9 Reasons to Retire Your "Homegrown" ERP Software Solution Before it's Too Late

Compared to a robust ERP system built by a well-established software provider, homegrown tends to be fragile and lacking in-depth support. And while a custom-built system may seem to offer control and flexibility, it may actually lock you into a sub-optimal solution.

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An Epicor® White Paper 9 Reasons to Retire Your “Homegrown” ERP Software Solution Before it’s Too Late 9 Reasons to Retire Your “Homegrown” ERP Software Solution Before it’s Too Late i Table of Contents Introduction ..............................................................................................1 Reason 1 ...................................................................................................2 Vulnerability and Isolation of Knowledge Reason 2 ...................................................................................................2 Immediacy and Breadth of Data Reason 3 ...................................................................................................3 Data Duplication and Discrepancies Reason 4 ...................................................................................................3 Lack of Testing Reason 5 ...................................................................................................4 Lack of Vision/New Advances Reason 6 ...................................................................................................5 Shortcomings in Systems Architecture Reason 7 ...................................................................................................5 Costlier Than You Think Reason 8 ...................................................................................................6 No Built-in Learning Management System Reason 9 ...................................................................................................7 Lack of Ability to Easily Integrate Conclusion ................................................................................................7 About Epicor .............................................................................................7 9 Reasons to Retire Your “Homegrown” ERP Software Solution Before it’s Too Late 1 Introduction In today’s complex business environment, it can be very challenging for in-house IT professionals to keep up with the pace of change necessary to sustain a competitive advantage. Whether the homegrown IT system you have seems “fine” for now, or your company has developed strong loyalty to a custom-built solution, these options cannot offer you the level of protection and security of an outside enterprise resource planning (ERP) solution. ERP system installation is often thought of as the most risky, expensive, and disruptive investment a distributor can make in their business. However, you must also consider the inherent risks of a homegrown solution. When you argue against a potential system switch with costs, pain, and efficiency concerns, you should take a look at them as they exist in your current system. Compared to a robust ERP system built by a well-established software provider, homegrown tends to be fragile and lacking in-depth support. And while a custom-built system may seem to offer control and flexibility, it may actually lock you into a sub-optimal solution. Some basic questions to consider include: XX Is software development really your core competency? XX Can you spare the programming resources? XX Do you have the years and the capital to develop, test, and finetune your application? XX What happens if you lose the precious few resources that can support and maintain your older technology? XX What is your visibility into emerging technologies and industry best practices that other distributors are using? XX Is your system truly integrating information and processes from all functional divisions of your organization, or do you have disparate data sources “running” your business? Cost-effective ERP solutions meet distribution organizations’ demands by leveraging existing applications and technologies, while taking the burden off your internal development resources. For all of these reasons, it is in your best interest to partner with a leading ERP provider, in order to advance your operations to the next level of efficiency. To help answer the above questions and explain the realities of an ERP system, we have compiled the top nine reasons to weigh the advantages of an outside ERP over your homegrown system. 9 Reasons to Retire Your “Homegrown” ERP Software Solution Before it’s Too Late Reason 1 Vulnerability and isolation of knowledge Using a homegrown solution can raise numerous challenges. For example, what happens if your IT director is no longer with the company? Or the programmers who developed the original application move on to other projects, other jobs, or retirement? You may be coding in yesterday’s technology, and will find it hard to replace resources who are familiar with and competent in those environments. Who will take over development of the current system, and how will they get up to speed on the application? With only a limited staff of custom programmers, it’s unlikely that you are taking full advantage of the ideas and innovations of other leading distributors or industry consultants. You may never be able to develop capabilities at the rate of the rest of the industry, and competitors in your market will pass you. Items to consider What are you planning to do about areas of the system that were coded by people who left the company years ago? Typically, there are certain areas that everyone is afraid to touch because they are not readily understandable and not coded to standards. If you try to remodel those, will they ever really work the right way? Reason 2 Immediacy and breadth of data Even if you were to successfully reface your homegrown system to a modern graphical user interface and port to a relational database, you will still be technically challenged by the core foundation of a custom system’s millions of lines of business code. Moreover, a homegrown solution is unlikely to include some of the