Why does every ERP system suck?
Why do they suck (at least a little)?
I'll tell you about a little industry secret shortly, but let's be clear about something here.
What is an ERP system exactly? You probably know it, you might just call it differently.
I'll be very short on the intro because it's not a sexy topic. ERP stands for enterprise resource planning. Fancy words, but think about it this way: an ERP system bundles together the typical things that a company needs in ONE system. These are invoicing, stock-keeping, order handling, etc. They usually throw around the word "integrated", which means that when a sales guy creates a new partner for himself in the CRM, the other guy in logistics can already see this partner and handle the delivery later. No double entry of data.
Okay, that's enough explanation. So...
I remember talking to a friend of mine about a decade ago. He was working for a big telco company at that time and they just introduced SAP. I was curious since I took a class about programming for SAP and always considered the company as THE ERP COMPANY.
- So you introduced SAP. Wow. How is it?
- Jesus, it's so terrible. Everyone is so annoyed because we can't do anything properly. Sometimes we have to enter the same data 2 or 3 times. And they say that the company paid a fortune for this. FOR THIS.
I was confused. SAP is the biggest company that is producing its ERP systems since 1972, for more than 5 decades now. It can't be bad.
As time passed, I had similar dialogues with many people about different systems. It didn't matter if it was from a local vendor or a globally known huge corporation. The more complex the system was, the worse their opinion got. No exception.
But why? Why do all these systems suck?
Average doesn't exist
I'll jump right ahead and say that this whole problem is connected with the notion of averages and I'll tell you about why I think that. I had an AHA moment which happened on a short 2-hour plane flight. It all had to do with this book: "The End of Average".
It was written by Todd Rose. He fell out of high school and had to work from an early age and he was on welfare. Things weren't pretty for him. He somehow attended a special program about learning, and the program was managed by Harvard. A high school dropout is not someone that ends up in Harvard, but he somehow managed to get into the program. Long story short, he's the leader of this program now and it has to do with teaching in a new way. He got fascinated with individualized teaching and this was very different from how our education system works. Our education system was made for an average student to learn what he should know. On average.
Now, at first, I thought that this will be another book that wants to convince me that everyone is a special snowflake and that's beautiful. That grouping people by patterns is evil because it might be hurtful, even though that's evolutional and we can't do anything about it.
Turns out I was wrong! Here's the thing that convinced me.
The beauty contest
There was a women's beauty contest that they held, with a twist.
You see, there was a statue called Norma. The name is not a coincidence, because this statue was created by averaging 15000 women's different properties, like height, hip width, arm length, etc. The measurements average out, creating "the" normal woman, hence the name Norma.
For this contest, every participant had to send 9 of her body properties. The goal was to find the woman who is the closest to Norma in all of these measurements. The judges were sure that it will come down to just millimeters, or even smaller. Almost 4000 women participated.
They announced the winner, a woman named Martha Skidmore. A thin brunette who liked dancing and swimming.
What do you think, how close was Martha to Norma?
Here's the crazy part: Even Martha, the winner of the competition was off by a lot on a couple of the 9 properties.
Out of the 4000 women, only 40 were SOMEWHAT like Norma. But even from 40 women, only 5 (five) properties were somewhat the same, out of the total 9. In the remaining 4 properties, they were completely off from Norma's measurements.
Concluding the event, they declared that there's no such thing as "an average woman".
This was my "AHA!" moment. This flipped a switch in me, moving me from "a lot of people are pretty average" to "well, you have to take differences into account". Of course, it's not just physical properties that we cannot consider by starting from averages. The same applies to mental skills and capacity as well. It's a flawed concept for determining how individuals (people, entities, etc) should be considered or evaluated.
Every ERP is average
Remember that we started with ERP systems? I promised you that I'll tell you a little industry secret.
This secret is only revealed to people when they are participants in the introduction of a new computer system that affects the job of the employees. The secret is: the users have to be adapted to the system and not the other way around. Yes, even for big names like SAP. Or dare I say ESPECIALLY for big names like SAP.
The way SAP does deployment is they send a swarm of "consultants". The biggest role of these people is to teach the staff of the company how to use their software.
Now why do they do that?
Because these systems are made for an average company, with average business processes and average requirements. But there's no such thing as an average company. Don't get me wrong, these systems can be configured to align with the business processes of the client. But the more configuration options you add, the more complex the system gets. That's an issue from a maintenance point of view.
Think about it. We cannot find a single woman that completely matches an "average" standard that consists of just 9 different properties. Then how could we find a company that would fit a thousand different properties of an ERP system? It's just impossible. Just think about it! What are the commonalities between:
- a funeral home
- a government-owned telephone company
- and a slaughterhouse
?
Nothing.
Yet all these can opt to use the same ERP for their day-to-day job.
Off-the-shelf software cannot be by design good for everyone. Yet almost everyone expects them to be.
A few years ago I was demoing the order fulfillment process to a CEO of a company:
- "Why does it work that way? That's just dumb! That's not how we do it here! We create the invoice first, then we handle the delivery in the following days"
- "I know a different company that does the exact opposite way. You'd get decapitated if you create an invoice before a delivery note"
And this is just a random example.
Everyone wants software that "just works" for them. The requirements are simple from a bird's eye view: invoicing, inventory, CRM, etc. And every off-the-shelf system that promises to handle some or all of these does 80% or 90% of the job just fine. It's the remaining 10% or 20% that causes problems.
What can we do?
So you can ask the question: "What should I do if I want an ERP that doesn't suck, but is not that expensive?"
