Standard operating procedures (SOPs) are a set of instructions for any particular operation within an organization. These instructions map out all steps and activities of a process or procedure, which, when followed with care, should guarantee a particular expected outcome. In the ERP world SOP is often used alongside or interchangeably with the similar term “best practice approach.” The idea behind this is that people have been working with a particular set of guidelines which they have determined to be the best way possible to get a particular job done: filling out a customer receipt for example, or completing a sales order. While each company is different, some of the broader processes and methods can serve as a model for other organizations with similar functions that need to be performed.

There are many benefits to having SOPs in place within an organization. In the first place, in documenting any function within an organization, you commit collective or even individual knowledge into something tangible: a document. Written procedures and practices then become part of the corporate knowledge base, and are no longer limited to one particular individual or group. Routine training of new employees can be based on the SOPs, and tasks across the company can be standardized. Performance of and adherence to set guidelines can be enforced.

In an environment where regulatory compliance is a requirement and spot checking is in place (pharmaceuticals, medical devices, chemical plants, etc.), SOPs are a must. According to some literature, one of the most frequently reported problems identified in regulatory inspections is a lack of written SOPs and/or the failure to follow them. In a manufacturing environment, SOPs are also imperative in order to insure uniform results, effective quality control, and ultimately, traceability. SOPs are not static documents, however, and they need to be reviewed regularly and updated to assure that they are keeping up with any new working procedures, developments and/or regulatory requirements that are put in place. Changes to the SOPs should be documented.

On a corporate level, SOPs are all about improving your business – be it striving towards continuity, or putting into action best practices for the long run. In the process of documenting and putting SOPs in place, companies may even discover better ways to complete tasks.

When deciding on whether to invest in an ERP system, before moving over to a new system, while in the process of implementing or even re-evaluating the way you do business: take the time to think about SOPs. To get real value from your software and your implementation, insist on working with SOPs. Make sure that the system you are having installed can handle the way you do business. And make sure that things are documented. The people that are involved in the work itself OR their direct supervisors should be consulted when preparing SOPs. If your consultant tells you this is not necessary – beware. The people in the trenches of your establishment are the ones responsible for doing the work documented in the SOP. The greater their involvement, the greater their sense of ownership, the greater their investment and ultimately, the greater the likelihood that they will adhere to the SOPs. Where this is impractical, at the very least the SOPs should be “owned” by the supervisor.

SOPs are proven to work. They can help you streamline processes, enhance performance, improve customer service and, ultimately, boost business. Investment of time in creating and maintaining SOPs will be well spent. In today’s economy, companies need to make the most of the resources they have. In creating SOPs you are not only using your resources wisely, but you ensure that hard earned knowledge and experience is shared, becomes tangible and is transformed into a corporate commodity.

Channel conflict, changing terms, lack of support. These are all things that you will hear and read about in the world of partnerships and when considering the advantages/disadvantages of becoming a VAR for any type of vendor. In the shifting world of ERP/SaaS, you’ll probably be hearing about them more and more.

Changing Face of ERP

ERP systems have traditionally been sold as in-house solutions, where the VAR is often not only the sales conduit, but the implementation and service provider as well. Different vendors have historically implemented different terms and conditions for the opportunity to participate in their partner programs. Some require substantial payments for the privilege of becoming a partner, some don’t; some provide sales commission or leads but no commission, some don’t; some expect their partners to make money only on implementation and service, and many employ a combination of any or all of the above and more. With the new opportunities of SaaS, where an ERP system can be hosted and many of the implementation and service issues are necessarily falling back to the vendor, things have gotten complicated, and in some cases with big name vendors, even nasty.

While there is inherent logic in the decisions many VARs are making, to stick with the partnerships they have been nurturing for years, others are realizing that it may be time to broaden their horizons and try to make the most of the new offers that are now available. While there is a need to focus on a particular specialty or area of the market, both you and your market may benefit from more of a choice of offerings. A look at our previous post ERP Fees & Installation Alternatives will outline some of the different options now available, while we continue to focus here on how these changes effect the partner relationship.

