FERRARIS, FIATS AND FORTUNE 500S

FERRARIS, FIATS AND FORTUNE 500S

Why we don’t buy Ferraris when all we need (and can afford) are Fiats ?

It makes little sense to buy a Ferrari when you need to trudge daily along bumpy, pothole-ridden roads. The average person does not need a Ferrari. The average person cannot afford a Ferrari. If by chance he does get a Ferrari, in all likelihood he will not be able to maintain the Ferrari.

Alas the average man and the Ferrari are not meant to be.

In the context of enterprise resource planning systems, big firms like SAP offer Ferraris expensive, fancy and completely unsuitable for the average SME. Oracle and SAP have single handedly caused catastrophes of biblical proportions for their clients. Nike and Hershey’s may have been able to survive apocalyptical losses of $100 million but an SME most certainly cannot.

A Fiat is more affordable. A Fiat is more suitable. Most importantly, the average man can maintain a Fiat in the long run. Once an ERP system is fully deployed, it stays in place for 10 to 12 years on average.

In India many firms use outdated IT systems in their offices to coordinate their business functions and resources. India is the hub for small and medium businesses and a cradle for start-ups. The majority of the country’s workforce is employed by small and medium enterprises – not the Fortune 500s. Business is set to boom and overtake China by the end of 2030. Despite the dynamic development, firms have failed to adopt more efficient and standard practices that results in them continue to lag behind.

The ERP solutions by the big firms in the ERP are too extensive, too complex and too confusing for SMEs. The processes, modules and programs designed are geared towards the requirements of large conglomerates and Fortune companies. For the system to be suitable for the average firm, considerable changes and customizations are required – which further drives up the cost of the ERP. It is akin to buying a Ferrari only to replace all its parts one by one and its engine with that of a Fiat’s. By all means, it is a poor decision at best and the catalyst for an absolute catastrophe at worst.

Many local IT and ERP providers are gaining ground as a results, because they build their solution specifically for small and medium enterprises at a fraction of the cost and with a much faster implementation cycle. Once you order for a luxury sports car and then proceed with the desired customizations it is already months past.

If you buy a Ferrari you can expect to wait a long time for it to finally be in your garage – with the necessary paperwork, regulatory compliances, formalities and customizations. If you buy a car from your local dealer, you can expect it in your garage within a week or two at most. Small and medium enterprises need a provider with local knowledge who can give adapted solutions. SMEs as a results are better off hiring Tier II and Tier III vendors who are based locally as they possess in-depth understanding about the relevant industry and business environment. The ERP systems that are provided by major IT firms are too extensive, and complex and do not have the flexibility to adapt their services to local conditions. Given that the large IT firms give standardized solutions throughout the country with their centralized support system, they lack the ability to adapt their service to very specific local needs of the SMEs. Partnering with Tier II firms who give local support service tends to be the wiser, better choice for SMEs.

It is essential that the modules in the ERP system are designed with the day to day processes and relevant industry specifics in mind. Vendors like ExpandERP provide business solutions specifically for SMEs and are specialized in export and manufacturing solutions. An SME thus has a solution that perfectly addresses their business needs with greater support at a fraction of the usual cost.

Tier II firms design sturdy affordable cars and have an extensive service support. Tier I firms prove state-of-the-art, customized luxury cars but at exorbitant rates and with limited support system. SMEs require a relatively sturdy, standard system that can handle the firm’s daily challenges and go over the bumps without breaking down. The tier II solution or the Fiat gives a smooth ride, good mileage without breaking the bank of the buyer. It is advisable to leave the Ferraris to the Fortune 500s and ride away in the Fiat and save the tears and headaches.

References:
https://www.cio.com/article/2429865/enterprise-resource-planning/10-famous-erp-disasters–dustups-and-disappointments.html

Contributor: Vidushi 

Custom Road to Failure

How heavy customization doom projects

Big firms such as Nike planned to go the whole nine yards ensuring that their ERP system would be absolutely custom fitted to their needs and desires. Sure, the additional modifications and

customisations would indeed add a few more thousands to their ever growing expenses, and the project may get delayed by a month or two, but in the end it would work out perfectly right? Wrong. The $400 million upgrade to the supply chain and ERP system resulted in the company losing $100 million in sales and their stocks crashed by 20% as a result of this fiasco.

The failure of the ERP system can wreak havoc for any company. Excessive ERP customization is often blamed for these disasters. ERP customization refers to the process of modifying the existing software and programs as per the requirements of the firm. Customizing the ERP program takes a lot of additional resources, time and financial investment –and it almost inevitably results in the project going way over budget and gives a system where the company has to rely on non-tested functionalities. A case in point would be the United States Navy who sunk over $ 1 billion in four different ERP projects that all resulted in failures.

The following are three main reasons why custom-made solutions end up causing more problems than ever before:

Increased Complexity and long term costs:

A company that demands heavy modifications to the system has to invest large upfront capital before they can reap the benefits of the ERP. Often time the changes are very narrowly focused and even minor deviations in business practices or related legal regulations render the entire system outdated. Once the firm has invested large capital in an on premise system, they are financially bound to a certain degree to continue using the system and upgrade the same solution for years to come. The ERP programs have to be individually customized each time the ERP system has to be updated to support the evolving industrial environment.

Upgrades to the system are continually delayed

ERP vendors periodically release new versions of their software and add new features and services. A customized ERP system is not able to mesh fully with the new version and data is often lost in the process. The firm is dependent on customization consultants to alter the customized codes each time that the system has to be updated – which adds a significant amount to the ongoing operational expenses. These additional expenses and problems are a hindrance when the firm decides to update heavily customized system. Companies tend to delay the upgrades to their system – sometimes indefinitely. This makes the company vulnerable as it is not able to adapt to the rapidly changing business environment and requirements.

Best practices are compromised

ERP vendors expend a significant amount on R&D to develop the best, standardized system that incorporate the industrial and legal requirements. Customisations to the system may result in the company failing to adhere to the industrial best practices and cause a lot of financial and legal woes.

If a company finds that it needs to customize the entire ERP system, it would generally indicate that the chosen solution is not the ideal one for them. Looking for an industry-specific ERP solution would help the firm in minimizing the amount of customisations required to make the system compatible with the business needs.

Companies need to understand beforehand that heavily customizing their ERP system greatly escalates the potential for disaster. The initial upfront investments required are exponentially greater and both the short and long term operational costs are significantly higher. The industrial best practices tend to be compromised in the long run and the consistent delays in updating the system leads to the firm becoming a dinosaur in the dynamic business world.

Contributor : Vidushi