It can be easy to get caught up in a game of comparisons when searching for new software. And in some situations, it is very important to compare different solutions side by side, especially when it comes to things like data migration, implementation costs and reading the fine print on proposals.
However, trying to compare different systems can become extremely dangerous when not comparing apples to apples. This becomes a significant problem when comparing introductory software such as QuickBooks to fully integrated ERP systems. During initial discussions, companies using introductory systems can experience sticker shock when looking at more sophisticated ERP solutions, and we often hear the question, “How come your software is more expensive than my introductory system?” The answer? Because they are two completely different solutions, designed to fulfill different needs and appropriate for companies of different sizes and sophistication.
Trying to compare introductory software to ERP is like trying to compare playing a round of golf with one club vs. a whole bag. Sure an amateur golfer could theoretically play a whole round of golf with only one club, but it would take a lot more time and effort than if you have a full bag of clubs and tools to choose from. This is the same for introductory software. Although it can help you manage processes and streamline some operations as a small business, if you want to grow and remain competitive, you will eventually have to upgrade to a system that provides advanced tools and functionality.
Below we expand further.
Functionality and Costs
Since I used costs in my example, we might as well start there. Yes, the costs do vary significantly between QuickBooks and ERP, just like they do between one golf club and a whole bag. With ERP the amount of functionality available increases significantly. This includes built-in functionality like the ability to manage multiple locations, units of measure and multi-currency, as well as additional features like lot tracking, eCommerce integration, warehouse management, contact management and CRM. In addition, ERP solutions are built for growing businesses and so do not provide limits from a database-size or transaction-volume standpoint. Because ERP solutions are designed to be all-in-one systems in terms of inventory and accounting functionality, the costs are comparable to purchasing multiple standalone solutions, with the benefit that all components are fully integrated. Inventory data flows through to purchase and sales orders and accounting information is streamlined throughout the entire system. ERP vendors also provide extensive data migration and set-up help which increases the initial costs, but can save you money and time compared to having to do these things manually.
Just like learning how to use all the clubs within your golf bag takes time, so does implementing a full ERP solution. There is more work required to set up the system because it is designed to manage more processes, and automate more tasks. To break it down further, implementations typically include: data migration, installation of hardware and systems, configuration of system parameters specific to your business, and training.
Good software vendors will manage the entire data migration process to ensure there are no issues with data set-up. This includes extracting the data from your existing software, “massaging” the data in terms of clean-up and structuring and then moving the data into the new system. This is one of the most important aspects of the implementation process and can be very time consuming for the vendor. Even though some businesses would prefer to move the data themselves, this almost never goes as smoothly as planned. ERP vendors have the resources in place to ensure the information is the most up-to-date and accurate come go live. They also have the necessary skill set and knowledge to retrofit the old system’s extracted data so that it works and makes sense in the new system.
Configuration of System Parameters:
With ERP solutions, vendors will aid in the system configuration that is specific to your business. This includes setting up receivable and payable limits, product categories, “flags” for dealing with specific actions such as customers over their credit limits and bank accounts. Setting up the system properly from the get-go can foster best practises and good habits for maintaining data and entering information.
Training is another area of software implementations that takes up a lot of resources. Most vendors will provide generous ballparks when originally estimating this cost as it depends on several variables. For example:
- The more people who need to get trained the more work is involved. It is easier to sit down and train a group of 5 people than a group of 30.
- The amount of experience your team has with software and technology will also impact how training goes. If employees are used to working in similar systems and are more “tech savvy” this can make the process easier. However, if employees are “too tech savvy” they may also become bogged down with some of the details in the system which can actually delay the training process.
- If you have to train the same employees on multiple areas of the software, this can also add to the time required and costs.
Installation of Equipment and Hardware:
More advanced software will also require updated hardware and servers, especially for on-premises solutions. This is one of the advantages of choosing a cloud-based solution if you do upgrade, as equipment management, IT maintenance and data backups become the responsibility of the software vendor.
Lastly, the vendor’s schedule will also play a role in why implementations take so long. Given that each implementation requires significant work, vendors must schedule these accordingly. Most software vendors will schedule implementations on a first-come, first-served basis and so it does not make sense that they would be able to get a new customer up and running overnight. In order to ensure you get the timeframe you want for an implementation, make sure you begin the software search process well in advance.
True ERP solutions are designed to replace introductory systems in order to accommodate significant company growth. Therefore the two are not directly comparable. An upgrade to ERP will include an increase in costs, but also an increase in automation, functionality and efficiencies. In order to make the best decision for your business it is important to understand the implications this has on your business and the opportunities it can provide. The best way to grow your business (and improve your golf game) is to get the right tools and training in place.