Does your favourite START-UP need an ERP to become SMART-UP?

Most start-ups start lean with big ideas but small teams. Also, since most of the successful start-ups are based on innovation and industry disruption, the focus is always on planning, execution and launching the idea instead of starting to think about keeping track of capital raised from multiple investors and reporting operating results to those investors.  Technology is THE most important enabler for a start-up today and cash management is one of the less liked functions in most techies. They normally hate to be involved in financial management and would rather spend their whole time on fine tuning the ideas, finding buyers and doing software development to launch their ideas. An ERP is not only about accounting or managing finances but for a start-up the challenges start from here. Some of the challenges related to handling of finances and accounting can be:
  • Compliance with complex accounting rules
  • Handling deferred sales & revenue generation
  • Chronological recording of financial transactions including investments
  • Potentially rogue team members stealing data from their machines
  • Long-time taken by team to determine revenue for a month
  • Inability to accept money from customer in case of payment through credit card
Well, this article is not only talking about F&A challenges that Start-ups face. If we start talking about the challenges, they will be much more in the areas other than F&A and will present a much stronger case of having an ERP for a Start-up organization so that they start in an organized manner and are equipped to handle larger size of operations as and when they grow. It is more about the impact an ERP can make to a start-up to make it a Smart-up as fast as possible.
I know a founder (Ashish – name changed on request) of a start-up who started their business around 18 months back and are doing pretty well till now. Having acquired initial funding for their venture, they started growing and within a year, they reached a top-line of $6.5 Million. Ashish shares with me that they took an early decision to go for a cloud based ERP (believe me there are large number of ERP products available today which are being marketed as only for start-up and GOD some of them are too good) and feel pretty good about that. Ashish told me that small businesses like them are benefitting from ERP because of its ability to manage flow of information. The decisions that they were able to take quite early in their cycle were all because of ERP they selected and implemented (unlike traditional ERPs, these new crop of ERPs for start-ups take 4-6 weeks to implement bringing lot of value).  Streamlining back-office (procurement, supply chain, inventory, finance, human resources etc.) helped them focus on sales, improving market reach and measure customer satisfaction. You will be surprised to know that they doubled their revenue this year and in last six months, they have already crossed $7 Million revenue already and Ashish gives lot of credit to the ERP they implemented.
 When I asked him what he looked in the ERP product before deciding, he gracefully shared good insights such as:
  • Availability on public cloud – mostly software as a service rather than infrastructure as a service
  • Ability of the product vendor to guarantee security of data
  • Cost Effective, easy to use and good support model (24X7)
  • Ability to meet industry specific needs
  • Own analytics dashboards
  • Extent of availability on mobile devices
  • Easy licensing norms & availability of exit clauses (with data return)
  • Fast implementation period
  • Ability to integrate with host of other systems
This is not an exhaustive list but since it has come from a real user (Ashish also acts as the CIO for their start-up), it has lot of value.
It would be nice to hear more comments and voices from other start-ups and ERP evangelists on whether ERP plays a definitive role in growth of a START-UP into a SMART-UP or it is just another software which brings some value to any company, be it start-up or not. Shoot!!

How far software can help you in managing transportation costs and optimise delivery time/cost?

