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Business Accent
Which SMBs need an ERP solution?
 In
the first of a two-part article, Nilesh Auti highlights some
of the key considerations SMBs must take into account before they
opt for an ERP package.
An ERP implementation can be of value to a company
if it is well thought out and driven by a high-level strategic game-plan.
The timing and need for an ERP are the first questions raised by
SMBs. It is increasingly so in cases where an organisation has legacy
applications running, is comfortable with a legacy accounting or
financial package, and is of the opinion that most of their requirements
are satisfied by this package. The lack of foresight and aggressive
growth ambitions are evident in this line of thinking.
An effective way for SMBs to gauge whether they
need an ERP solution will depend on the answers to the following.
- Are you growing at a rate of 20 percent
plus and expect to grow at the same rate in future?
- Are you in the auto, manufacturing,
pharma, chemical, garment, engineering or infrastructure industry?
(These are the segments which have high domestic and overseas
growth potential in the coming years. India holds an advantage
in these industries.)
- Is your customer base, vendor base or
new product range growing rapidly?
A ‘Yes’ to any would warrant an implementation.
Timing
When am I ready, in terms of systems and
processes, to absorb ERP in my company?
Implement ERP when you are small and growing.
ERP systems help the company to use industry best practices in its
processes and systems, putting you in an advantageous position to
leverage industry wisdom. Incorporate smart processes at this stage
so that you can face any growth target in the future with lean processes
in place. As the organisation grows, it becomes fairly difficult
to change processes and implement best practices because the learning
and change management effort increases exponentially with the passage
of time.
Before you embark on an ERP implementation, here
is a set of internal checks for your ERP implementation readiness.
- Top management commitment. Decision-makers
need to be convinced and ready to take an ERP project as a key
focus area for the company.
- Processes. Need to have a fairly well-stabilised
business process in the company.
- People. Users within the organisation
should be ready to absorb the changes that the ERP system will
bring into the organisation.
Evaluating ERP packages
How should I choose the right ERP product?
As the most important phase in the entire process,
a decision on the ERP product should be a well thought out one.
It is nothing but the mapping of your current and future requirements
against the product features that will lead you to the right product
for your organisation. More often than not, the ERP choice is driven
by cost considerations and not by requirements, leading to a failure
of some of the initiatives. A critical set of evaluators include:
- Current processes and future direction.
The ERP product should cater to all your process requirements
today and should have the functionality that you think you’ll
need tomorrow.
- R&D focus of the vendor. The ERP
product vendor should have a strong R&D base which is continuously
developing best practices and processes, and investing back in
the product to make it more mature.
- Extent of localisation.
The ERP product should offer India-specific functionalities.
How should I choose the implementation
partner?
The selection of the right implementation partner
is as important as the selection of the right product. An implementation
partner who doesn’t understand the product or the industry
can lead to the failure of the initiative. The wrong partner will
not be able to fully leverage the product functionality or be in
a position to fine-tune the product as per the domain peculiarities.
The partner should therefore have extensive experience
in the same or a similar industry vertical that you operate in.
In addition to the implementation, the partner should have the capability
to provide support and maintenance services, and the competency
to implement any high-end processes in future. Select a partner
who is focussed on the domestic market and has a good understanding
of domestic business requirements. The partner should also be able
to cater to all your legal and procedural requirements of tax, pricing,
excise, export, import, etc.
How should I select the right hardware?
‘Think long-term’ should be the key
principle to follow here. Always do hardware planning taking into
account your business requirements for the next five years. Avoid
selecting low-end hardware which might be sufficient only for today’s
business requirements.
Get the software implementation partner involved
in selecting the right hardware configuration. Do keep in mind that
the hardware should be flexible enough to expand in line with the
company’s growing requirements.
Getting ready for ERP
What preparations are required for the
project?
No preparation is complete without a buy-in from
business users and the top management. The three crucial steps to
smoothen the implementation process are
— Map your current processes and documents
properly.
— Ensure clean and complete data availability.
— Set aside a separate room for the project team.
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The investment
in ERP should be looked
at from a holistic perspective, and hence there should be
an evaluation of one-time installation costs as well as ongoing
maintenance and support costs
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Who should be involved in the project from
the company’s side, and what should their involvement be?
It is found that most SMBs do not have a full-fledged
IT department. In this scenario, the core team should comprise business
users and senior management. The core team should remain unchanged
throughout the project implementation cycle. The following is the
suggested involvement pattern for the company.
- Middle management. One from each department
should be a full-time member of the core team.
Process owner or department head should dedicate at least 20 percent
of his time to understand new processes and drive changes within
each department to derive proper business benefit from the project.
- Top management. Should devote 5 percent
of their time for steering reviews and taking critical process
decisions.
What investment factors should I be ready
with for an ERP project in the future?
The investment should be looked at from a holistic
perspective, and hence there should be an evaluation of one-time
installation costs as well as ongoing maintenance and support costs.
The various costs can be assigned under the one-time and ongoing
costs as follows—
A key decision to make is whether you can afford
to keep your own IT team to maintain ERP systems as against the
cost of complete IT outsourcing for maintenance and support.
How do I avoid cost and time overrun for
the ERP project?
Cost and time overruns are mostly a result of
poor planning and project tracking. An implementation partner with
an experienced team can reduce this to a great extent because of
their experience in similar implementations. The overruns can be
avoided if a proper tracking and course correction process is defined
early on in the implementation lifecycle. The following checks are
absolutely necessary to avoid overruns:
- Weekly project review at the project
manager level.
- Monthly steering committee review with
top management.
- Sticking to the process scope of the
project throughout, and avoiding experimentation with new processes
just because they are available in ERP.
- Proper communication within the team
and with the top management to resolve any issues quickly.
...to be continued
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