How to make ERP pay

PAUL MARKETOS, Managing Director of Bluekey Software Solutions, an implementer of SAP Business One, says that when it comes to ERP systems, companies can, and should, expect measurable and quantifiable returns on their investment. Furthermore, they should expect these returns within 2 years and companies in the SME space should expect ROI on ERP within four years ‚ anything longer than that is an indication that something has gone wrong.

As with any major investment, company decision makers want to see a return on their investment (ROI) in information technology (IT) ‚ and typically they want returns quickly.

But many fail to get the returns they want ‚ whether it be the gains in profit, efficiencies, sales or market share that they expected the acquired technology to deliver.

And, sometimes ROI in software isn’t easily quantifiable, and some amount of expenditure on technology is not actually a matter of measurable return but rather a cost of continuing to be a player in a high technology, high information business environment.

However, Paul Marketos, Managing Director of Bluekey Software Solutions, which specialises in the implementation of SAP Business One, says that when it comes to Enterprise Resource Planning (ERP) systems, companies can, and should, expect measurable and quantifiable returns on their investment.

‚Essentially, companies invest capital to create capital. A logistics company for instance buys more vans so that it can expand its distribution network in order to make more deliveries and make more money. Investing in ERP is no different except the returns are relative because they are defined in terms of the company’s goals, which might be to increase sales, enhance customer service or improve stock management.

‚Companies should expect to see a return, and it should happen quite quickly, within two years,‚ says Marketos, adding that one of its clients, The Communication Products Group, which implemented SAP Business One in 2006 achieved return on its investment within a year, and grew the business by 46% in the year following the installation.

‚ERP can drive profits through improved efficiencies and processes, greater productivity and better access to information, amongst others,‚ adds Marketos.

He says there are a few reasons why companies might fail to get the ROI they expected, with one of the main reasons being poor implementation.

‚This goes back to choosing the right implementation partner. Yes, it is absolutely critical to select the right solution based on your business’s specific requirements. But, even best-of-breed software is only as good as the partner implementing it.

‚For a system to work effectively it must be implemented correctly, and other aspects such as data conversions, change management and training must be done timeously and properly.

‚For this, effective and efficient project management is crucial,‚ says Marketos.

Another reason why companies might fail to achieve adequate ROI in ERP is lack of ownership and buy-in within their own ranks.

‚Very often, lack of ownership of the system by the company reduces ROI. What companies must understand is that once they’ve bought the solution and it’s been implemented, it’s theirs. They need to invest the time, skills and other resources to make it work for their business.

‚Swapping over to a whole new system is not a walk in the park. Companies must be prepared for hard work. It’s not something that can be done overnight. It takes time and effort. The sooner a company takes ownership of the solution and is ready to invest the time and resources necessary, the quicker they can expect to reap the benefits. Companies must want to make it work.

‚As with the roll-out of any IT application within an organisation, getting user buy-in from the get-go, and encouraging organisation-wide adoption, is absolutely essential. There must be senior management buy-in and key users should be engaged from the start so that the implementation is not viewed as an IT-only endeavour.

‚Everyone at all levels of the business should be kept informed on the project’s progress to build momentum. There must be a strong focus on change management. People don’t like change. So, it is vital to generate excitement and build confidence in the new system. Without user buy-in, the system won’t be optimally utilised in a sustainable way, which will impact ROI.‚

According to Marketos, it is this very need for staff to be actively involved that means it makes sense for companies to consider implementing ERP during quiet patches rather than when business is moving at a pace.

‚While it’s during busier times when the need for a more efficient system is more pressing to ‚take away the pain’, implementing a new system when no one has the time to focus on it defeats the object. It is more conducive to tackle a large-scale technology changeover when the time and resources are available to get it off the ground.‚

Marketos concludes saying that companies in the SME space should expect ROI on ERP within four years ‚ anything longer than that is an indication that something has gone wrong somewhere along the line. ‚What we are finding is that with excellent software well implemented our customers are typically seeing a return within 12 to 24 months.‚