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Rethinking your ERP implementation? You're not alone

 

As Coupa’s CFO, I talk to a lot of my peers at industry events, and at customer and prospect companies. I’ve had a number of conversations lately with people about their ERP implementations and plans to upgrade, re-implement, or replace their existing system.

 

If that’s you, you are in good company. With the economy continuing to improve, it seems to me we are witnessing an echo of the pre-Y2K ERP adoption bubble.

 

An ERP project consumes a lot of organizational time and energy, and it’s something most companies would rather avoid.  I feel your pain.

 

When I worked at Deloitte, I helped Fortune 500 companies implement SAP and PeopleSoft. As CFO both at Coupa and my previous company, I implemented new ERP systems so I know first hand how much stress

this cause CFOs. Naturally it’s something we’d like to avoid. Ultimately though, your hand gets forced.

 

Maybe your company has grown to the point where your system can no longer handle the transaction volume you’re doing now. Maybe you want new functionality that isn’t available with your current system. Or, maybe your vendor is no longer supporting your version of the product.

 

Being on an unsupported version that works for you might not be the end of the world, but eventually something like your tax interface or your browser support will break so you need to be prepared for that eventuality.

 

So how do you decide to reinvest, upgrade, or go to something new? While it would generally seem to be easier to just upgrade to the latest version of your current product, I see surprisingly few organizations that take this option. That’s usually because of the level of customization of the product they are using requires a complex upgrade process, or because they have a desire to change business processes from those supported by the initial implementation.

 

That being the case, should you re-implement the devil you know, or take a risk on the devil you don’t? There may be some exciting opportunities open to you, and there’s also lot to consider.

 

If you’re facing an inflection point like this with your ERP system, here are some high level considerations that will drive the cost versus benefit of each approach:

 

  • How much has your business changed since your last implementation? How much transformational value could you potentially achieve?
  • What are the training costs and efficiency gains associated with your approach?
  • What is the skill set available at your company or in the market for the solution?
  • How much integration do you have? Will they be able to survive?
  • What’s the roadmap for the product? Is the vendor adding applications, increasing mobility, moving to the cloud? Or is the product in maintenance mode?
  • What is the “best of breed” system used by your peer companies today?
  • How should your company’s pace of change factor into your decision? Are growth, acquisitions, and divestitures in your future?
  • What is the expected useful life of your approach, and what is the implication if it is longer -- or shorter?
  • How does your ability to invest constrain or enable each approach?
  • In both of my ERP implementations as CFO, the benefits of a modern “best of breed” system used by peer companies outweighed the cost savings of re-implementing the old system. These were both high-growth companies, and I think many high-growth companies would come to the same conclusion. With fast growth comes significant business change, and there is usually an opportunity to make a truly transformational change with your ERP selection.

     

    When you also take into account the company’s growth in resources -- both budget and people -- and the easier integration that’s possible with newer, more modern systems, the cost gap between reimplementing the old system and adopting a new one can be more easily bridged by the likely benefits.

     

    The world changes; companies transform, and technology advances, requiring ERP implementations to keep up as well. At some point, every company has to weigh the cost/benefit of change versus the status quo. The answer will be different for every company.

     

    I don’t have all the answers -- just an inside view on some of the questions that a lot of smart people at forward-thinking companies are considering right now. What about you? What is your experience? Is there anything else that should be taken into account? Please share your thoughts.

     

    Mark Verbeck is CFO of Coupa. This article previously appeared in Wired Innovation Insights.