Partnerships with Vendors

Trust. Beyond the terms of partnership, possible channel conflicts and the way they are addressed, and initial and continuing support, the bottom line when choosing a vendor is trust. Can a vendor be trusted to be fair and to treat their partners decently? Complaints will always be made about varying terms of the partner relationship and fluctuating commission fees, but in the long run, does the vendor treat their partners as true partners, or a necessary evil of doing business in today’s environment?

Fairness. Changing realities, new technologies and options in the market will ultimately result in vendors’ need to restructure their price lists or partner terms. This is fair. But do vendors give enough advance warning to their partners? Are they willing to discuss the issues and explain the points and rational behind the changes? Are they flexible with outstanding quotes to end customers, so that no face is lost in attempts to close the deal? All these are key questions to ask potential vendors and will help you determine whether they are fair in dealing with partners.

Business Ethics. Channel conflict, where partners have to compete against one another or the vendor’s own sales teams, is another touchy issue between partners and vendors. In addition, poaching customers is not an unheard of phenomenon among partners. While this may have more of a financial impact on partners in on-premise installations with one-time and annual use payments, it remains an issue in the SaaS arena. Different options have been employed by vendors to address this, including deal/lead registration and providing direct support, but the jury is still out as to the effectiveness of these options. Lead registration has been touted as a protection device to ensure that a partner does not undercut the partner who initiated the deal, but has also been thrashed as helping some vendors sweep up the deals themselves. A vendor that is truly interested in promoting the success of their partners will ensure that lead registration is respected and maintained. And that if at a later stage, for whatever reason, a customer decides to switch service providers, the partner who originally made the sale continues to receive some revenue, even if they are no longer providing support.

Cooperation. Some believe that if you have a captive market, then the partner working that market is at an advantage. We’ve actually found the opposite to be true. Healthy competition is not necessarily a bad thing. Also, when prospective customers see that there are more and more vendors of a particular solution, they are less insecure about investing in the said solution. As long as the vendor is looking out for everyone’s best interest, cooperation across geographic or even technical expertise lines can be bridged, making cooperation mutually beneficial for all concerned: customer-partner-partner-vendor, a win-win-win-win scenario.

Support. In terms of product support, one of the key indicators of a vendor’s willingness to work hand-and-hand with partners is the level of support provided. Often vendors require partners to take expensive training courses as well as pay for on-going support. While this does seem to be fair, it should not be abused by the vendor, and as much material as possible should be provided to enable the partners to help themselves. Again, this fosters the growth of a foundation of strong partners that can be self-reliant and independent, allowing the vendor to concentrate on their own priorities.

Ideally, vendors should be focused on getting the best product out to market and providing the support and infrastructure necessary to allow their partners and VARs to flourish. By significantly expanding and maintaining a growing footprint in their market, sales will benefit both the partners and the resellers. Look for win-win scenarios when reviewing terms and contracts, not only from the partner-vendor point of view, but from the partner-partner-vendor and customer side of things as well.

By Rebecca Haviv

Business intelligence. Now more than ever you need to have your finger on the pulse of your business – to ensure that all department heads know how their sectors are performing, are able to identify problems as they arise and are in a position to put corrective action into place quickly and efficient. Businesses just can’t afford to waste time and effort on getting data out of their systems and then figuring out what to do about it.

The ability to identify fluctuating business conditions in real time, as they are happening, and then react accordingly can significantly affect a company’s overall performance.  Business Intelligence needs to go beyond gathering of data. Corporations need to be able to set and monitor goals, build strategies and scenarios to address business needs as they arise, and turn these strategies into action items if necessary. They also need to gather data to assess the execution of plans on a financial and operational level.

There are plenty of BI solutions that can plug into your data and churn out reports, or that you can integrate with your existing corporate system. But ideally, you want a software solution that can not only manage your business, but provide you with a bird’s eye view of the information you need to make critical business decisions. A system that can help you build the plans and strategies for dealing with your operation. A system within which you can set parameters, and then examine your data from multiple angles.

