A Teen's Car Dream vs. The Reality of ERP: A Tale of Two Investments
Last week, I found myself in a challenging conversation with my teenage son about buying a car. His focus was squarely on the car's aesthetics (wheels, stereo, spoilers, exhaust) and he was primarily concerned with the initial cost and fuel expenses. As we talked, I gently nudged our discussion towards a broader perspective. I wanted him to consider the whole picture — insurance, maintenance, and other ongoing costs that are easily overlooked by a teenager in the excitement of a new purchase.
Reflecting on this exchange, I was struck by the parallels to a recent experience with a prospective client who, several years into their Enterprise Resource Planning (ERP) system journey, found themselves grappling with disillusionment. This scenario is not uncommon in the world of enterprise software, where understanding the full spectrum of ownership is crucial yet often underestimated.
The Client's Challenge
Company X came to me expressing dissatisfaction with the support they were receiving from their ERP implementation partner - the folks who set up their system. They wanted my help to switch to a new partner, hoping for more effective and responsive maintenance of their system. However, as I delved into their situation, a crucial realisation emerged: they didn’t have a support agreement. Company X had not fully grasped the need for, and the costs associated with, ongoing investment in their ERP system. The lack of a comprehensive support contract was at the heart of their dissatisfaction, creating a gap between their expectations and the reality of the services provided.
From Auto Aesthetics to ERP Economics: A Comparative Insight
This scenario reminded me of my son's initial focus on just the purchase price of a car, overlooking the full spectrum of running costs. Similarly, Company X hadn’t fully recognised the continuous effort and investment that are vital for the smooth functioning of their ERP system. This brings me to an interesting comparison: investing in an ERP platform is much like investing in a car:
Initial Implementation Cost (Delivery and Dealer-Installed Add-Ons): The initial setup and implementation of the ERP system are like taking delivery of a new car, including all the dealer-installed options you choose, such as bull bars, tow bars, window tinting, etc. These upfront costs represent the customisations and configurations made to the ERP system to tailor it to your specific business needs at the start. In this analogy, just as driving a new car off the dealership lot signifies the conclusion of the purchasing process, completing the testing and launching the ERP system similarly marks the end of the 'fixed price implementation' phase.
Ongoing Software Licensing Cost (Car Lease Payments): The recurring software licensing fees are akin to the payments made for leasing a car. In both scenarios, you're essentially paying for the privilege to use the asset, without the commitment of full ownership. Just like a car lease typically bundles the costs of running the car and may include the benefit of upgrading to a newer model periodically, the software license fee covers the operational costs of running the software, along with access to regular software updates. Importantly, these licensing fees are paid directly to the software vendor, similar to how car lease payments are made to the leasing company, not the car dealership.
Ongoing Support Cost (Roadside Assistance): Paying for ongoing support from your implementation partner is like having a roadside assistance membership. In both instances, you're investing in a safety net for those moments when things don't go as planned. Just as roadside assistance steps in to get you running again the implementation partner’s support service is there to tackle any issues that arise with your ERP system. They provide immediate assistance to rectify problems, or for more complex issues, they liaise with the software vendor on your behalf. The key distinction here is that your financial commitment for this support goes to the implementation partner, akin to how your roadside assistance fees are paid to your local auto club, not the car manufacturer.
Post-Purchase Upgrades (Additional Services and Customisations): After the initial purchase, you might return to the dealer for additional services or customisations for your car, such as installing new accessories or updating the navigation system. Similarly, you’ll likely seek further customisations or enhancements to adapt the ERP solution to the evolving needs of the business. Just as you would expect to pay for any after-market enhancements to your car, it’s reasonable for your ERP implementation partner to charge for the expertise and labour involved in adapting and upgrading your system to ensure it continues to meet your business's growing and changing requirements.
Ownership Responsibilities (Car Upkeep and Platform Management): Effective management of an ERP system, much like regular car maintenance, is a critical yet often underappreciated aspect of ownership. I consistently advise clients to appoint an internal platform owner. This role is akin to that of a conscientious car owner who understands the essentials of vehicle upkeep. The platform owner should have a comprehensive understanding of how the ERP system operates within the business context, similar to a car owner adept in checking fluid levels and maintaining vehicle cleanliness. Their job is to know the ERP system inside and out, helping new staff get up to speed and being the main point of contact for any complex issues that need the partner's help. This role is crucial for maintaining the ERP system's efficiency and effectiveness, analogous to how diligent care ensures a car's optimal performance and longevity.
Caveat Emptor: Not all support contacts are created equal.
When it comes to selecting an implementation partner for your ERP system, understanding the varied landscape of support options is key. Each partner brings a unique approach to ongoing support, both in the nature of services offered and their pricing models. This diversity means you'll encounter different cost structures and types of support depending on the partner you choose.
It's essential to view ongoing costs not as optional extras, but as integral to the health and value of your ERP system - much like regular maintenance is to a car. I’d encourage you to reframe them as investments in a valuable asset. Just as the real value of a car comes not just from owning it, but from using it effectively - driving it, relying on it for your needs - the true worth of your ERP system is realised when it's fully leveraged, or 'sweated', for all its capabilities. This means not only using the software but also actively maintaining and optimising it to ensure it aligns with and supports your business strategy.
Effective budgeting for these ongoing expenses is not merely about keeping the software operational; it's about ensuring that you're getting the most out of your investment. It's about maximizing the value you derive from both the software itself and your partnership with the implementation provider. With thoughtful foresight and strategic planning, these ongoing costs become a pathway to aligning your business strategy with the dynamic capabilities of your ERP system, paving the way for a more successful and sustainable implementation.
Guidance and Perspective: The Path to Informed ERP Decisions
Navigating conversations with my teenager often reminds me of the importance of perspective and guidance. Part of my role as a Virtual CTO is bridging these types of gaps in understanding and guiding clients towards comprehensive technology management strategies is a key part of ensuring their long-term success – much like preparing a new car owner for the road ahead.