FACTORS & POTENTIAL ISSUES IN ERP SOFTWARE

Factors to be considered when choosing ERP software

1.      Upgrade vs. replacement. Evaluate first if you need to get a new ERP system or just an upgrade. Many ERP solutions today are modularized; you can simply integrate a module, for instance payroll, with your current applications. This way you minimize disruption and costs.
But if your ERP system is ten years or older, it may be wise to replace it. You can leverage today’s ERP solutions for mobility, integration, scalability and deployment options. Similarly, machine learning, predictive analysis and advanced reporting are pushing ERP to the next level.

2.      Customization. Aside from ensuring the ERP processes match your key business workflows, look closely at your departments. They may have different priorities and culture, which may even be contradictory. For example, Marketing spends, while Accounting saves or Production lives by daily output, while Sales lives by monthly quota. All these lead to myriad workflows that won’t fit into a one-size  solution. Look for an ERP solution with customization tools, localized dashboards and configurable workflows, among others, that allow departments to define their goals and set the ERP based on their parameters.

3.      Reporting and dashboards. Go beyond spreadsheet and PDF exports. ERP solutions today feature advanced reporting that can generate compliant financial statements based on your region. The latest ERP reporting tools also allow in-system query and smart filters coupled with real-time data. Likewise, look for agile and ad hoc reporting to quickly adjust to evolving business needs and disruptions. Dashboards, on the other hand, should let you mash up quantitative vs. qualitative data at user, role and department levels. Look for the standard dashboard function of displaying KPIs with drill-down links.

4.      Integration. ERP should work seamlessly with your existing business applications. There are a number of  integration points you need to consider from top to bottom. These include system-to-system (example, ERP to your existing CRM or HRMS), module-to-system (example, ERP payroll to your existing HRMS) and file transfer capabilities (example, exporting/importing PDF, JPG, DOC, CSV files). An ERP with flexible integration can work with existing infrastructure, expand its functionalities or, in fact, replace it while ensuring smooth records and files migration.

5.      Training and setup. On-premise ERP solutions need to be installed by someone with technical knowhow. If you lack a tech team, make sure you understand your service level agreement or SLA.  Installation is often charged separately from license, but some vendors offer all-in bundled plans. For SaaS ERP, setup is as easy as activating an account to access the vendor’s server.
Likewise, ERP is more complex than most business solutions, so it requires user training. Does your vendor provide this service? Whether bundled in or exclusive to the plan, the kind of training you’ll receive should suffice for average users to adopt the system.

6.      Cost of the Software:

Most ERP solutions are priced by quotation for customized features. The cost of ERP software is usually based on factors like number of users, modules, installation, add-ons, maintenance and training. Let’s take a look at the price model of some of the most popular ERP solutions today.

Potential issues with ERP SOFTWAREs

1. Unsupported applications

If your business is using dozens of productivity apps, introducing a plug-and-play ERP won’t be that smooth. The more existing applications you have in place, the narrower your options to find a fully integrated quick-install ERP solution.

Unless you plan to discard existing applications, you need to assess ERP integration for each of these apps. It’s time-consuming and, even if you’re lucky, you’ll find the best ERP falling one or two apps short in compatibility space.

In such case, getting an ERP with an open API ensures your developer can tweak the system to integrate your current apps.

2. One-size-fits-all doesn’t cut it

Plug-and-play, off-the-shelf ERP solutions work well with small businesses with straightforward processes. But for large corporations with subsidiaries in different places, a uniform system quickly runs into bumps in a diverse environment. Variations in factors like culture, policies and regulations make it difficult to implement an overarching infrastructure. The result is either the ERP suffers low user adoption or an expensive system is left in an abandoned company warehouse.

Many large enterprise today are trying a two-tier ERP approach to address their organizational complexities. A corporate ERP is used by headquarters, while another ERP system is used by the subsidiaries.

3. Security risks

ERP aspires to cover the whole nine yards of operational and financial tasks. This overarching infrastructure, in fact, lends to ERP its strengths: shared files, integrated and automated processes, central database and a collaborative platform. They drive efficiency and lower costs.

However, the same single architecture is its source of weakness. the classic all-eggs-in-one-basket risk. The wider the scope of ERP the more access points it has, the more chances of internal data breach. Although firewalls and encryption mitigate this risk, the fact is all your data is attached to this system superhighway.           
Poorly designed ERPs heighten even more the security risk. Incompatible applications can lead to crashes. Limited reporting tools force users to import external files, leading to a firewall break. Moreover, a disgruntled tech employee can wreak large-scale havoc. Delayed updates or old system version also exposes all your data to hacks.

The good news is, ERP vendors are fully capable of putting up security checks and controls. After all, any breach is a death kiss to their business.

4. Lack of compliance

Most ERP solutions are designed for financial compliance, so the problem is less of a technical shortcoming and more of how the ERP is implemented. When an accountant is not part of the ERP project, it’s easy to gloss over financial compliance. The CEO or CIO is focused on streamlining processes to drive efficiency.

Without the auditing and regulatory knowledge of a CPA, financial regulations can easily be overstepped, including GAAP requirements and Sarbanes-Oxley Act (SOX) protocols for US-based public companies.

The issue can easily be addressed by including a certified accountant in your ERP project team. She can verify if the configuration controls and processes are compliant and recommend audit controls, where necessary.