Cloud ERP has changed the way that we look at ERP systems. The following is a look at the advancement in ERP systems.
Once upon a time, before the great recession, companies looked for ERP systems that were as close to a perfect fit for their business as they possibly could find. This search took a massive amount of time, and always involved compromises. The harsh reality is that virtually no ERP system is a perfect fit. Companies would spend a great deal of their budget on “customizations” intended to fix the imperfections. In fact, implementation projects for most of the top-tier ERP systems (SAP, Oracle, Microsoft) were famous for huge cost overruns and massive customization. Huge investments were made to meet that perfect fit.
After go-live, however, it got worse when customers found the perfect plan spiraled out of control and their assessment of their needs ended up being totally wrong. The customization had been wasted. Their own expectations were wrong. Often the company needs change during the months and years it took to get the ERP up and running. ERP gained a reputation for being painful, expensive, and difficult.
During the Recession, things changed. Two major things happened. Companies had no money and Social Media spread anecdotes and tribal knowledge to the masses.
Social Media was probably the most effective change agent that the ERP industry had ever experienced. Now companies were sharing their ERP experiences on LinkedIn, blogs, and a variety of other ways. Companies could compare the experiences of their peers. The word was out, and the word was that perfect was never perfect, and that customizations were virtually always wasted.
The Age of Cloud ERP
And so we enter a new age of ERP, one where Dynamics 365 Business Central, Netsuite, and other cloud ERP are not so much changing our expectations as they are responding to the changes in ourselves. The expectation of a fully customized, perfect ERP implementation has gone the way of the dodo. We are looking for Pareto’s law – which is often called the 80/20 rule. Customers are looking for 80% of the functionality of a perfect ERP, for 20% of the cost.
For some people, 80% sounds bad. It sounds like a 20% failure. This is based on the assumption that we stop after our implementation. That would be a good assumption based on past performance.
In the past, ERP implementations were painful, long, difficult, and expensive. And when we say long, we mean long. Often ERP projects took 12 to 24 months of solid work to complete. We called the result “ERP Exhaustion” and nobody had any appetite to spend more time or money.
Following the new method, ERP implementations are relatively painless, short, easy, and inexpensive. For instance, Sabre hasn’t had an implementation take over 9 months for several years. In fact, most of our customers complete their project in less than 6 months. And because we leave advanced and difficult modules for later, the implementation is easy. This is becoming the norm for ERP projects. What it means is that the project exhaustion that used to be normal for ERP doesn’t happen. There is energy when we are done.
And that energy works amazingly well once your staff is actually familiar and comfortable with their new ERP. You are using your new ERP quickly. You are seeing some of the benefits more or less immediately. You saved significantly on budget, (some customers spend less than 35% of what a classic ERP project would cost) so there is an appetite to spend some more money to get more improvement. The exhaustion doesn’t settle in. And now you move forward with the other 20%.
The huge advantage is that you are much better informed as to what that 20% really should be. Following the old way, we all guessed what we needed to do to create perfection. Following the new method, we operate with more knowledge and less guesswork. Following the new method, we get better returns.
Our expectations of ERP are changing, and the ERP systems are changing to meet them.
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