ERP systems, in helping you to run your business, must be able to address this need. They should not only provide you with real-time data that can tell, for example, what product or campaign is performing best, in what region and even what store, but help you analyze why something is not performing as expected. In drilling down to the details of orders and analyzing trends, you can determine that selling snow shovels in Florida isn’t the most effective approach, and re-organize to allocate that stock to Maine. Or if sales for one particular store or salesperson have been outpacing all others, you need to figure out why and see if the same strategies can be effectively employed elsewhere in the organization. In manufacturing, managing and monitoring production or scrap materials can have a significant impact, as can tracking the efficiency of vendors and quality of raw materials. All these are key factors that can substantially impact the bottom line of any business.

When evaluating products that are designed to help you make sense of your data, beyond the cost of the software itself and integration with your existing system (if required), look for the following:

Timely data: Running analysis on data that is a week old won’t be very effective. Conversely, systems that can only provide you with a snapshot of where your data is holding at any given moment are limited in scope and usefulness. Look for solutions that can provide you with real-time and historical data.

Ease of use and rapid implementation: If you can’t figure out how to get the information you need out of a system, the fanciest and most expensive tool in the world won’t be much use. Look for solutions that have pre-defined reports and even dashboards for certain targeted groups or areas of operation (executives, sales/marketing managers, CFOs, HR, Projects etc.), which can be customized for an individual’s particular requirements. This will not only make it easier for your team to access the data they need, but will ultimately save countless hours in putting the pieces together.

Analysis, or “slicing and dicing”: Look for systems that can filter and sort data to identify potential problems before they snowball into bigger issues. Analysis of dimensional data through intuitive query and online analytical processing (OLAP) tools should let your users “slice and dice” data and drill down to as many levels as there are parameters. So you can sort and analyze data by region, store and even sales rep. Or flip the data and look by item sold, then region. Different angles can reveal different trends, so make sure you can see as many as possible within the data.

Visualization: Try to find a solution that will help you understand key trends and patterns at a glance and display data in familiar forms, such as graphs and charts. Dashboards and key performance indicator (KPI) dials are particularly effective tools. The visualizations will enable users to track and monitor the metrics they are responsible for, compare actual performance to predefined targets and trigger alerts when performance strays too much from goals.

Access to data: Seeing data in real-time is crucial, but what if you want to analyze that data off-line as well? Make sure your data can be accessed when you are online and offline for maximum ROI.

As a rule, but especially now in this time of belt-tightening across the board, every company should be looking for ways to streamline operations and expenses. Make the most of the software you have and see what kind of BI information you can get out of it. Go one step further and ask your software representative or consultant what they can do to help you mine your business data and make sense of it. All too often, complicated BI tools make it too hard to find the data you are looking for, and too easy to get confused by what you find. Integration can be a problem with stand-alone BI systems. Try to look for software that can pull all your data together, help you set up targets in the form of KPIs, set business rules for alerts when KPIs are missed or met, and of course display the information in a simple and intuitive interface.                 

By Rebecca Haviv

ERP vendors come in all shapes and sizes, offer varying levels of functionality as well as functional integration and offer different options for installation. On the face of it, there are three basic installation options, and each enterprise has to decide which the best fit is for their purposes: a traditional on-site one-time payment installation; an over the internet on-demand, software as a service (SaaS) model on a pay per-user/per-month basis; or an on-premise deployment, also on a pay per-user/per-month basis.

Traditional On-Premise Installation – One-time license payment

Although SaaS and hosted software are the buzzwords of the day, traditional on-site implementations provide some companies with the sense of security and ownership they require, with a one-time license fee instead of an ongoing monthly expense. There is often an additional yearly maintenance fee which must also be taken into consideration. While this model requires an investment in the purchasing and maintenance of hardware and infrastructure, it can sometimes be more cost effective in the long run then a per-user/per-month installation. Once you’ve paid the initial license cost, the service charges are usually fairly stable and hosting and other charges (including testing environments, which in on-premise installations can be a back-up or test server) shouldn’t surprisingly increase as time goes on.

