I recently visited a CEO in an international manufacturing company, who was considering replacing their ERP system. The company had had the same system for more than 15 years, and during the years it had been expanded, patched, integrated and welded together so that the system today appeared completely opaque, undocumented and had become a millstone around the company’s neck.
The CEO did no longer rely on the information in the ERP system about products, customers and employees, and it took too long time to get the necessary and important information.
He said; “I am sitting behind the wheel in a car, but I cannot see through the windshield, and the engine smells burnt”. That is an unpleasant situation for a managing director.
Today, many companies are in a similar situation, where they have outgrown their ERP system. The problem is that you cannot just stop the business to replace the system. The daily operation must go on. And typically you cannot just upgrade the ERP system, due to the many customizations in the system.
You can try to extend the lifetime of the system. However, that is just a short respite. Experience shows that at some point, the system must be replaced, and then a few important guidelines apply:
Understand what makes your company special and where your competitiveness lies. It is for sure not the standard processes and standard functionality, where up to 80% are identical with your industry and can fit into a standard solution. Therefore, choose standard processes and adapt your business to the software. Not the other way around. Instead, you should focus on the few processes, which constitute your competitive advantage, and customize the system within these areas.
Implement a strict control of the project and particularly control of the parts of the systems, which should be customized. It takes a firm hand from the management team to stick with the standard system.
When the company is successful in remaining on standard software and standard processes, while avoiding modifications, the project will be smaller, cheaper, faster, and the risk minimized. That way the company ensures an optimized lifetime of the ERP system, and that the system represents a competitive advantage – and doesn’t hold back the company’s development.
When the new ERP system is operating, it is important to give it a service check on a regular basis. Ensure that the system is upgraded regularly.
My advice to the CEO was to get started with the replacement. And just as important to make a watertight plan for the project implementation, so that the company is able to service its customers, produce goods, update the warehouse, send invoices and pay salaries. In short, the company can continue to run at full speed while the ERP system is being replaced.
Expect that the replacement may take longer than first expected, and that will be more expensive than expected! Because it usually takes longer to get a grip on 15 years of data and logic than most people can predict. In return, the benefit is great when the company runs on the new ERP system, because then access to information is faster and easier with strong competitive advantages as a result. And hopefully it will take more than 15 years before such a radical replacement is relevant again.
Thomas Honoré is Chief Executive officer and President of Columbus.