Author: Wayne Hockley | Posted February 03, 2020 | ERP
Few decisions for business owners cause more angst than IT software decisions. Many owners and senior leadership teams are confounded by the overvalued presentations of ‘technology”, that focus on everything but what every business executive needs to know – the value proposition for now and what the investment time horizon looks like in the future.
It’s interesting to me that someone who has been involved in hundreds of these meetings over the past almost 30 years that many have tried to quantify the value proposition, but none have tried to predict and help the business owners get a sense of the future of their investment by looking at the past. In many decisions in life, we wouldn’t dare to try to predict the future without a good look at the now and also the past. Can looking back at the Enterprise Resource Planning history book give business owners a helpful peak at the future? From someone who has been in this world, let me summarize a few lessons from the past, and help you chart the direction of the future as you weigh one of the most complex, confusing and painful decisions you will ever have to make for your business.
The concept of ERP, in a simple way started in the 60’s. With the rise of computing power and new ways to store data it and operating systems that would allow a way to ‘automate business process’ and start the long journey towards the center of the ERP universe – the General Ledger. The old paper ledgers that accountants used were fraught with errors, cumbersome to use and impossible to summarize into useful elements for companies to benefit from, in a timely basis. The world of month ends, year ends that took months and months to summarize were born, but ERP gave a new vision for how companies could run. In the 70’s manufacturers could start to predict inventory needs, based on complex calculations for their manufacturing processes called MRP. Literally MRP and MRPII transformed not only the manufacturers themselves, but all of their vendors and suppliers – and as important as the calculation of inventory, timelines were transformative, for the first time manufacturers could calculate costs and the information would flow into the General Ledgers – and reports could tell a business owner not only the rolled up cost, but all of the elements flowing into calculation on things produced in the past 7 days. Revolutionary!
The 80’s saw the revolution of the Personal Computer, and soon after that networking – imagine multiple people working on the same program and all of the data flowing into the general ledger, on a computer platform that was opening up new markets, new possibilities, mid sized and smaller companies. As the market grew, the networks got faster within a company then programmers of ERP started to add more and more capabilities into the ERP’s of the world, growing from companies primarily with accounting needs, to manufacturers and now distributors, service companies, smaller government institutions. In my view this is the time when the concept of Best of Breed software started to emerge. Best of Breed was an attack on the ‘one business system’ concept of ERP, it promised specialized functionality with a quick implementation, but it was a band aid approach that introduced a new concept to companies who now had to wrestle with a monster called ‘unintegrated’. Now departments of companies could each run their own specialized business software, but the owner and senior management teams struggled with getting a view of their company information without building a huge overhead trying to manually bridge the data gaps.
In the history of ERP this must be the big lesson – the value of having the entire business system on one system outweighs those best of breed functionalities running on separate systems. Many companies still find themselves in the unintegrated, patch work of systems IT environments – very expensive, very cumbersome and upgrades well almost impossible. The great news is, that in the past 20 years ERP vendors have closed the gap on these best of breed systems as far as compelling functionality. The internet now, has changed everything again as companies can have quick access to their company data anywhere in the world, but that has once again only highlighted the value of ERP type systems. ERP systems now can offer companies with IT groups a whole new way to provide a better kind of value to their companies – allowing development and tweaking to bring the ‘out of the box ERP’ to a much tighter, company specific functionality – and this is possible with new ways to do development and allow for future upgrades.
As you weigh the future direction of your company’s IT platforms here are a few lessons from the past pointing us towards the future.
Work with an ERP partner who sees your company as an extension of their own – a partnership-based relationship. After all, the platform you choose now needs to have a long investment time horizon so that the benefits and ongoing changes in your company will be hand in hand.
The dream of the 60’s in my opinion is finally being realized – one where one platform should be able to take the complex and make it simple. Unfortunately for many years IT and Software companies have taken a simple idea of one platform and instead made it a complex mess that many companies continue to wrestle with. There are a lot of reasons owners get told to buy software systems, but if it doesn’t make the complex simple it isn’t worth considering.