Companies continually look for ways to reduce costs, facilitate sales, and increase customer satisfaction. While there are a multitude of specific approaches that could be utilized to address each issue, all three of these objectives could be achieved at the same time through automation. Production systems serve to increase sales efficiency and introduce cross-sell opportunities; while the implementation of back office systems serve to drive support efficiencies and remove non-value added costs. Efficiencies that improve the sales process and/or the customer service process will result in increased customer satisfaction.
But, prior to searching for the best enterprise system solution for your business needs, establish your preliminary budget. Consider licensing fees, development costs (external and internal), as well as the conversion costs. Compute your expected Return on Investments (ROI), which is the ratio of income generated less dollars invested, over dollars invested in a process or product financed, to stimulate the growth of the company. This statistic should be used to ensure that your financial resources are being allocated to growth opportunities with the highest returns. As you get closer to selecting the new technology, these numbers should be revised.
Just keep in mind, any change in your business model will cause a certain level of disruption, regardless of the size of the system to be implemented. If not executed correctly, the new system may cost you more than you expected, both today and in the future. Proper planning is critical. In my experience, the top issues which raise the cost of the development are consistent across different platforms, and not specific to the size of the company. These are common issues associated with all technology implementations.
Issue #1 – Customization – When an off the shelf enterprise system is purchased or leased, a certain amount of customization will be required. This customization serves to ensure a clear identification of features for the users, within the application, in the terms common to the business. Another area that requires customization is the development of reports specific to managing the business or responding to client needs. But all customization requires development time, that quickly raises the price of the new technology. Be sure that the requested customizations are required. Differentiate “nice to have” from “need to have.” Negotiate and budget for this start-up expense.
Issue #2 – Integration – It is not uncommon for a business to be composed of a few systems with no integration. This situation occurs when a business is growing and different departments purchase technology for their own areas, not considering the greater business. This situation also is common for larger companies that recently experienced a merger. It becomes obvious quickly, that different departments of the new business cannot communicate clearly with each other, as they are not all on the same platform. Ensure that any new system is integrated within the company, satisfying the needs of a few departments. At the very least, there should be integration between your productions system and financial system. Integration requires development time and quickly raises the price of the new technology.
Issue #3 – Data Quality – When introducing new systems or upgrades, information maintained in either a legacy system or a homegrown database may be incomplete and inconsistent. Information clean-up is time consuming and has an internal cost. But correcting deficiencies today is a worthwhile project, vs. perpetuating issues in your new technology application.
Following are “best practices” to avoid these issues or at least reduce the negative impacts associated with implementing and managing new technology within your business –
Understand your Technology Needs – Assess the current needs of your customers (internal or external); while also considering their future needs. This step may include surveys and focus groups with the users. Flowchart the process today and identify what happens when things occur without issue. Analyze the flow. Are processes as efficient as they could be? Now consider the experience when breakage(s) occur. At what point in the flow does it happen? How can this situation be avoided?
During this process, continue to consider user acceptance. If your system is not intuitive, external users may not wish to use it; and internal users may not transition to the new platform quickly, making conversion a long and drawn out process.
The output of this analysis should be reviewed with key stakeholders to gather their thoughts and views. The result of this task will be a clear understanding of the business needs. Document this information.
Next, issue a Request for Proposal (RFP) to service providers. There are very few processes where there is not more than one supplier. Send the RFP to at least three providers.
Develop a relationship that compliments your business – When considering a technology solution; the vendor relationship is as important as the technology being purchased/leased. Prior to entering into any relationship, keep in mind, that there are common risks inherent with all vendors –
- Employee quality – vendor employees requiring special knowledge, licensing, certification;
- Business continuity – impact of a disruption in your vendor’s business on you; and,
- Service quality – impact on your internal and external customers.
Establishing your requirements and how you will work with the vendor, prior to entering into a relationship, would be time well spent.
If the technology fits your needs; if the vendor will be a good partner for your business; and if the final budget and ROI are acceptable – it is time to draft the contract and statement of work.
As stated previously, proper planning associated with the integration of a new enterprise solution will ensure your selection satisfies the process improvement and cost containment needs of your business within the established budget, while achieving the required ROI.
I wrote this article for CIO Review Magazine-Corporate Finance Technology Special 2014 (April 2014) The story can be found on page 50.
© Copyright 2014 Regis Quirin, All rights Reserved. Written For: CFO Tips - What you need to know, to be a CFO TODAY!