs of integration, and an idea which has long been a vision to software developers has been realised. Done well, an integrated approach gives a much better implementation: faster, better suited to the business and with all the key advantages of a traditional ERP implementation.
How can implementing a new system fail?
or it makes key people leave in frustration.
But there are much bigger hidden failures: the missed opportunities. This is the 9/10s of the iceberg below the water: these costs are much more significant than the obvious failure risks, but they are harder to see.
Risks can be "failure" risks or "opportunity cost" risks. Opportunity costs are costs of wasted and missed opportunities. They can be very large, but more obscure because you don't know what you can't see.
Failing to inspire your team (Finance, management, production, warehouse etc) with the advantages of the new system, leading to people leaving and loss of confidence in the finance team.
Timing of a new system: when to go live?
The one rule is to live at the start of a month.
Any month which is not the start of the financial year will have some nuisance. If you go live at the start of a quater, your VAT/BAS disruption is low, but payroll will be split across two years. Such problems only happen once, though. In return, you can time your go-live to suit a quiet time of the year.
GrowthPath can select the correct system. If the right choice is a traditional ERP approach, we can run a tender and shortlist program, do vendor negotiation and then support the implementation. Our advice saves tens or hundreds of thousands over the life of your new system. The savings come from the easy wins of experience, and long term, deep value of a better implementation.
If the right choice is an integrated cloud solution, we will implement it. Cost should not be the main motivation when changing core business IT, but avoiding a traditional ERP systems will be a significant saving in both running costs and implementation costs.
GrowthPath fills a large gap: software vendors are often strong at understanding the capabilities of their software, but not experienced at understanding what makes your business work.
Typical successor systems to MYOB and QuickBooks.
These problems are usually solved with finance systems running on a database server. The data will be on an SQL server, almost certainly Microsoft SQL Server. This solves the big problem of MYOB: multi-user access to data. These 'grown-up' systems are an opportunity to reduce spreadsheets and third-party systems used for forecasting, stock management, scheduling, and they offer much stronger businesses controls with surprising paybacks when talking to banks, investors and potential acquirers. And in reduced audit fees.
What systems? There are many. I could name Accpac, MYOB Exo, Pronto .. but there are many more.
Vendors try to differentiate their products, but your interest is the opposite. You want to convince vendors that their offer is merely a possible candidate among a strong shortlist.
If you're upgrading from MYOB, the increase in reliability and functionality is such a huge step from MYOB that if may feel impossible to make a mistake. No matter what you do, you'll see a big improvement. However, this attitude risks costing you money, not to mention the missed opportunity of a new generation of business information.
Make a business case for a new system, which specifies where it will deliver measurable improvements to the business.
You should expect improvements in business control. This may not seem very exciting, but it makes a strong impression on banks, investors and potential acquirers. Should you need external audits, a good business control implementation will earn substantial fee reductions.
You should expect the system to earn pay-back through more efficient core processes. Apart from lower downtime, a new system should enable faster month-end closing and reporting, and greatly reduced rework due to errors.
The points above are generic. Each business will be able to identify some more precise links between growth plans and the new set of tools delivered by a modern mid-tier finance package.
Even if the functional gaps to your requirements are not very important, having a good list of talking points is helpful in price negotiations.
If you need to integrate with existing systems, you will notice remarkably different approaches. Integration with existing systems has real benefits, but it is an increase in complexity and needs a careful cost/benefit exercise.
I have a technical background, and at this point in package selection I examine Application Programming Interfaces (APIs), quality of documentation and the pricing and quality of Software Development Kits (SDKs). There are always different options for integration, starting from primitive flat-file interfacing. More often that not, API-based integration is the best choice, since custom systems are often very tailored for business requirements.
Commercially, pay very careful attention to annual maintenance charges. Insist on making them optional, and see what the wonders of competition produce. Make sure that your licence is not dependent on annual fees; that is, no lock-out for non-payment. Annual fees offer bug fixes, some very limited support and usually include upgrade to new versions. However, you can pay catchup fees if you need to. Five years of 20% fees in return for access to new releases? If you plan to upgrade every five years, it's not a saving, certainly not a cashflow benefit, and locks you in. Perhaps you are better off making that decision in five year's time with the cash still in your bank. In five years time, cloud and hosted ERPs will transform the mid-tier market.
Vendors will strive to differentiate their packages. Your interest is opposite: finding a shortlist of packages which all suit your needs, since this increases your bargaining power.
You will usually buy mid-tier software from a reseller. The reseller makes a margin on the licence fees, a good margin on consulting fees, and looks forward to years of 20% annual maintenance fees (discussed above).
4) Data migrations: A very important step. Includes making sure that there is no customer and supplier disruption with invoices and orders started in the old system, and making sure there is meaningful historical information for reporting and forecasting. Data migration is tricky because it requires strong knowledge of both the old and new system. Often it involves judgement in dealing with duplicate data.
Every part of this is negotiable. This is a highly competitive sector, and resellers are under pressure to sell. Often a reseller represents different products; involving the Australian software distributor directly can be useful. All parties are looking for reference sites; if you have a reputation for being innovative, exploit it.
Shortlist to keep the competition intense, and play offers against each other.
Finance teams can be surprisingly reluctant to change software. Counter this with two motivation angles.
1. New skills to enhance a CV.
Modern finance systems cater to businesses looking to get more faster, simpler and more relevant information for decision making. To enable the power of these tools, you will probably need to reposition your finance team and raise expectations of its contribution to your business. This is good for the business, and exciting for most of the finance team. You may need to look at your team balance to make sure the finance team can properly serve the business pro-actively.
GrowthPath offers fixed-price, end-to-end project management service for implementing new ERP and Finance systems. We do independent package selection, vendor negotiation, project management and we manage crucial aspects of the new system, such as design of the chart of accounts, reporting, integration between existing systems, business controls and inventory management: areas where our operational experience is usually far beyond the package vendor. We are zero-commission and propose open technologies. We will help you avoid lock-in and its high costs.
A common situation is businesses which believe they have outgrown MYOB AccountRight. There are ways to extend the life of MYOB. But if a move is needed, there is now an opportunity to move to cloud-based solutions.
"Not only the best implementation I've ever seen, but the best I've ever heard of".
We hope you find these tips helpful when selecting and negotiating new systems.