To summarize some of the benefits of an on-premise installation:

• Ownership vs. monthly fees: This might be most cost effective in the long run
• Security: You control of the security of the environment including back-ups
• Accessibility: Connectivity to the system is intrinsic, without the need for internet connections throughout the organization

Software as a Service (SaaS) – Hosted Option

The SaaS model provides an ERP option for companies who need the solutions provided in ERP software, without forcing them to make a capital investment in on-premise IT infrastructure: software, hardware and implementation.

The hosted option has a number of benefits over an on-premise installation:

• Fees: Ease of use, no costly set up fees, and no need to invest in IT infrastructure or personnel.
• Automatic upgrade: Upgrades are handled automatically on the hosted platform so you are always using the latest version of the software.
• Accessibility: Connectivity is available online, anytime, from any common web browser.
• Low-risk: With no large up-front investment or long-term commitment, this model allows you to “try-before-you-buy,” as it were, though migration from an existing system does need to be considered.
• Security: In general, data is protected by the platform security; systems and backups should be in place to ensure uninterrupted service.

When the SaaS model is offered a pay-as-you-go, per-user/per-month basis, with its own advantages:

• Initial cost: No major initial outlay of capital
• Stability: Your fees are ostensibly stable and on a regular basis with no surprises
• Functional Scalability: Often, no additional fees required for most of the functionality (e.g. begin using ERP software for CRM and expand to Accounting, Inventory Control etc., at either scalable or no additional cost, depending on the package)

On-Premise Installation – Pay-As-You-Go

For companies that want to take advantage of the pay-as-you-go per-user/per-month basis model, while maintaining their ERP system in-house, many companies now offer the option to do so, though it’s a mixture of both benefits and disadvantages or each approach. The benefits are, as above for the SaaS option:

• Initial cost: No major initial outlay of capital
• Stability: Your fees are ostensibly stable and on a regular basis with no surprises
• Functional Scalability: While often no additional fees are required for most of the functionality (e.g. begin using ERP software for CRM and expand to Accounting, Inventory Control etc., at either scalable or no additional cost, depending on the package) – there might be some configuration involved and updating which would be automatic in the regular SaaS solution

Mixed with advantages from the traditional on-premise installation:

• Security: You control of the security of the environment including back-ups
• Accessibility: Connectivity to the system is intrinsic, without the need for internet connections throughout the organization

The many flavors of ERP systems now give you the power of choice. So it’s important that you consider both the short and long term requirements of your organization. If you’re not sure, try to find a solution that offers as many variations as possible so that you can move from SaaS to on-premise if the need arises, without costly migration expenses and the headache of switching such a major part of your business operation.

By Rebecca Haviv

Addressing the issue of Total Cost of Ownership of an ERP project means spelling out some of the “hidden costs” that are sometimes overlooked or minimized when a vendor is trying to sell you their ERP or satellite software solution. Don’t be fooled. Those hidden costs can add up and need to be taken into consideration.

The leading expenditures on ERP projects are (listed in order of magnitude):

• Internal resources
• External (consulting) services
• Software (licenses and maintenance)

Some of the factors that affect these expenses are the size of the company, number of ERP users, and the depth and breadth of functionality. The true total cost of the ERP system’s deployment, however, is usually unclear during the evaluation process, because these expenditures are not readily apparent until they come up over the lifecycle of the project. Some (but not all) of these “unexpected” or “hidden” costs can include:

1. Data conversion and improvement (both from existing systems and ongoing)
2. Add-ons (external components), private customizations, satellite utilities (web sites, BI, BPM, Document Management, mail, etc.), their interfaces to the main ERP application and their migration through ERP upgrades (service packs and advanced versions).
3. Identity management and security enforcement

All of these hidden costs take close scrutiny and time to discover.

IT Related Expenses

One of the bigger hidden costs, or one not always adequately factored into the equation, is the expense item of IT (or the IT staff/internal resources).

Data collected for 2004-2007 on companies with 500-999 employees in the U.K by Kew Associates clearly shows that annual spending on IT staff is larger by a factor of 4 than any other IT expense item.

What are the IT people doing?

IT people make a host of applications tick, including the selected ERP system and all other applications. An ERP system that can incorporate as many applications as possible will minimize the costs involved in maintaining a large IT staff and the hours spent on dealing with multiple applications, not to mention the costs of the applications themselves.
 