Allow me to show you 2 ends to the solution:
1: Total adaptation: Adapt the users to the system by teaching them to pick up new habits. This is harder for the people. They will complain that it's not how they were doing things. Some processes will be much slower, and some might even completely come to a halt. My experience is that people eventually find a way to do what they have to do, and eventually accept that they can't do certain things in the new system.
2: Total customization: Modify every part of the system to have a perfect fit for the company's needs. This is harder for the stakeholder's wallet. This end is a completely custom software solution, written from scratch. Companies opt for it if they have so many unique processes, that no ready software can fulfill those needs. I've seen big custom software created and a good phenomenon that happens is as the software is being created, the processes that people use also evolve with the software.
Don't forget, this is a spectrum. You can do more of one and less of the other. Money and the existing system is a big factor in determining which path one can take. A lot of times, companies end up somewhere between the 2 ends. A lot of times, they start with the 1st end, and introduce the system. Then slowly shift towards the 2nd end as new requirements emerge.
6 questions to help you decide
I'd advise you to answer the following questions. These can help you to decide whether you need custom software or an existing product that already satisfies your needs.
1. Do stakeholders see it as a cost center or as an investment?
The perception of a new system among stakeholders can vary. Those who see ERP as a cost center often focus on the immediate expenses associated with implementation, licensing, infrastructure, and ongoing maintenance. They may overlook the long-term benefits and potential returns that a well-implemented ERP system can offer. On the other hand, stakeholders who view ERP as an investment recognize its transformative potential. They understand that an ERP system can streamline processes, improve efficiency, enhance decision-making through data insights, facilitate collaboration, and provide a platform for business growth and innovation. These stakeholders perceive the initial costs as a means to achieve long-term strategic goals, increased competitiveness, and improved financial performance. Ultimately, the perspective of stakeholders on whether ERP is a cost center or an investment depends on their understanding of the system's potential value and their ability to align it with the organization's overall objectives.
This greatly determines the budget and the customization options for the product. If leadership sees a new system as an investment for the upcoming years, they'll allocate more funds for bespoke features, moving to the right on the spectrum.
2. What are the long-term goals and vision for my organization?
Consider your organization's strategic objectives and plans. If your goals involve innovation, differentiation, or a focus on specific industry requirements, a custom ERP system may align more closely with your vision.
When deciding between an off-the-shelf ERP system or a custom one, it's important to think about your organization's long-term goals and vision. If you have specific plans and unique ways of doing business, a custom ERP system can be tailored to fit your needs. It can help you achieve your future growth plans and stand out from competitors.
Keep in mind that a new system will live with you for many years, even decades. If you plan to start a webshop in 1 or 2 years, you should already think about the integration of that into the system.
3. Do you have the budget to fund development?
Off-the-shelf solutions will be orders of magnitude cheaper than custom solutions. This is the biggest reason you have to justify developing a proprietary solution. The ongoing maintenance fees will be higher too. It will be an ongoing thing that you have to include in your planning.
One mistake that often happens is that clients ask for an estimate for a big and complex software without a thorough discovery from the developer's side. These estimations are always off. Paying for a proper specification or at least a discovery is essential to get a better sense of how much this endeavor will cost.
A mix of both worlds is when the software provider offers customization. Cost and capacity will be the biggest question in these instances. It is not rare that even small requests from ERP clients are delayed for months due to a lack of manpower from the provider.
4. What are my organization's unique business processes and requirements?
Assess the specific needs of your business, considering industry-specific workflows, regulatory compliance, and any unique processes that may require customization. There are millions of software out there, some of them for very specific needs. If you search for a long time, you'll find a SaaS for almost every problem. But beware! If you buy a system for a specific workflow you have, and another for the other generic parts, you now have an integration problem.
If you tried multiple systems and none of them were adequate, custom is the way.
5. Do you already have an ERP installed?
If your current ERP isn't meeting your needs or lacks important features, you might want to explore other options. However, if it's working well and can be upgraded to meet your changing needs, it could be more cost-effective to stick with it.
If you want to go the custom way, you can gather valuable insights from the users of the current system. They know what they like, what could be improved, and what they hate with a vengeance. But it's important that you systematically gather these data, not just expect the users to come up with ideas.
If you want to purchase, users will be more resistant if they are used to existing software. The phrase "It was different in the old one" will come up countless times. They will push you to customize the new system to work like the old one, even if they can do the same, just differently. People are habitual creatures and it's hard to make them change.
6. Do I have access to in-house IT expertise or resources?
If you have no IT personnel, or at least someone who likes technology, then you'll rely 100% on the provider. This can be problematic if the relationship between you and the other party is not mature enough.
If you have, then they can be the "champion" of the system on your side. This is paramount in the introduction of a new ERP system, whether it's custom or bought. The reason for that is that people with a good eye for technicality can bridge the communication gap between the end users and the provider. and Requirements are translated faster, problems are reported and described in a manner that aids the developers to solve them. Depending on the software, in-house personnel can even configure or develop the system.
Summary
In conclusion, ERP systems often face criticism because they attempt to cater to an average standard that simply does not exist. The concept of averages, as highlighted in Todd Rose's book "The End of Average," demonstrates that each individual, company, or entity is unique and cannot be adequately represented by a one-size-fits-all solution. Despite big names like SAP, most ERP systems are designed with an average company in mind, leading to frustrations when businesses realize that their specific processes and requirements do not align seamlessly with the off-the-shelf software.
I hope that the 6 points help you choose your path.