The main facts, purposes, benefits and things to know about ERPs (3)
We selected a few key facts and data from a comprehensive CIO article about ERPs, in view of the critical importance of these systems for modern businesses. This week, take a look at a few cost-related considerations, and at what cloud ERPs bring to the table.
ERP-related costs need a bigger picture for full estimation
The CIO article finds that four factors are usually underestimated while in the project planning phase:
– Learning to work with the new system and seeing what it can do usually triggers more modifications that initially expected, because team members feel empowered to get more improvements out of a change initially perceived as uncomfortable, and to which they were at least partially reluctant, in the beginning; once on board, demands multiply and increase, leading to added change;
– The need for an organization change management program greatly reassures the cohesion and consistency of all involved processes and makes the transition smooth, but generates its own costs;
– Data migration times are usually underestimated, due to the project owners not being able to convey the nature of data for a precise editing time calculation in advance;
– When custom code is involved in the implementation, all subsequent upgrades and alterations will be more time-consuming, in accordance with the initial custom version.
The ERP ROI issue
Although for each instance the ERP ROI structure is different, there are a few common sources for the successful return of investment:
– An increase in the quality of business processes and supporting IT systems, depending on the leap forwards performed by these systems;
– Technical benefits, depending on the degree of acceptance of the ERP by the staff;
– The ability of the implementation team to keep the delivery times under control, provided no unexpected external elements intervene;
– Cost-saving measures enabled by the ERP, including fewer necessary staff, as long as those in charge are committed to implementing these changes.
Sometimes the ERPs may not deliver the benefits and lucrative advantages as discussed at the beginning of the implementation project. The risks are there, although getting an experienced and reliable implementation partner strongly diminishes the likelihood of their materialization.
A few triggers for less than desirable ERP implementation outcomes would be, according to the CIO publication:
– Having selected an unsuitable ERP package (see in our previous posts, part 1, the categories of ERPs);
– Internal reluctance in deploying and using the ERP at its full capacity.
Cloud ERP and its importance
ERP producers have either created cloud versions of their software solutions, or even cloud-tailored ERPs.
There are two main options when operating a cloud ERP:
– ERP as a Service (SaaS model), where “all customers operate on the same code base and have no access to the source code. Users can configure but not customize the code”.
o Initial advantages:
- Lower initial cost;
- Easier upgrades to new releases;
- Easier to rule out writing custom code for their customer, a way of avoiding such requests issued by reluctant executives.
– ERP on cloud as an IaaS, employed by those who have custom code in their ERPs and who cannot use the above version; in such cases “only option is to move to an IaaS provider, which shifts their servers to a different location”.
It is notable that ERPs currently evolve towards modularity, allowing for intermediary solutions, offering “hybrid solutions that bridge on-premises and the cloud” to the customers that want the benefits of both.