To be sure, there are plenty of good-quality, low-priced, very specific software tools out there in the market. But when you combine the price of the software with the expense of their integration with an ERP application and the IT overhead required to support and maintain them all – the costs just keep adding up.

Installation
Installation of traditional ERP products can take months. There are a few products out there that can shorten that time frame substantially. Ask when vetting products, in order to get a clearer picture of what the cost and time frame for this will be.

Implementation & Adoption
A speedy implementation cycle lowers the TCO, but the truth is that there is no easy road for implementation. It doesn’t matter if your solution is SaaS, on-demand or on-premise since the time and cost of implementation depends on the depth and functionality of the chosen system, and the effectiveness of its adoption by the workforce.

Finding a solution that can either smooth the road to a successful implementation, or provide you with tools to do it yourself as much as possible, is the best solution. This can often also provide a hidden benefit, if you will, of giving end users a sense of “ownership” of their processes, which can smooth the path to adoption. Some things you can look for in a software package are:

• User-level configuration utilities for data migration, eliminating the burden of writing customized conversion routines.
• Training tools incorporated in the application, including ready made templates, and step-by-step interactive help files and/or wizards which will ultimately empower end users.
• Good, easy-to-understand documentation and help tools.

Software Costs/Platform Options
Special pricing plans for various software solutions offer a wide array of convenient flexible options, from fully hosted SaaS ERP to per-user/per-month to flat fee on-site installation:

1. Choosing the fully hosted on-demand/SaaS ERP plan not only sets a low-cost fee per user per month, but can help you save on the cost of servers, operating systems, middleware, databases and accompanying administration (maintenance and security). You can also “try before you buy,” and stop using it if the software does not match your requirements.
2. With the “Per-User/Per-Month” on-site installation you can start out small, using a few of the modules, and expand to use additional modules as you need them. Let the use of the software grow with the features you gradually employ and the number of users within the organization that progressively move over to the new system.
3. For companies that have existing infrastructure, or that need to keep the application “in-house”, on-site installation are often the only solution.

Private Customizations

Look for software that includes user-level design and configuration tools for as many aspects of the software as possible (which can also be limited if required), especially to control layout and reporting functionality (e.g. look for software that can help you build the reports you need). This will keep private customizations to a minimum.

These are some of the major factors that are part of the equation and affect the TCO of any ERP solution. The challenge is to choose an ERP solution that not only fits your business requirements, but can help you address and minimize even these “hidden costs.”

By Rebecca Haviv

This post is dedicated to those who know that there are no simple answers in the ERP space, and want to learn more about it. Here are a few Myths and Facts from the world of ERP.

MYTH: “Our project is not progressing as planned because it lacks management commitment”

FACT: Progress is often not achieved because of management burn-out. People involved can be disillusioned by promises made and expectations that were built-up by overzealous vendor reps, consultants who collect exorbitant fees as the project lingers and IT personnel who were looking for big budgets and the opportunity to rub shoulders with the “big boys.” When management is made aware of the process, and understands that there are no silver bullets in ERP or quick fixes, then expectations don’t run amok and progress can be measured in a real and meaningful fashion. A successful ERP implementation can provide a qualifiable ROI.

MYTH: “Our system went live in just a few months”

FACT: It is more likely that the financial part of the ERP went live in a few months rather than the whole system. Corporate financials are fairly straight forward to implement. Also, in most organizations the financials are already “under control.” An ERP system’s biggest added value is not in the financial area, but rather in other parts of the operation and perhaps in tying those other parts into the financials. Modeling and effectively managing operations in an integrated ERP system may take years to implement. In fact, it is an ongoing process. Ultimately, the system must be flexible enough to accommodate operational changes indefinitely.

MYTH: “Once we finished getting our ERP system up and running, our expenses went down drastically.”

FACT: Outside consulting fees may have been reduced and the initial costs for setting up the system are paid off, but companies often fail to take ongoing internal implementation investment into consideration. In the words of one CIO, “we planned for $600,000 and a 6 months project; we reached both and then stopped counting.” An ERP implementation extends over long periods of time, and any worth its salt will take years, not months.