Ever increasing customer expectations, supply chain becoming more and more complex driven by globalization, increased volatility and shrinking margins have put much higher pressure on managing your shipping costs and time. This, when combines with shortages of drivers, trucks, railcars, ocean slots, ports and escalating fuel costs, becomes a nightmare for a supply chain executive.
A lot of organizations have already embraced technology to get better visibility into their transportation budget and operations. It has helped them in keeping the transportation costs checked and manage consolidation & globalization of outsourcing suppliers. But, the question I raised in one of the recent discussions at a supply chain forum, that how far software alone can help you in this regard? Is the software enough to take out of all operational issues or you will need to transform the practices also in your organizations to reach the goal? Of course, there are no prizes for guessing that both the approaches are required but what should take precedence? Can there be strategy around this?
While, the software will promise a lot like providing logistical processes control and visibility, optimising planning cycles using real time data, shortening of time duration of planning and fast adapting to changing regulations but most of the promises will hover around your capability to exploit the software using process discipline and providing right data set as the input to the software. For example, one of the CIOs shared that they deployed the best available solution for transportation management but still there was no improvement in on-time deliveries (in-fact it went down for first 3 months) or hardly any improvement in load optimization. After lot of drill down, they found that the sales team was not following any process for entering orders – means they used to keep on entering orders in the ERP but lot of these orders were not to be fulfilled ultimately. It means, there were a large number of cancellations in reality and these were not flowing to ERP and hence the transportation management solution was planning for those orders also which were not to be shipped. Due to this, the logistics team had to do lot of rework in re-planning after taking out the orders manually and the results of load optimization were also impacted. The sales team was adamant that they will not change their process just to meet process of the software and kept on working the same way. Normally, the CEOs will never bother much about the software and will always thing that it is the job of the IT Team to ensure the software works as per business needs and this organization was no different. Without looking at the reality, and not listening to the CIO, the CEO branded the software solution as useless and a liability. It is at this time, that the CIO had to escalate even beyond CEO and a consulting company was hired to really clear the mess.
After spending 3 months and consuming lot of organization’s resources and money, the consulting company gave the same recommendations and sales team had to change the process in such a way that they will cancel the orders which are actually cancelled by customers and rest of the orders which are not fulfilled even after 2 months, will be cancelled by ERP itself. The results after this change were humungous. Within 4 months, the on-time deliveries were improved by 14%, they were able to reduce number of planners by 20% and allocated them to other areas, cost per tonne got reduced between 10 – 15% and host of other non-tangible benefits were achieved. The software is same but a small tweak in process became a game changer for them.
It may not be the case with all of us but the point that came out of this story was software alone can do nothing – it will only provide you capabilities to do certain automations and bring visibility but ensuring that input going to the software is as good as the software, will bring the desired change.

Do you have a roadmap to kill your ERP or you are happily married to it?

If you were doing an IT Job in early and mid-1990s, you would remember the Euphoria around ERP systems. Almost every organization wanted to implement an ERP system so that they have an integrated view of their processes, business applications and financial data. Lot of organizations, consultancies as well as product companies benefitted during that phase of ERP implementations across the globe with US leading the way and Europe not far behind. Especially consulting organizations had a windfall of revenue just because they could package their services along-with Business Process Reengineering and ERP product implementation capabilities which included customization abilities too. Customization became a new tool to make money by consultants and the cost of customization and support for an ERP project started going through the roof sometimes hitting 5 times the size of implementation fees.
ERP has come full circle in last 20-25 years and realization in client organizations as well as ERP product organizations, that customization is not the right way to go, started bringing changes in the solution and the way it was used. ERPs now became liabilities instead of assets because of inabilities to peacefully upgrade or take advantage of a new functionality in product as some or other customization is blocking it to be used in some or other way. The product organizations started a new trend of cloud with leaders like Oracle and SAP leading the pack by introducing products like Fusion Applications or Line of Business SaaS respectively.   The new age is talking only about Cloud based ERPs (mainly Software as a Service Model) and the old guard is expected to give way. The ERP (on premise model) has started dying as all incremental applications have already started moving to Cloud which will be followed by the core business processes also making their way out of organization owned data centres.
Are you ready to KILL ERP?
If you are a services organization, it is highly likely that you already have a plan to kill existing ERP and move to cloud (do you?) but if you are a manufacturing company or a trading organization that deals with mainly products and assets, you still are waiting for others to take the plunge first. It is expected that there will be around 8-10 years difference in ERP life at services organizations and manufacturing organizations as ERPs traditionally have done a good job in mapping the processes and delivering results for a manufacturing company rather than a services company, but the end is near for sure.
The big questions are: Are you ready? What is your plan? Are you still struggling to fix business analytics reports based on ERP because of data integrity issues or have started thinking to move to state of the art best in breed applications on cloud that that have their own analytics capabilities?
Is it really the time to shed your love for existing ERP that you implemented, nurtured and supported all these years or it is time to move on and take on new challenges so that your organization can be early mover and can take a competitive advantage using new technology?