The Dangers of Relying on a Homegrown ERP System

Today's demands on distributors can spread independent ones thin in critical areas while making it critical for these businesses to have a modern ERP system. Homegrown ERP may give the user a sense of total control, but it also brings a number of challenges and dangers compared to utilizing a provider.

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The Dangers of Relying on a Homegrown ERP System Epicor White Paper The Dangers of Relying on a Homegrown ERP System 1 Imagine being able to, yourself, produce everything you consume, fix your vehicles, accurately diagnose and treat any medical condition you develop. Compared to using grocery stores, auto repair shops, and doctors, it would likely save you a boatload of cash and time to seek out those services. It would be a lot more labor for you, but would allow you to live a more organic life. Unfortunately, being that organic is nearly impossible in today’s society unless you are a jack-of- all-trades living off the grid. Businesses also put a premium on achieving organic growth. Ideally, most of them would self- sustain in all aspects of their operation—from hiring, payroll, accounting, and software down to the Internet they use and changing out their water coolers. However that has been unrealistic for decades now. Businesses utilize service providers to handle all those operations and more, allowing them to focus instead more on what matters most—the customer. In the world of B2B distribution, very large businesses grab most of the market headlines. However, the vast majority of the market is still comprised independent firms, many of them family-owned. These types of businesses are often run with legacy operations, are set in their ways, and have a hard time letting an outside entity handle any part of the business. Along with perhaps a native eCommerce platform, these distributors often have an ERP system they built from the ground up. They may have done so as a means to have total control over such an important piece of software that essentially runs the business, and/or as a means to save on what it would otherwise cost to buy an ERP provider’s platform. In theory, having an organic ERP system sounds ideal—but just as someone is typically better off having their car serviced by a mechanic rather than try fixing it themselves, in many cases a distributor is better off leaving such a crucial business feature as ERP to the experts who specialize in it. Today’s demands on distributors can spread independent ones thin in critical areas while making it critical for these businesses to have a modern ERP system. Homegrown ERP may give the user a sense of total control, but it also brings a number of challenges and dangers compared to utilizing a provider. Here, we’ll discuss these dangers and how leading ERP provider platforms are built to handle them. It’s Not What You Are Best At Simply put, distributors are not software companies. You are providers of products and services to customers. That has been your bread and butter since the industrial revolution—not building an extensive data logging system that can run the business. An ERP system can take a distributor more than a year to build from scratch, eating up countless hours of labor, finances, and other resources that could otherwise be put toward core competencies of selling and serving customers. Lack of Staff and Support While distributor office employees have become increasingly tech-savvy over the years, the only staff typically qualified to handle ERP design, installation, and/or troubleshooting issues are IT personnel. Even if such a project of building an ERP system is delegated to a company’s IT department, that’s going to take that team away from their core role of helping in other operations. The Dangers of Relying on a Homegrown ERP System 2 Compounding this is that, for a homegrown system, the only ones in the company who can respond to an ERP problem are typically the individuals who built it. They are the support team. What if that team needs support? What if the lead person with all the answers is out of the office or on vacation? What if they leave the company? Relying on your own IT staff to be your troubleshooting team can quickly lead to frustrations and headaches. On the other hand, an ERP vendor has teams of support personnel who are prepared to handle any issues that arise from using their platform. They are only an email or phone call away, and have seen and solved virtually every problem that could pop up. Whereas employees using in-house ERP may be well versed in the ins and outs of the system, it can be a steep learning curve for new hires, and the only ones who can teach them the system are fellow users or the IT staff. Compare this to leading ERP vendors, who typically have extensive robust learning management systems, help screens, training classes, and certification tests to get new employees or users on board fast and efficiently. Quality Control Going hand-in-hand with the support aspect of ERP is the painstaking process of making sure an ERP system is bug-free and 100 percent operational before it goes live. Unless your IT team is extensive, the testing and re-testing process may still not find hidden problems or oversights made in the architectural stage. Launching a homegrown system only to find out it doesn’t do one or more tasks you expected would not only be disappointing, but may quickly require maintenance and more resources to resolve. Leading ERP providers market their solutions to thousands of customers and end users, and their reputation depends on having a quality product. This ensures