MYTH: “Consultants are professionals who can guide the selection process and manage the project while maintaining an objective stance.”

FACT: We believe that anyone reading this already knows the facts.

MYTH: “Comparing ERP functionality lists is a good practice for initial screening of vendors for your project.”

FACT: Functionality lists are of marginal value in the selection of potential ERP systems. A single line in a list may represent a world of functionality in one software packages and very little in another. Even if the desired functionality is fully supported in the software, actually making it work for your specific needs may make implementation complex and cost prohibitive. Referrals in your industry are a much better yardstick. As the implementation team is just as important as the software in terms of successful projects, referrals from industry representatives regarding the implementation team are the second most valuable indicator.

By Galit Raviv

If you are looking for a blog post that will detail the benefits, functionality or implementation processes of a particular ERP solution you can stop reading now. This post will step back a level and try to see the overall picture of deciding to move forward with an ERP solution, the forest, and not just the trees. Our journey begins with a short description of why ERP software can be an outstanding tool for an organization, and goes on to take a look at why so many implementations fail leaving a bitter taste in the mouths of all involved. The road ends with solid recommended practices, foundations as it were, for a secure and effective ERP implementation.

Why ERP?

Even with the economy in trouble and companies looking to cut costs in order to stay afloat, many are still making the decision to move forward with new ERP systems, or continue to invest and develop the ERP systems they have in place, often to the tune of hundreds of thousands of dollars. Why? Because ERP systems, when properly chosen and implemented, make sense. In the long run, they ensure better business practices, have the potential to reduce time spent on tasks that can be automated, freeing people up to concentrate on other tasks and improve productivity, and can ultimately result in tangible monetary benefits in the long run. 

ERP systems are not simple. They are, or should be, an enterprise level investment of most of all, time and energy. An ERP system should not be purchased to address the needs of the finance team, or the sales people, or even the people on the floor of a manufacturing plant. An ERP system must be able to address the needs of a company as a whole, and when it does, that company will reap the true benefits of the system. 

Where in the past a company may have one software package for their accountants, another for sales and yet another for their warehouse, using ERP can not only give all of these different entities information across the company, but also give management a bird’s eye view of what is really going on, without the need for complicated reports generated from different systems. How much more efficient is a system if a sales clerk can see if a particular item of merchandise is available in a different store, or in the warehouse, or if not there if it is on order and when it is supposed to arrive – all at his or her fingertips. And that is just one example. Consolidation, integration and the sharing of information. How would it benefit your company?

What are some of the other advantages of ERP?

Proper implementation of an ERP system forces companies to get organized. You have to take a good look at the current business practices, make sure they are actually the “best” they could be and are achieving the expected results, and then think about how to make them better. Once this is all documented, it’s time to set rules and constraints in the software to control events. All this translates into establishing best business practices and processes. This is time consuming at first, but once everything is in place, and you know that management will be receiving an email if something out of stock was ordered and didn’t arrive within 24 hours of its expected delivery date (for example), it’s time that is worth investing. And with the rapid turnover of personnel in some companies, the “knowledge” of how a particular task is done is documented to ensure that it doesn’t get lost if a particular employee is no longer with the company.

Flexibility 

This is key to a successful ERP implementation, from both sides of the table. The ERP system chosen must be flexible enough to meet the growing needs of an organization, and to be able to change, modify and adjust processes as business needs change within the company. From the other end, the management must be aware that as business needs change, they may have to reinvest time and resources into making sure the software is keeping up with their needs.

Conclusion

Deciding on an ERP system is deciding who you want your business to partner with in the long term. It’s a partnership that needs to be re-evaluated periodically to ensure that the software is keeping up with advances in technology and changes in business needs. The ERP customer must be ready to commit to this long term partnership, and acknowledge that implementation is an ongoing process. Ultimately, the rewards will become apparent.

Future posts will address some of the pitfalls of ERP decision making processes and implementation, and how to avoid them.

By Rebecca Haviv