The Best ERP Software vs. BSM: 5 Questions CFOs and CIOs Should Ask
ERP projects are a little paradoxical, aren’t they? These systems are the financial backbone of an enterprise and they are essential for managing back office functions. Yet ERP implementations can be difficult, intransparent, and expensive. With so much already invested, many CFOs and CIOs default to their ERP when it’s time to make investment decisions and consolidate their tech stack. These leaders need to show value, and quickly. And when you’re under pressure, it’s hard to find the time and space to seek out a better way of doing things.
The smarter way: a BSM-first approach to accelerate ERP projects
CFOs and CIOs are discovering how to deliver better business results quicker with a Business Spend Management (BSM) platform to unlock more value from their existing ERPs.
Modern organizations extend their ERP investment by implementing BSM first or in parallel to:
- Funding their ERP implementation with savings achieved from BSM
- Gaining visibility into and control over spend and liquidity
- Better mitigating third-party risks
- Quickly adapting to changing spend priorities as needed
- Delivering outright cost savings
- Accelerating digital transformation and increase automation
- Achieving full financial control and compliance
Here are five questions CFOs and CIOs and their leadership team should ask before making an investment decision.
1. What is the time-to-value of the best ERP software vs. a BSM-first approach?
An ERP implementation could take three to four years. Compare that to about a year for BSM implementations. (We’re basing this estimate on our collaboration with more than 3,000 customers around the globe.) Going the ERP route often means a double-digit million dollar price tag along with company resources tied up for years.
A BSM approach is, simply put, faster. And it helps organizations avoid other kinds of costs. There’s no need to squander resources on ERP integrations from mergers and acquisitions — and then migrate to a new system a year later. It’s also worth understanding how much it will cost your company to keep onboarding ERP users and training them on processes and functionalities that don’t add value to their daily work. What’s more, the savings you achieve by committing to BSM first can be used to fund the ERP implementation later on.
In short, BSM has faster time-to-value and shorter payback period.
“What am I actually going to get incrementally for the [ERP implementation] versus what am I going to get incrementally if I roll out a source-to-pay solution? The delta between the benefits was huge: 80%. That was the value coming out of the source-to-pay solution.”
2. How do the financial models of a BSM-first approach and the best ERP software compare?
To uncover the real cost benefit of an ERP implementation versus taking a BSM-first approach, it’s essential to compare financial models by running various scenarios.
Summit Materials, for example, evaluated various scenarios that ranged from conservative to best-case. For example, for the former, the team modeled scenarios in which only 50% of the benefits were achieved or there was a 50% increase in implementation costs. They also looked at internal rate of return (IRR), net present value (NPV), cash flows (forecasted vs. actual), and payback period. For Summit Materials, the financial models showed that most of the value came from BSM.
These numbers need to be taken within the context of your business. As stewards of your organization’s money, it’s important to tie these financial models to business justification in order to align with key business partners.
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3. How well does the best ERP software enable business agility compared to a BSM-first approach?
Modern tech stacks need to support the business today as well as tomorrow’s growth. Even the best leaders can’t predict every single change these days, so it’s essential to rely on technology that’s designed with the agility to keep up with the changing needs of the business.
Let’s look at three key aspects of business agility and how ERPs and a BSM approach play a role:
- Have a unified data model. An organization might have one ERP but multiple instances of that ERP, each with its own customizations and data that are disconnected from the other instances. How can a business be agile if its data is siloed? A BSM platform solves this by sitting across multiple ERP instances and cleansing the master data. And if you deploy BSM first, it accelerates your ERP implementation (or upgrade) because it cleanses the master data.
- Avoid customizations. ERP upgrades are known for eating up time and resources. Although customizations seem like they make sense early on — named workflows, for example — they wind up making these projects even more expensive and time-consuming.
- Stay connected to innovation. BSM cleanses the master data and acts as the primary user interface for employees. This allows the ERP implementation or upgrade to run in the background with less disruption to the business. At the same time, a BSM implementation keeps employees across the organization plugged into the latest platform innovations with one straightforward upgrade experience. Users everywhere can make smarter decisions faster, whether it’s to control costs, work more efficiently, or help meet the company’s environmental, social, and governance commitments.
“With [our ERP], we relied on customization, and that caused friction within the organization. Coupa enables internal processes. It allows us to be more agile in the projects we create and the problems we solve.”
4. How much longer is the best ERP software going to allow users to sidestep processes around financial controls?
A cumbersome and disconnected buying experience is frustrating for ERP users. Even worse, it encourages them to take the path of least resistance through gaps and loopholes in financial control. But using unified S2P capabilities on a single BSM platform, companies make it easy for employees to buy the right item every time.
CFOs, talk to your organization’s procurement leaders to find out how your system:
- Supports guided buying across the business
- Captures and amplifies value by ensuring contracted goods and services are actually purchased
- Manages approval changes and how that speed impacts bigger issues such as fraud protection and business agility
- Adapts to evolving global compliance requirements, especially for ESG-related regulations
5. Can the best ERP software help you turn change management into an advantage?
Faced with organizational silos and financial mandates, CFOs, CIOs, and CPOs can wrestle with alignment on the right way forward. One consistent piece of advice from our customer community’s senior leadership: Put yourself in each other’s shoes. Ask questions like:
- What does it mean for your organization if we stick with our legacy procurement system?
- Does it impact your business negatively, or not?
- When you see value, what impact does it have on your business?
Jeffrey Pernoud, Director of Supply Chain Operations at Waste Management understood that his CFO was concerned about working capital costs, cost overruns, and tying up money in a multi-year implementation — and he also related to the CIO’s worries about rising costs of legacy systems and how to maintain them to support the organization. That helped them collaborate and challenge their leadership team on where to explore opportunities and appreciate the urgency to address them.
Lack of executive sponsorship is just one reason why infrastructure projects deliver poor results. Our infographic shows you four more.
“An ERP implementation can get ugly. Coupa was the layer on top — it keeps the users away from the messy ERP stuff and focused on their job.”
Your ERP has played a key role in advancing your business to where it is today. But to transform the business to withstand tomorrow’s challenges, you’ll need more than legacy systems. Rising costs, increasing inflation, supply chain disruption — to answer these bigger questions and deliver more value together, CFOs and CIOs can rely on a BSM-first approach to maximize their ERP investment.
When it comes to time-to-value and financial modeling, consider a BSM implementation first. Because the best ERP software can’t do it all.
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