Smart Family Business Strategy
Using an ERP Agnostic is a smart family business strategy when considering an ERP system - he/she can save a lot of time and money!
An early life lesson is, “be careful what you ask for, because you just might get it”. In life and in business, that is an important lesson to remember!
Over the past 25 years the concept for using computer technology to better manage a business has evolved from the old MRP (Materials Requirements Planning) systems to the more sophisticated and holistic ERP (Enterprise Resource Planning) systems that are commonly deployed today in better run businesses.
Even though the new ERP technology has become less expensive (a relative term for sure…) and more user friendly, the “process” for purchasing the best ERP system for your family business – and then training and implementing a new ERP system can be as traumatic as ever. In other words, the technology has become really slick but the selection and implementation “process” is still a minefield.
When a family business owner reviews the research dealing with ERP implementation – a startling statistic comes to the forefront: Less than 40% of ERP implementations return any type of a ROI. Obviously that means that the selection and implementation “process” generates far more failures than successes.
In many cases the root problem has to do with the false expectations created by the ERP sales people – that the ERP system is going to be the perfect panacea for ordering the chaos that can overwhelm a family business. This is especially true for those companies lacking the necessary infra-structure to support the growth and profitability objectives of the family business.
On the other hand, it is not surprising to learn that most family businesses are not fully utilizing the full capacity of their ERP system. As the business grows, the functionality of the current ERP system appears to be even more obsolete.
Accordingly, as the ineffectiveness of the current ERP system is becoming ever more apparent, family business owners are susceptible to finding a “better solution” – a brand new ERP system that will be the “perfect panacea” for their family business!
There may be a less expensive and less intrusive strategy if the family business owner can reflect on all of the implementation problems associated with ERP:
Business owners having to learn new ways of managing the business
Users learning and training on becoming proficient on the new system
The hours required for training management and staff planning are significant
The project management time required for training and implementation are generally understated
To save money, full system utilization is aborted or compromised
Bottom line is that the business owner and the entire management team are frustrated, bitter and disappointed with the results
Our family business ERP expert Mike Roman, an ERP Agnostic, responds to questions from family business owners and that can often help brainstorm solutions to ERP-related issues.
Recently, a client called and asked “why the costs for the software and implementation were so high”. His requirements were very standard for a distribution company:
The client was dissatisfied with his current system. It had been quite awhile since the last upgrade, it was slow, and it still depended on manual applications that should have been automated.
It was a rather unsophisticated system that fit the bill 6 years ago when the business was a $1M company but was not meeting the needs of a $10M company. In fact, the business owner had come to realize that his current ERP system was actually impeding the growth of the business.
Prior to giving us a call, the client had met with a number of ERP vendors and had narrowed the search to one of the ERP systems that seemed to meet the present and future needs of his business.
What we usually find at this point in the negotiation process, the “hard” questions of what the ERP system “can do" are the basis of the discussions – but what is left unasked are the “soft” questions that determine what the ERP system “will end up doing”.
When asked how long it would take to implement the new system, the client was unsure.
When asked about the data conversion plan, the client was unsure.
When asked about the training plan, the client was unsure.
The client was unsure of a number of points except that he was convinced by the sales person that he needed a new system!
To make a long story short, our ERP Agnostic Mike Roman compared costs and found that there was a huge savings opportunity in upgrading and perfecting their current ERP system.
That delivered a number of advantages:
The upgrade will take a day while a new system would take several months to implement
The cost of the upgrade (along with a new computer to host the software) is a few thousand dollars while the new system and computer would cost approximately $60k+
There would be an additional charge for the data conversion
There would be an additional charge for the training
There would be an additional charge for the conference room pilot
The disruption of the old system was approximately two days while the disruption of a new system was approximately 4-6 months, maybe more..
The client’s focus on replacing his old system blurred his understanding of the many benefits of upgrading the current system. He, with the help of a very smooth sales person, had already sold himself on the new system!
According to leading family business expert
founder of the
Family Business Institute,
“Using all of the available resources when making a major financial and operational decision simply makes good sense. Using an ERP “Agonistic”, someone who is not affiliated with any particular ERP system, can save time, money and a great deal of frustration”.
“When it is all said and done, it is not about making the “right decision”, it’s about the process for “making the decision right”, according to Schwerzler.
If you have questions about your ERP system and feel your family business would benefit from getting input from an “objective third party”, you can contact Mike Roman using our ASK THE EXPERT feature.
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