January 11, 2021 | Andy Makeham

An SME Guide to Selecting an ERP system And What Can Go Wrong

selecting an erp system

We talk with a SOS ProAdvisor and veteran of the ERP and manufacturing ERP software world, Barry Linnard, who has spent the last 40 years selecting and implementing ERP software for SMEs around the globe. Barry has much experience, some of which he shares here.

Why Have an ERP System?

“SME is a very broad term,” commented Barry when I asked him for the interview, “ranging from a 1-man startup to a business with 500 employees. So, I think we need to segment the market further for any analysis to be helpful.”

“In my experience, whilst the mid and upper ranges of SMEs have been adequately served by ERP solutions in recent years, the smaller companies have been left wanting.”

Until recently, smaller companies employing 2-50 staff were not well served by ERP software. It was just too complicated, and I learned from bitter experience that it often created more problems than it solved. So, when I first came across SOS, I could not believe how simple it was. It took just 6 weeks from start to finish, and it did everything expected of an ERP system. At long last there is now a solution for the Micro- SMEs”.

Why have an ERP system?

“Unified data,” replied Barry without any hesitation, “is an integrated business system delivering you one version of the truth.” I ask him to explain further. “If you have just one spreadsheet running your business, you probably have one version of the truth, but you never just have one, do you? You will have a spreadsheet in sales, and another in purchasing, another in costing… and so it goes on. And with all that you have created that wonderful monster… data duplication! Now tell me, is the stock figure showing in the sales department’s spreadsheet correct? Or is it the slightly different figure showing in the purchasing spreadsheet? Without an integrated business system (an ERP system), it really is very hard to manage your business,”

What preparation should be made before starting the selection process?

“Communication is the first point I would make. Tell your team, however small that team is, what you are planning and why, and tell them early. The aim is to make them feel involved, make them feel they are party to the selection. That way they will feel it is their system, and they are going to be committed to making it work. Believe it or not, people do try the alternative of NOT telling the staff about a new system until it arrives. That never ends well!”

“Process is the second thing to consider. If you are putting in a new system, you are going to create change in your business whether you like it or not, so why not use the disruption to your advantage? Ask yourself ‘could my business run better?’ If yes, write down the processes that represent your ideal business, and select a new software solution to deliver that. There are books written on this whole business transformation game and consultants charge thousands, bedazzling you with their acronyms when in truth it is simple. If you want a formal mechanism to follow, try this…. “

“Go to a largish meeting room with plenty of flipchart paper, board marker pens and blue tack, and take your key people with you, too.

On one wall write up the as is processes – draw the route of an order takes as it flows through your business, all the way through to billing and cash receipt. At each stage, ask two questions (1) Do we have to do this? And (2) If yes, is the best way to do it? As you re-model your business into the shape you would like it to be, write up the new order flow on flipchart paper on the other wall. These are your ‘go to’ processes, and it is against these that you will select your system.”

“The go to processes will form part of your Statement of Requirements (SOR)… this is the list of things you want the new systems to do for you. You need this before you start the selection, to help you remain impartial. Ideally, your list will be prioritized, with must haves flagged, and you will have a scoring mechanism that you can use when you are having demonstrations.”

barcode scanning

How to Select an ERP Package

“Firstly, let’s just make a point – it IS a package you are buying; you are not going to have some bright spark write a bespoke system for you. The continuous nightmare of maintaining a custom solution really isn’t worth it. There are hundreds of stock ERP systems available for business of all sizes, less so maybe for micro-SMEs (but then we have SOS!)

  • You want a system that is proven yet innovative and modern.
    • Don’t be a pioneer for something new (and therefore unproven) no matter how great the sales-spiel. The rewards for pioneering are arrows in the back!
    • Don’t buy a legacy-system, i.e., an old system that has been around forever but might well appear to meet your niche-vertical functional needs. It will be on an old-technology platform, with minimal investment in development. You need something that is on a modern development platform that is being heavily invested in today. Technology is developing faster than ever. AI (artificial intelligence) is being slated as the new oil. The right system can give you a great competitive edge. And the reverse is also true.
  • Look for reference users like you, who do what you do, and who are of comparable size. If you are fortunate enough to find some (and they aren’t arch-competitors!) – track down the CEO and phone him up and see how they find the product and the support. If two are three such reference calls are positive – then budget allowing – that is possibly your solution.
  • Demonstration. In an ideal world, you should be able to try the software, and run it with some of your data to see if it really works for you. For micro-SMEs you now have SOS, and this is exactly how they sell it; they expect you to try before you buy. This is possible with SOS Inventory because the software is so simple to use and implement. It is sadly not possible for most other SME ERP packages, and for these you will need to see a demonstration.”
    • Ask to record the demonstration. After two or three different demos – you will not remember what you have seen.
    • Go to the demonstration with your eyes wide-open. The salesman will obviously present his software at its best and will skirt around the weaknesses. They are masters at making it look good!
    • You have your statement of requirements, and scoring mechanism, as you now watch the demo carefully.
    • Ask questions. Make sure you SEE what they claim.
    • Beware the salesman using words like could and should – this is obfuscation. The words really mean ‘NO’ or ‘at a price.’
  • Cloud or on premise? This battle is all but won. Cloud every time. Why on earth do you want the headache of hosting the software on your own servers? In some parts of the US and some parts of Europe, internet access still isn’t great, and it is only in these conditions should you consider on premise.
  • SAAS (Software as a Service) or one-off license fee. SAAS is basically paying a monthly fee for use of the software you are using whereas the one-off license fee is a one-time payment to purchase an own use copy for your company. The world is increasingly SAAS, and if you are selecting a market leading modern technology ERP solution you will probably only have a SAAS option available. SAAS is immediately more affordable. For example, SOS inventory can cost as little as $25/user/month for a fully functioning ERP system that will more than meets the needs of most Micro SMEs.
  • Apply the Dummies test. If you are an SME that wants a solution that is really easy to use and implement, do an internet search and see if there is a Dummies Guide for using the software you are considering. If there is – it isn’t easy to use at all! That is why someone has written a Dummies Guide to try to simplify it.
  • Do you need a consultant to help you? Selecting a system isn’t hard, it is really just common sense, but buying the wrong system can be painful and expensive. That is why people like me have a job! If you need help, the local chamber of commerce usually has a list people like me, or sometimes selection is a service they offer.”

Having got your system, you then need to make it work. And that will be subject of my next interview with Barry.

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