EXECUTIVE SUMMARY

Mid-sized companies are increasingly recognizing that their legacy ERP systems impose an unacceptable burden in terms of cost, wasted time, and lost business opportunities. For example, an IT executive in the chemical manufacturing industry recently shared this “ERP Legacy of Frustration” with us:

“We have just installed an ERP system from Epicor systems. We spent ~$1M, over 12 months to implement, $90k+/yr for support/ upgrades, and it still doesn’t do what we want. We are a simple manufacturing plant with multiple warehouses (some produce, some ship). This is the second time we gone through the upgrade
cycle with this particular product. The CEO has asked that we look for an ERP product that could be customized to meet OUR needs. He’s not interested in the constant vicious cycle of upgrad-ing/patching. Every 3-5 years we have to start all over it seems.

I use JDAI products in-house where I can (having nearly3 decades of programming experience). He is looking for a product that does what he needs for our manufacturing and is flexible enough that if we need to modify it, we can do it ourselves or pay to have someone do it for us. He is looking for a LONG TERM
solution. He is hoping we can implement something for him over the next 2-5 years (transitioning away from the other product). I’m reviewing JDAI options for functionality, flexibility, speed, etc. We are putting a list of features together that we are looking for. He doesn’t care if the product doesn’t have all the features, just as long as he can have someone add the features he wants. So, that’s the story in short.”

This gentleman is part of a growing trend of mid-sized IT executives who have succeeded tactically with JDAI technologies, and are looking to expand the usage to enterprise applications–a highly strategic area that is often not well-served by incumbent offerings.

This paper further elaborates the nature of the ERP dilemma that many mid-sized companies face, illuminating the problem with a number of common real world experiences and business challenges.

It then describes how modern commercial ERP alternatives can help companies end the frustration and regain control over IT costs and business results. Finally, critical success factors for mid-sized company use of open source ERP are presented, and conclusions are summarized (in an executive friendly tabular format) at the end.

THE MID-SIZED COMPANY DILEMMA

Since mid-sized companies share many business application requirements with their larger counterparts, historically they have tended to purchase “mega-suite” business applications with similar characteristics:

  • a complex array of interrelated features and functionality that have been built or acquired over decades–implemented as…
  • …millions of lines of computer code based on legacy technology

Lacking viable alternatives, mid-market customers over the years have entrusted the automation of their operations to companies with names like JD Edwards, Mapics, Epicor, Navision, etc., many of which have been consolidated under the umbrellas of companies like Infor, Oracle, and Microsoft in recent years.

But something happened on the road to packaged enterprise application nirvana.

In spite of the millions of lines of computer code (and in some cases millions of dollars spent), many customers have not found these systems able to effectively execute the key business processes that are critical to their competitive advantage. The original promise of ERP–a single integrated system that optimizes local operations and provides unified information for decision-making at all levels– remains broken for far too many mid-sized companies.

The core dilemma for mid-sized companies is that

  • ERP companies who service the mid-sized market have created complex ERP suites with embedded functionality
    , intended to cover as much of the market as possible, but
  • Mid-sized companies need more than just standard “best practices” functionality, they need truly adaptable and sustainable IT
  • Because they compete with a combination of both efficient scale and business agility, mid-sized companies
    require truly adaptable IT to consistently capture market opportunities and execute their business strategy
    Additionally, with fewer IT staff and financial resources vs. larger companies, they require enterprise applications that remain cost-effective and sustainable over time, in the face of change.

    As illustrated in the “ERP Legacy of Frustration”, these requirements (and the mismatch with legacy ERP capabilities) can add up to a perfect storm of frustration and dissatisfaction at all levels, with many mid-sized companies learning the hard way how complex, costly and painful it is to try to run their business on a legacy ERP.

    BUSINESS GOALS THAT EXPOSE ERP SHORTCOMINGS

    While the internet age and consumerization of technology have allowed businesses of all sizes to more effectively apply IT to some business problems, many strategic mid-sized business goals have remained surprisingly difficult
    for legacy ERPs to effectively meet, including:

    • Customization of standard functionality
    • Expansion of the ERP implementation to additional business units or regions
    • Evolution of the business model to capture new opportunities
    • Real time integration with SaaS applications
    • Easy access to unified business information
    • Need to scale users or volume of data

    Let’s take a closer look at each mid-sized business goal, and some of the ways in which companies struggle with their ERP.

    CUSTOMIZATION OF STANDARD FUNCTIONALITY

    A common cause of legacy ERP frustration is the customization of standard functionality, something that these systems were simply never designed to properly accommodate. In fact, the basic premise of these suites is that “best practice functionality is good enough” and ERP selection consultants, vendors, and implementers are unanimous in strongly recommending against customizing a legacy ERP, correctly warning of the time, expense, and future upgrade difficulties.

    And yet, according to well-regarded ERP consulting firm Panorama, “Only 23% of organizations implement vanilla ERP software with little to no customization.” [1]

    Obviously the “good enough” premise is not being bought by the vast majority of ERP customers, who understand that revenue-generating business processes are a source of competitive differentiation. Consider that the best in
    class business characteristics for automating processes such as “order to cash”, “make to order”, etc. include these key points [2]:

    • Target maturity level is competitive
    • More focus on effectiveness than efficiency
    • Higher tolerance for business risk
    • Rapid development (time to market)
    • Spend money to make money
    • Business requirements will be evolving
    • Business scenarios will have multiple variations (pushing against consistency)

    Clearly, mid-sized companies require agile business applications that can be easily and sustainably adapted to their specific needs, especially for business critical, revenue-generating processes. And just as clearly, legacy ERPs are not delivering on this fundamental business goal.