advanced data capabilities of modern ERP systems: XX Batch System vs. Real-Time—older custom systems are usually updated via batches (daily or monthly), and it is extremely difficult to rewrite all the logic into a 100 percent real-time system. Batch systems also typically have lengthy day-end, month-end, and year- end processes. XX Limited History—homegrown systems often have limited transactional history, as the data is purged every few months. This forces you to refer back to paper reports or information that is stored in a separate document imaging system. XX Limited or No Drill-Downs—older systems have limited drill-down capabilities where you can view summary information including paid A/R invoices, POs, A/P invoices, and GL entries. XX User-Friendly Interface—homegrown systems typically lack the ability for end users to customize the interface and information to their specific business needs, make them more efficient, and view data that is most relevant to their job function. Items to consider Lack of rapid access to required information also may require extra hands to manually track down the data, causing you to overstaff your customer service department. 2 9 Reasons to Retire Your “Homegrown” ERP Software Solution Before it’s Too Late Reason 3 Data duplication and discrepancies It can be quite challenging for company employees to get the data they need directly from a homegrown solution. If you plan to port data on a nightly basis to a data warehouse on an open database like Microsoft® SQL Server® for reporting, there may be data discrepancies between your legacy system and the data warehouse. You should ask yourself, if your reporting is going to be done off a SQL database, why not have a core business system that runs off SQL, so there doesn’t have to be a translation layer between two separate data structures? Refaced custom systems usually have areas of the system that don’t fully integrate with other areas, creating inefficiencies by doing duplicate work and creating disparate (and possibly conflicting) data sources. These areas can include such important functions as direct billing and A/R cash receipts. Items to consider Where will the data reside after a remodel? If not in a SQL-based database, you may always have compatibility problems with off-the-shelf packages such as Office®, MapPoint®, BI, CRM, etc. If you have to struggle to pull data ad hoc, your decision-making may be hampered by a lack of information. Reason 4 Lack of testing Homegrown systems clearly are not receiving the benefits of other leading distributors’ knowledge and experiences. On the other hand, an ERP software company has to sell its solution to thousands of customers and end users. This means there are many more end users involved in the beta testing and ensuring the software does what it needs to do before it is released. What better way to instill confidence in your system than to have a dedicated QA team and hundreds of other users testing it to make sure it’s “rock solid”? How many people test your internally developed applications, how much industry experience do they have, and how many meaningful scenarios can they come up with? Items to consider The wide-ranging testing in real-life scenarios by leading ERP companies helps bring best practices to bear. You may have coded a process into your system because that was the way it had always been done at your business, but there may be a better process that you are missing (and others are using, giving them an advantage). Considering the interdependencies of an ERP solution and the global nature of many businesses today, who is best prepared to ensure that the forecasting logic is correct, for example, or that European accounting rules are followed? If you have to struggle to pull data ad hoc, your decision- making may be hampered by a lack of information. 3 9 Reasons to Retire Your “Homegrown” ERP Software Solution Before it’s Too Late Reason 5 Lack of vision/new advances Up until the year 2000, it was fairly common for distributors to write their own business systems, as it was believed this provided a competitive edge. Now, however, technology is evolving at an exponential pace, making it nearly impossible for small IT shops to keep up with the changes in solutions that a business needs to remain competitive. A distributor with an in-house IT staff for its custom system is actually at a competitive disadvantage today. Best-selling author Geoffrey Moore’s book, Dealing with Darwin, outlines a blueprint for sustaining a competitive advantage. The key principle is to focus on what is core to your business and provides differentiation, and outsource context to someone who is better at that than you. The key question is, “Should we be in the software development business when our core competency is as a wholesale distributor?” Items to consider XX The critical problem is vision. Effective systems development requires a single vision translated into architecture. But instead of beginning with a vision, custom IT shops often begin with bullet points or a list of different goals and expectations. XX No matter what your IT department tells you, they are not a software company and cannot possibly operate like a best-in-class one. There just aren’t enough great programmers to meet the demands within the distribution industry. XX Software companies are in the business of not only developing their software, but also making sure their customers are happy, and staying on top of new trends and advances that can benefit them. 4 9 Reasons to Retire Your “Homegrown” ERP Software Solution Before it’s Too Late Reason 6 Shortcomings in systems architecture that lead to workarounds and patches based on “tribal knowledge” In most cases, distribution employees want systems to meet their immediate needs, and they want delivery “yesterday, at the latest.” When IT doesn’t deliver, employees are apt to create various workarounds, causing the company to lose the economies of scale that can be achieved by having everyone adopt standard operating procedures. A major concern with a homegrown solution is that custom IT shops don’t understand systems architecture—the ideas that