Are you interested in upgrading your company’s ERP or financial management system? There is a big world of choices out there – but depending on some key choices and your companies needs and resources you can quickly narrow the field. Here is a quick list of things you should consider:
Cloud vs. On-Premises and “hosted cloud” vs. “cloud-based”
In the recent past, the discussion with many of our system search clients was whether they should stick with a traditional on-premise solution (where you own and support your own servers, infrastructure and software in-house) or a cloud solution (where a vendor provides and supports the servers, infrastructure, and software and you pay an annual subscription fee).
At this point, the tide has shifted toward cloud deployments, and generally, our clients have made this choice before we even start talking with them. If you look at most traditional software vendors, they are all either building or acquiring a cloud strategy – which signals they are responding to this shift as well.
Instead of discussing Cloud vs. On-premises, we now discuss the differences between “cloud” products with customers – because they are not all the same. The main question to explore is if the vendor is using a multi-tenant strategy or a single tenant strategy.
In a multi-tenant strategy, customers each have their own data storage – but they all access their data through the same interface – which means you will always be on the latest and greatest version of the software. Additionally, because it is a more efficient model for the vendor to manage, it usually costs less. Also, software support is performed for the whole user base – and since everyone is on the same version of the software, performing support is much simpler for the vendor.
In a single-tenant strategy, customers have their own data storage – but they also have their own user interface. In other words – it is possible that customers can be on different versions of the software as new updates roll out. When there are updates to the software, the vendor has to apply the changes to each customer’s instance – and in some cases, the customer is actually responsible for installing the updates themselves and testing that everything is working afterward. Obviously, this model makes support more complicated for the vendor and tends to increase costs,
Next, we discuss the key capabilities that our customers need from their new software. As many find out, there is no silver bullet software out there that will magically meet all their needs – and cloud software can sometimes make that more challenging if it isn’t built to be customized and adaptable. But, as is often the case, some are better than others in this area. Some things to think about when evaluating your software candidates include:
- Industry suitability – It is important to evaluate if a particular software has the functionality to accomplish your objectives. Most importantly, any solution you look at should have strong core capabilities around its General Ledger, Accounts Payable, Accounts Receivable and Reporting functionality. However, you will need to consider if there are other capabilities needed that are specific to your industry. For instance, if your business is focused on professional services, you will want to ensure the new software will be able to track billable time and expenses and automate your customer invoicing process. Often software vendors will have case studies and customer referrals available that can help you determine if the software will be a good fit. When the vendor demos their product for you, be sure that they show you how it will accomplish your key functions. Avoid only receiving verbal assurances that the product will meet your needs.
- Ability to integrate with other solutions – as mentioned, since very few products will be able to meet all your needs, the ability to easily integrate with other solutions can result in a powerful custom design. Let us say you can’t find an ERP that has robust enough inventory tracking at a reasonable price for your distribution business. In that case, if your ERP has strong integration capabilities, you will have the ability to go into the market and pick the best inventory management system available and simply integrate it into your ERP. This “best of breed” concept allows you to effectively build a “custom” solution while getting all the benefits of lower-cost cloud software. It also allows you to adapt as your business grows and changes over time and different needs come up.
- Ability to scale – similar to moving, system migrations are not something you want to do very often. When choosing your ERP you want to make sure you have room for your business to grow – both in terms of transaction volume and changing strategies. We will discuss ROI later – but in order to realize the value of the migration onto the new software, you will want to make sure that it will be able to support you for several years – or ideally forever.
- Reporting capabilities – often when vendors demo their products, they start by showing you the reporting. After all, the ability to evaluate data and make better decisions is probably a key driver of the software search to being with. Here we recommend evaluating if the solution has drill-thru capabilities and charting capabilities. But the most important thing might be understanding how easy it is to write and/or edit your own reports. Once again, as your business grows and needs change you will need new or updated reporting – and it will be important to know if that is something you can handle yourself or if that comes with the additional cost of developers and consultants.
Total Cost of Ownership (TCO)
One of the most overlooked decision inputs made when choosing software is evaluating the Total Cost of Ownership of the products they are considering – or even the TCO of their current software. Often we see one of two things –
- Businesses choosing software with a lower subscription price to “save money” but then they spend more on personnel and have inefficient and less controlled processes, or
- They overpay for a product that has a lot of functionality baked in that their business will never use.
These systems are typically more difficult to implement – so there is a higher upfront cost – and it makes it harder to get a good return on your investment.
Finally – when evaluating and implementing new software we recommend finding the right partner to help you evaluate the products and streamline the migration process. We often talk with our clients about “leaving the office Friday and logging into their new software on Monday.” Obviously, that is over-simplified – but with the right partner getting onto new software does not have to be the nightmare you hear about sometimes.
At Madken Advisors, we specialize in helping our customers work through the considerations discussed above and make the best decision for their growing business’ needs. Interested in learning more? Please reach out to us for a free one-hour consultation.