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Advice and Information for Finance Professionals

5 Reasons Companies Change or Add ERP Functionality

Christiane Soto
Marketing Manager - SMB
This is a syndicated post, view the original post here

There are many reasons why small and medium businesses (SMBs) look to change or upgrade their enterprise resource planning (ERP) systems. But five seem to bubble to the top of the list, according to a recent report published by Aberdeen—ERP Expectations for Small-to-Medium Businesses.

Let’s take a few moments to discuss the five top reasons that growing companies look to change or add ERP functionality.

1. Take advantage of new features (55 percent of respondents). As a company enters new markets and pushes new product iterations out the door, ERP systems must handle exponentially increasing transactional volume, provide access to the right information quicker, and support new process requirements. Legacy systems will probably fall short.  The worst thing that could ever happen to a medium-sized business is to own an application that provides bad data to its internal users and customers. For example, if your legacy ERP system provides bad pricing data or inaccurate account balances to customers, it is time to make a change. Today customers can share their unhappiness with the world; therefore, you must have a trusted ERP solution to provide accurate and relevant information. Also, if faulty data is used for planning and forecasting, it is time to make a change. The world moves too fast for mistakes that result in excess inventory, not enough product to meet demand, or a missed a partnership/new market opportunity.

2. Ease of use (29 percent of respondents). Growing midsize companies recognize that their ERP solution must do the job and be easy to use. In 2016, the median age of the labor force was 42 years.  In specific industries, such as high tech, life sciences, advertising and public relations, retail, and internet publishing and video, the median age is much lower. This younger workforce may find newer software more attractive and even familiar, for the simple reason that these more modern technologies follow similar design patterns to consumer applications that most of us use every single day. Providing tools that are easy to use boosts employee engagement, and an engaged workforce directly correlates to employee retention. In addition, today’s consumer wants efficient and straightforward experiences. If your ERP solution cannot support a customer entry point such as mobile ordering or ecommerce site inventory look-ups or the ability to configure (and price) specific products, then those customers will look for a more modern vendor.

3. More flexibility (27 percent of respondents).  Flexibility supports profitable growth. But what is a flexible ERP system? There are three differentiators:

  • Ability to add new functionality as needs change without any disruptive upgrades or enhancements. The result? A lower total cost of ownership (TCO).
  • ERP solution must be able to handle different languages, currencies and accounting standards, manage multiple company sites, be implemented automatically, and run seamlessly.
  • With competitive dynamics and the pace of change so quick in most industries, companies often do not know what their business model will be in the next 2-3 years. It's their ERP and other IT infrastructure that must support their ability to change and adapt.

4. Current performance is inadequate (26 percent of respondents). There are several warning signs that your ERP solution is not meeting performance standards. If users are relying on workarounds to perform their daily functions, then it is time to change. Increased transactional volume may slow some ERP solutions to a crawl. Are your employees submitting tickets for outages or for reports that are taking longer to run than typical or batch jobs that are not completing in the allotted time? If "yes," then it is time to make a change.

5. Incompatibility with emerging technology (20 percent of respondents). Companies in this situation should reconsider their entire IT and systems strategy. A cloud-based approach—one with a provider that can handle growth and integration support— is a viable solution. Emerging technologies may be a buzzword, but they are not a fad. Artificial intelligence (AI), machine learning (ML), and natural language processing (used in chatbots) are finding a home in ERP solutions across many different industries. They are game-changers in these industries and are being used (not just talked about) in many ways. So if your ERP solution cannot support AI to ….. it may be time to change.

For more insight on the expectations midsize and medium companies should place on modern ERP systems, download our newest Aberdeen report.

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