front, middle, and back offices have different functions and different requirements. A custom IT system, for example, might have good front-office analytics running in real time, but may not be able to perform credit risk management because the middle and back offices use batch processing. After all, risk management requires linking current order entry inputs with data from legacy back- office systems to provide up-to-date exposure information. Fixing these shortcomings inevitably leads to patches, add-ons, and workarounds. Equally disastrous is asking each employee what they want from a system without having a method to cut the project down to the essentials. “Companies fall into the ‘toy store syndrome,’” explains a consultant. “Everyone wants something, so they decide to write specs.” XX TD Bank Group reportedly spent $4–5 million by first asking everyone for a wish list. It quickly had a massive list, and three years later, there was still no software to show for its ambitious plans. Reason 7 Maintaining your homegrown solution may be costlier than you think While on the surface, remaining on a homegrown system may appear to be the least risky choice, there are many underlying challenges and trade-offs associated with your current custom system environment—and there is often a price tag attached. In-house development can be much more costly than it appears—far more so than partnering with a leading distribution management system. Add up the salaries of your development team, the downtime in user departments during all phases of development, and the opportunity cost of not putting developers on other worthy projects that would propel your business forward. The time it requires to extract meaningful data for executive analysis out of your database must also be included as a cost consideration. The maintenance of custom applications is time-intensive, slow, and fraught with undocumented functions—and that’s just for normal operations. Don’t forget the cost of downtime when outages occur. The complexity of today’s computing environments only magnifies the difficulties and expense of implementing and maintaining these custom systems. The complexity of today’s computing environments only magnifies the difficulties and expense of implementing and maintaining these custom systems. 5 9 Reasons to Retire Your “Homegrown” ERP Software Solution Before it’s Too Late Reason 8 No built-in learning management system to maximize employee adoption and utilization The average end user’s utilization of an in-house system is typically lower than on a standardized ERP, due to most of the inner workings of the system being “tribal knowledge,” as noted above. Distributors typically don’t hire professional documentarians, so they have limited online help screens. They also rarely have comprehensive user manuals or documentation for end users to easily understand how the programs and forecasting logic work. When people don’t understand the system, they don’t use it as frequently or efficiently. Items to consider The focus of homegrown solutions is often on the features and not on best business process flows, so they usually don’t have standard operating procedures. Your old system may be familiar to your longterm employees, but it is likely to be quite foreign to new hires raised on Microsoft Windows® and the Internet. How will you be able to recruit good talent if potential employees don’t want to work in a customer built environment, but would rather access industry-leading tools and technology that will enable them to perform their jobs better? Homegrown systems typically don’t have robust learning management systems to coordinate employees’ learning; e.g., by setting up training agendas with due dates, recording web-based training classes to be taken on demand, or setting up tests to certify employees’ understanding of various areas of the system. All of these can maximize employee adoption and utilization of the IT system. 6 About Epicor Epicor Software Corporation drives business growth. We provide flexible, industry-specific software that is designed around the needs of our manufacturing, distribution, retail, and service industry customers. More than 40 years of experience with our customers’ unique business processes and operational requirements is built into every solution—in the cloud, hosted, or on premises. With a deep understanding of your industry, Epicor solutions spur growth while managing complexity. The result is powerful solutions that free your resources so you can grow your business. For more information, connect with Epicor or visit www.epicor.com. 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All rights reserved. +1.800.776.7438 info@epicor.com www.epicor.com 9 Reasons to Retire Your “Homegrown” ERP Software Solution Before it’s Too Late Reason 9 Lack of ability to easily integrate with other leading technology solutions Your homegrown solution may not “play well with others.” In particular, if it cannot integrate with an eCommerce storefront, you may be unable to offer customer-specific pricing and pull other ERP data into your online store without a lot of duplicate data entry or custom development work. Web storefront adoption is projected to explode in distribution, as 98 percent of retailers have a strong eCommerce presence, versus just 18 percent of distributors. Leading distributors are investing heavily in eCommerce, as the younger generation expects to be able to conduct all business in the same way they do Internet banking and shopping online. Conclusion While your homegrown system may seem comfortable and familiar, chances are you are missing out on advanced functionality that could greatly improve your business operations, employee productivity, and bottom-line profitability. A leading ERP solution that is focused on distribution will provide a modern technology environment now, while also offering forward-looking business applications such as integrated eCommerce, business intelligence, and a comprehensive inventory forecasting module. You owe it to your business to investigate options beyond the status quo. You owe it to your business to investigate options beyond the status quo.