that many ERP professionals have thoroughly tested to make sure the software performs as expected. Limited Data and Information A modern ERP system pulls data from various locations—purchase orders from different sources (in store, over the phone, emailed, eCommerce), warehousing, shipping, and staffing. Often, data pulled by a homegrown ERP system does not integrate or format well with other applications. This can result in data silos that detract from processes that need data from several of those sources, and duplicate data that may be inaccurate or incomplete. Worse yet, siloed or duplicate data requires additional storage than data that flows seamlessly between applications. Another downside to in-house ERP data is that it is often not in real time or only accessible at the office. Relying on this leaves a company far less agile and slower to respond to changes in market conditions or more sudden changes that an individual customer may endure. Modern ERP systems from leading providers have evolved to the cloud over the past decade with software that allows users to view and input data anytime, anywhere, and from multiple devices. Limited Potential Homegrown ERP tends to be tailored to that business’ exact role and end markets—and should be—but with today’s constantly evolving customer buying habits, what happens when that business’ role changes? What if the business grows faster than expected? If a distributor makes an acquisition or divestment, adds or removes a product/ service category, they need their ERP to keep up. These kinds of changes can require bolt- on additions to an in-house ERP platform and lead to inconsistencies across the system. Modern ERP software from leading providers adapts with the user, and offers applications, widgets, and functionality that the provider can seamlessly add. Additionally, certain ERP providers allow distributors to add only as much ERP software as they need, rather than an all-or-nothing solution. Maybe a distributor wants an ERP system only for their purchase order information but not for warehousing. That’s certainly an option with modern ERP. Today’s top ERP providers also help migrate distributors from the provider’s on-premises software to their cloud offering. Underestimated Costs One of the main reasons some distributors chose to go with an in-house ERP platform is the perceived notion that it would cost less than going through a provider. The initial homegrown start-up cost may in fact be a cheaper option, but is misleading when not factoring in the amount of time and effort used to build and install it. Then there are the maintenance costs. Since in-house ERP typically relies on historical data and has limited storage capacity, the system inevitably will need to be upgraded—costing more time, effort, and raw dollars. That’s not even factoring in the resources spent to solve unexpected issues. Meanwhile, the distributor could have been putting those resources toward growing the business and letting the provider handle the ERP side of things. The contents of this document are for informational purposes only and are subject to change without notice. Epicor Software Corporation makes no guarantee, representations, or warranties with regard to the enclosed information and specifically disclaims, to the full extent of the law, any applicable implied warranties, such as fitness for a particular purpose, merchantability, satisfactory quality, or reasonable skill and care. This document and its contents, including the viewpoints, dates, and functional content expressed herein are believed to be accurate as of its date of publication, October 2018. The results represented in this testimonial may be unique to the particular user as each user’s experience will vary. The usage of any Epicor software shall be pursuant to the applicable end user license agreement, and the performance of any consulting services by Epicor personnel shall be pursuant to applicable standard services terms and conditions. Usage of the solution(s) described in this document with other Epicor software or third-party products may require the purchase of licenses for such other products. Epicor and the Epicor logo are registered trademarks or trademarks of Epicor Software Corporation in the United States, certain other countries and/or the EU. All other trademarks mentioned are the property of their respective owners. Copyright © 2018 Epicor Software Corporation. All rights reserved. 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 45 years of experience with our customers’ unique business processes and operational requirements is built into every solution—in the cloud 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 Contact us today [email protected] About This Report The information in this report was originally researched and produced by Industrial Distribution in conjunction with Epicor. Statistical data was researched and compiled by Advantage Business Marketing in August 2018. The Dangers of Relying on a Homegrown ERP System Conclusion As noted in our introduction, it is understandable why a company would want their ERP system to be done in-house as opposed to relying on an outside source. For some companies, it probably fits their business model or is the only option. However, for today’s distribution and other manufacturing companies that want to stay or become modern and more competitive, utilizing the extensive resources of a leading ERP provider is the way to go. It is less costly, involves fewer headaches, and requires significantly less labor on the company’s end. Best yet, it lets distributors stay focused on what is most important— their customers.