‘This is a terrible time to buy ERP’

Published on the 03/08/2017 | Written by Donovan Jackson

ERP Just do it

Hold on to those purse strings, says ERP expert…

How does this grab you: a major consulting firm which makes a living implementing ERP solutions reckons this just isn’t a good time to be busting out budget for new deployments.

In a recent blog, Eric Kimberling, lead consultant for US-based Panorama Consulting, started off by observing that ‘a good time for an ERP project’ is a little akin to being asked ‘when is a good time to pull out your fingernails with pliers’. There really isn’t one.

However, why right now is particularly bad comes down to the industry being in upheaval. “The ERP software industry is in a state of transition, which is both exciting and risky,” wrote Kimberling.

He noted that SAP has introduced an entirely new enterprise application platform with SAP S/4HANA, Oracle has migrated its legacy applications to the cloud with Oracle Cloud, and ‘Microsoft is still trying to figure out how to patch together its various applications (Navision, Axapta, Great Plains) into a cohesive Microsoft Dynamics 365 product’.

What’s more, he added, “These are just three examples of many.”

While Kimberling goes on to note that many of the newer ERP offerings, even those from long established vendors, are unproven and that there is always going to be a higher level of risk with fresh solutions, the counter punch is that one must start somewhere. ‘New’ solutions, too, tend to have the benefit of having evolved out of ‘old’ ones; legacy isn’t always a dirty word in the software world, as it implies a level of experience and hard yards having been done.

Kimberling is not afraid to court a bit of controversy, so is this attention grabbing, or does he have a point?

We tested his assertions with local ERP implementation experts.

Digital steps
Nick Mulcahy, CEO of SAP partner Soltius described Kimberling’s contention as ‘an interesting view’. Soltius has recently implemented the first S4/HANA site in the region at Ballance Agri-Nutrients.  “The media is going on about stuff like digitisation, big data, predictive analytics and IoT. That’s all well and good, but you need to modernise the core back end to take advantage of that,” he said. “That was the rationale for Ballance; it started with a customer and digital strategy and realised [to execute] it needed to get the back end right.”

On S4/HANA specifically, Mulcahy said the product is now 3 or 4 years old. “Maybe it was a bit riskier 12 months ago, but I don’t think that’s the case now.”

And just how different is the ‘brand new’ version for the consultants who must implement it (and ultimately, the users?) “There’s a refreshed user interface and features around live reporting, predictive analytics and modeling, chatbots to communicate with the interface in a different way, but the fundamentals of the ‘old and ugly’ SAP that we know but maybe don’t love are all there. Like all modern software, it is designed to be easier to use and easier to work with. From a consultant’s point of view, probably the biggest issue is that there is a much needed rationalisation of the modules. So you need to figure out what’s in the new modules – and also what isn’t.”

Delaying pains
Simon Bishop, director at Melbourne’s Inecom Technology Partners, agreed that there is never a good time. “Everyone’s too busy, regardless of if it is a good solution or not. Sure, it’s easier from our perspective as we are paid to do it – but the customer isn’t. And they have to keep the business running on top of implementing new software, too.”

Be that as it may, the world doesn’t stand still and nor does business. It becomes necessary to make changes sooner or later and once that is apparent, Bishop said delaying the inevitable probably isn’t a good idea. “Nobody likes change, but it happens. Doing nothing will itself result in change – because if your business slows down or closes because of an inability to compete, that’s going to be a major transformation.”

A counterpoint comes from David Mills, MD of Abel Solutions.  “It’s always a good time [to look at a new solution] if you aren’t getting the performance from the toolset you have. Keeping up with the changing technologies is important for any business.  If you have inefficiencies that can be measured, the right ERP system should certainly pay for itself,” he contended.

And MYOB’s NZ GM Carolyn Luey said decisions about when to implement an ERP solution come down to where a business is in its lifecycle, rather than where a software vendor is in its. “You need clarity over requirements and to make the selection of a solution that meets those needs. Software is software: it evolves and if you wait for to be perfect, you’ve missed the boat anyway. And if you can’t find the right solution, it probably isn’t the right time.”

She added that the most important criteria for choosing an ERP solution is to select a credible vendor and an experienced partner. “That derisks the decision. And do a full due diligence to assess current and future needs as part of the [selection] process.”

Benefits and caveats
Kimberling fingered another potential bugbear for the newer systems: Potentially unknown TCO/ROI results. “Pricing on some of these newer solutions is ambiguous at best, or worse yet, higher than expected. Perpetual cloud pricing models, paying for, ‘in-memory databases’ and other kickers can quickly escalate costs. Perhaps, even more concerning: there are no credible benchmarks for the types of business benefits that customers are realising,” he wrote.

Mills picked up on the question mark around long-run costs. “In relation to TCO, be clear on what the costs are going to be to. If it’s not clear, it’s likely there will be hidden costs. Simple pricing models are your best option to stop unforeseen cost blowouts.”

New products, said Bishop, come with potential benefits as well as caveats. You could be the first to use the latest-greatest, benefiting from functionality and features not yet in use by others. But the relatively untested nature of the software could also mean you’re the guinea pig. “When SAP launched Business One on HANA, we declined to implement any for probably two or three years,” he noted. “That said, someone has to be first and generally, the partner and vendor will invest a lot more when new software goes in, as there is a considerable vested interest in getting those early ones running like clockwork. Because if they don’t, it’s unlikely there will be further sales.”

The newer products tend to be of the cloud variety, and Luey had a further point to make on the ‘cloud vs. on prem’ debate. “Introducing a cloud product can be less risky for the customer. You’re not paying up front for a perpetual license or new hardware, and you can phase in the new ERP. You could do big bang if you wanted to, but you don’t have to.”

Mills added that unproven software is always a risk, but it must be weighed up against the realities of a changing world, including mobility and different ways of consuming the multiple services necessary to run a business. These things should be enabled, not constrained, by an ERP solution. “When evaluating an ERP ensure that you have an ‘application process demo’ rather than a ‘powerpoint demo’,” is his advice. “That way you get a much greater understanding of what you are getting rather than what you think you are getting. To reduce the risk, you need to reduce the expectation gap between what you expect versus what the vendor expects to deliver.”

It’s not all doom and gloom from Kimberling either. He ends his piece by noting that, “On the bright side, innovative technology can potentially transform your business. The risk-reward profile may look different, but many of these solutions are conceptually quantum leaps in terms of functionality and technological architecture. But, the unknowns, costs, and risks are variables to consider.”

And the last word goes to Soltius’ Mulcahy, who pointed out that if you buy into the ‘digitisation’ hype, now could be a jolly good, rather than the worst, time to upgrade or implement a spanking new ERP solution; there could be greater risk by doing nothing. Still, he remains a realist: “It is open heart surgery to do this stuff, but the inherent benefit of the exercise has to be higher than the effort.”


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