An SME Guide to Selecting an ERP System and What Can Go Wrong
We talk with a SOS ProAdvisor and veteran of the ERP and manufacturing control 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.
What is an SME?
“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.”
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 ERP systems available for business of all sizes, less so maybe for micro-SMEs (but then we have SOS!)
Having got your system, you then need to make it work. And that will be subject of my next interview with Barry.
Andy Makeham has enjoyed a lifetime in software business development, as a programmer, implementor and entrepreneur. He has grown, bought and sold many business software companies and floated one on the public markets. He has worked with private and private equity owners. Today Andy acts as a business development advisor to the software sector. In that capacity he is working with SOS Inventory.