When you’ve been a software expert witness on as many ERP failure cases as we have, it’s impossible to have a “fairy tale” view of ERP software. Sure, it can be a knight in shining armor, but it can also be a fire-breathing dragon.
Today, we’re sharing some ERP pros and cons so you can learn how to avoid ERP failure by making the most of the potential benefits and avoiding the potential drawbacks.
5 Pros of Implementing an ERP System
Some of the most successful and profitable companies in the world count ERP systems among their most essential technologies. Here are some of the top reasons why.
1. Real-Time, 360-Degree Visibility
An ERP system gives you a real-time view of your operations. As it consolidates data across disparate departments, it identifies and shares key metrics. This helps business leaders make more informed decisions that add value and operational efficiency.
As your company grows, you can add business intelligence modules to support this expansion, so you can still access the full range of visibility.
A Failed Payroll System Implementation
Panorama’s Expert Witness team was retained to provide a forensic analysis and written report to the court regarding the failed implementation of a major software developer’s ERP/payroll system.
2. Automates Manual Functions
ERP systems automate many manual functions across departments, from accounting to HR. This not only reduces the risk of human error, but it enables user authorizations which minimize the occurrence of fraud.
Ultimately, your internal teams are free to focus on more mission-critical work, and your company remains both secure and compliant.
3. Reduces Long-Term Costs
Yes, ERP software does come with an upfront investment. However, if you approach the project strategically, then the ROI will be substantial. In fact, an ERP system can even save your company money in the long run.
Instead of spending time manually inputting data into multiple systems, employees can enter it once and it will automatically populate across departments. This makes employees more productive, which improves profitability.
In addition, ERP functionality allows employees to streamline some of their most menial tasks, from invoice allocation to report creation, which allows them to focus on revenue-driving responsibilities.
With a single system connecting all your operations, you’ll also save on training and maintenance costs.
4. Improves Data Insights
Your business receives an influx of data each day. It can be nearly impossible to keep up with it all, much less mine it for actionable insights.
An ERP system can take care of this task for you and display results on user-friendly dashboards with visual reports. With just one source of truth, you never have to worry about duplicate, inaccurate, or outdated data making its way into your reports.
For deeper analytics, many ERP systems now come with integrated business intelligence (BI) capabilities that allow you to not only understand how your company is operating but why, and what that might mean for the future.
5. Simplifies Supply Chain Management
ERP for manufacturing companies can manage all your end-to-end supply chain processes. This includes everything from raw material sourcing to production, order fulfillment, and shipping.
When integrated with a customer relationship management (CRM) module, an ERP system can go one step further, helping manufacturers manage all aspects of their sales and customer relationships. This simplifies sales orders and accelerates the lead-to-cash journey.
3 Cons of Implementing an ERP System
Considering the benefits that an ERP system can provide, the following drawbacks shouldn’t necessarily dissuade you from implementing ERP. However, you do need to be aware of these drawbacks so you can put best practices in place to avoid them.
1. High Initial Costs
The high cost of an ERP system can be a lot to process. In addition to the initial integration, you may also have to pay ongoing subscription fees, as well as any licensing costs associated with the software and technology.
Depending on the size of your company, it can be cost-prohibitive to implement, operate, and maintain an ERP system over time.
On-premise ERP systems require the support of your IT team and have associated infrastructure costs. These charges can quickly add up, becoming even harder to navigate as your company evolves and expands.
A cloud model can have lower upfront costs, but these costs accumulate over time as you’re paying an ongoing subscription fee.
2. Costly and Complex Customization
Some companies choose to implement their ERP system right out of the box, making no changes to its baseline functionality or source code. However, many companies customize their solution at least somewhat to meet their unique business needs.
Small-scale changes can be manageable, but the process can quickly snowball. Customizations can become overly expensive and time-consuming. It’s common for businesses to underestimate how long they will take or how much they will cost.
3. Implementation Roadblocks
When implementing an ERP system, some companies encounter challenges that threaten to derail their efforts. With proper planning, most of these problems can be avoided, but simply getting started can be the hardest part of all.
For example, the project team must work with many different stakeholders to determine which ERP system to purchase. These team members are spread across various departments including:
- Finance
- IT
- Operations
- Sales
- Marketing
- HR
Each department will have its own pain points and goals that it wants to address, so you must work toward strategic alignment.
Even with strategic alignment, you will encounter other implementation challenges.
For instance, it can be challenging to migrate all your necessary data from one system to the next, and at the same time, you must navigate ERP training and mitigate employee resistance.
Overlooking the challenges inherent in these activities can put your project over budget and behind schedule. It’s important to anticipate challenges as early as possible and put steps in place to address them.
Understanding ERP Pros and Cons
For some, the benefits of an ERP system outweigh the drawbacks. For others, the challenges are just too significant to surmount.
Before moving forward with an ERP implementation, it’s important to analyze all these ERP pros and cons with your project team. Together, you can decide if the time is right to change your technology.
Along the way, our ERP consultants can help you obtain the expertise and resources you need to make ERP a possibility for your company. Contact us below for a free consultation.
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