Go big or buy twice

One surprising thing many SMBs assume when choosing enterprise resource planning (ERP) software is that any software package will fit the bill – that it’s just a matter of deciding how much money they want to spend. In fact, not all software is created equal, independent of price.

Buying the wrong software for your particular organization can be a fatal mistake. You need to look carefully at each solution and make an informed decision about what you need – for the long and the short term. After all, the process of choosing and installing software is not simple. It will produce certain stresses on any business. It’s certainly not something you want to have to repeat every three to five years.

Smaller Canadian businesses with manufacturing and distribution operations suffer from another common problem: a general lack of self-awareness. When I ask companies to give me an idea of their business model, a common description is ‘straightforward,’ or ‘basic.’

But while they may see their business as ‘simple’ or ‘like everybody else’s,’ this is rarely the case. Most SMBs have grown to fruition because of the creative efforts and ingenuity of their founders. They have survived and thrived because of that ongoing creativity and ingenuity. But, most have had to build up complex business processes to support these models.

Business structures, in many cases, become more complex than even SMB owners themselves realize and by the time I have this conversation about business models with them, they are no longer suited for smaller, less sophisticated solutions. They may be better off going with more comprehensive software from a proven vendor.

Why would somebody choose such a solution when they could buy a less expensive solution and get away with it for a while? There are three primary reasons:

Expanding expectations
Growth is imminent. If you know you’re going to grow – organically or through mergers and acquisitions – it may ultimately be a waste of time and money to buy a tier two or tier three solution. Otherwise you’re going to have to buy, install and implement – not to mention train your employees – once now, then once again when the first solution will no longer suffice.

You have a multi-type environment. If you could be described as multi-country, multi-currency, multi-company, multi-location or multi-plant, a more meaty software application or suite could more easily manage and integrate all the different and more demanding elements of your corporate structure.

Never simple
You just have a more complex business environment than the average SMB. Some of the more entry-level solutions are very good at doing the basics of accounting and order processing but if you have a more sophisticated pricing and discounting environment or a more sophisticated product development, kitting, build-to-order or job-cost environment, you may run into problems. Even though your revenues may not be big, you might still need the support of a more sophisticated application.

I’m not saying that every company needs a tier one software package. The solutions I reference are not for a $5-million-in-revenue, first-time customer, for example, and you should probably be at least a 20-user environment before considering it. However, if you’re a small or midsize company that is ready to expand significantly or you have a multi-type and/or complex business model, you may find it the most intelligent long-term move.

Rather than buying a less sophisticated application and later attaching applications from different vendors to each other as you go – and experiencing all the integration effort and confusion this can bring – a single application with a single database could be a better choice. This could provide you with finance, supply chain management, customer relationship management (CRM) various flavours of manufacturing, human resources, capital asset management and more. The modules are yours to choose, and you just add them as they become necessary.

Believe me, it’s not the same as installing Accpac or QuickBooks. This involves a far more significant effort in terms of hours, sweat and dollars spent, but for many of those manufacturers and distributors with expanding or complex business structures, it can pay dividends.

Gary Shaffran is senior vice-president of Syntax.net, which provides strategic consulting, project management, systems integration, consulting, design, programming, installation, training, and post installation audits to companies of all sizes.

Comment: [email protected]

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