Why you don’t need an ERP: The 3 must-ask questions to save millions

The only certainty in life is that nothing’s certain. But certainty is often what ERP system vendors demand when purchasing from them. The enormity of the decision- financially and strategically- often requires you to be highly certain that:

  • Ripping and replacing your technology stack will improve performance
  • Building and maintaining your own APIs and integrations will generate ROI
  • The total cost of ownership is transparent and favorable compared with a custom tech stack

Understand that choosing an ERP system is much like getting married- selecting the wrong partner can result in a lifetime of misery or a costly divorce from which you may never recover financially.ERP Lifetime Partnership

Here’s how to better your odds of selecting the right partner- or partners...

Why the curiosity?

Whether you’re exploring options outside your current ERP or trying to determine if an ERP solution is a better option than your current tech stack, it’s crucial to identify the unmet business needs that launched you on this journey.

What are you unable to do that an ERP would enable? Is there another solution you might integrate into your current stack? What’s the expected ROI of each scenario?

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With that in mind, understand ERPs come in varying forms, making comparisons difficult:

  1. ERP as a system - a single solution for all of an organization’s software needs
  2. ERP as a supplement - integrated with existing technology
  3. ERP as modules - or collections of related software (Marketing/Sales or Finance/Accounting), that may be used for mission critical business functions but also integrated with existing software that may be separate or possess a different level of sophistication or focus

The central question- for those using or considering a complete ERP system- is whether decoupling from a single system and migrating to a multi-vendor solution fulfills your unmet business needs and generates the ROIC you expect.

But if you suspect integrating multiple solutions is a bigger headache than a single ERP vendor promising to meet all your needs, beware of...

Broken promises

It may not be indicative of the norm, but the Dow Chemical Co.- which spent $1 billion on an ERP system that took 8-years to implement- is the highest profile example of what can go wrong when selecting an ERP.

Delays and cost overruns are actually the norm.

In fact, 79-percent of ERP implementation projects missed their promised deadlines and came in over schedule in 2017. Even worse, 56-percent of ERP implementations came in over budget by 25-percent and 18-percent came in more than 25-percent over budget.

What’s sabotaging ERP implementation?

The three most common reasons are:

  • Unanticipated technical or organizational issues (45%)
  • Unrealistic budget (43%)
  • Additional technology requirements (41%)

For businesses that have legacy ERP systems or that have been acquired by companies with older ERP systems, the cost and implementation time may be further impacted by attempting to integrate a new ERP into the existing legacy in-house ERP which often requires a two-tier strategy.

Total cost of ownership

Despite delays and overruns, the global cloud enterprise ERP market is expected to nearly double by 2021, with vendors generating nearly $29 billion in sales. The demand is significant but the vital question to answer- when trying to determine if an ERP is right for you- is what is the total cost of ownership (TCO).

Importantly, it’s the costs not advertised by vendors that can cause TCO to balloon. Some of the more common hidden costs include:

  • Cost savings that never materialize
  • Ongoing support and maintenance
  • Re-engineering embedded processes

Be sure to factor these 21 cost elements into your ERP TCO. Consider running the numbers on your own as well as many of the ERP TCO calculators are created by the very same vendors trying to sell you an ERP system.

Decoupling: the benefits

Electing to go with a multi-vendor solution- or decoupling from a complete ERP system- offers the flexibility and customization complete ERP systems may require you sacrifice. Decoupling can also help you grow your business by offering an improved customer experience.Why you don’t need an ERP

For instance, ERP systems that were originally built prior to the eCommerce boom may offer eCommerce modules as add-ons that aren’t mobile-friendly, lack reliable shopping cart functionality, or are unable to meet enterprise requirements. In fact, some argue it’s imperative that businesses decouple eCommerce from ERPs so they’re agile and flexible enough to scale globally.

Importantly, choosing a multi-vendor ecosystem doesn’t mean having to sacrifice integrating your IT systems. In many instances, the 3rd party integrations you’d be required to build to integrate your ERP system are more complex and costly than the native integrations- offered for free- that seamlessly connect many multi-vendor solutions.

Three questions to ask

When interviewing ERP vendors ask the following questions- and keep asking them- until you get answers or it becomes clear it’s not in the vendor’s interest to provide an answer- which is an answer in and of itself:

#1: Which systems does your ERP natively integrate with?

You’ll often discover ERP systems lack native integrations with eCommerce or supply chain solutions meaning you’ll have to build and maintain your own via an API or third party consultant.

#2: Who or what type of business was your ERP designed for?

Intent matters and you’ll likely encounter ERP systems built for brick & mortar stores or manufacturers. ERPs not built with eCommerce, wholesale, or O2O commerce in mind may rely on third parties to layer on such functionality at an additional cost.

#3: Will I have have to switch my entire tech stack?

It’s not likely an ERP vendor will answer in the affirmative, however it’s not uncommon that following implementation you’ll be strongly encouraged to switch to the ERP’s accounting and CRM offerings which entails additional data migration costs and may increase TCO. Demand evidence that you can keep your favorite software solutions- ask for references.

Making your choice

Even though it can take take 6-12 months to migrate data and implement an ERP system, it may be the right choice if you’re a large enterprise.

Conversely, the benefit of going with a multi-solution ecosystem - and the often insightful communities of users that accompany them - may offer a cost-effective alternative that allows you to customize your tech stack with only solutions that were designed with businesses like yours in mind.

The answers to the questions you ask - in combination with the TCO as well as weighing the implementation risks - will help you objectively determine whether an ERP is the right solution right now.

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