Do you see your ERP/Business Software as a cost or an investment?
Really think about the answer rather than giving the one you are expected to give. Now think about it in the context of you budget and plan.
I read a great quote from the Cella 2021 in-House Creative Report. “Technology is only as effective as your implementation” and it resonated with me.
I see all too many agencies treating their software as a cost that needs to be managed. But they should treat it as an investment that needs to be kept up to date and continues to deliver the benefits that it needs to.
I/we have spoken about this on several occasions before. The problem starts at the system selection stage. It is perpetuated throughout the implementation, and exasperated “Post-Implementation.”
None of these come naturally when it comes to agencies so let’s go through each of these in turn.
I wrote a couple of articles about this last year. You can find the first one here and the second one here
To sum up, the agency absolutely needs to put together a business case for implementing an ERP based on a set of requirements. The business case should clearly articulate the expected benefits of the system, both the financial and non-financial benefits.
Some examples of financial benefits are:
- Increased utilization – I wrote an article explaining the incremental savings benefit of increasing staff chargeability by 1%
- Increased job profitability which will lead to increased margin.
- Lower usage of freelancers to reduce third party costs
It’s important to include non-financial benefits. Many of the benefits of implementing the right system are intangible. For example:
- Better collaboration on projects leads to happier clients and staff. It may also improve profitability by reducing the number of revisions.
- Less stressed and overworked staff
- Better visibility of sales pipeline
- Better visibility of capacity requirements etc.
Without a business case, you do not have a clear picture of the benefits you are aiming to gain from the new system. More importantly, you do not know how much you can invest and still make it worthwhile.
Finally, without a business case, you have no idea if the new software has met the objectives. This means that you will, of course, see software as a cost to the business.
The implementation of a software solution has become increasingly problematic over the past 20 years.
I believe it’s partly because we now live in an ‘instant gratification’ world where everything should be delivered to us in a matter of hours (if not minutes).
Unfortunately, implementing an ERP does not work like that. It takes time and has a cost.
Referring back to the quote above, “technology is really only as good as its implementation” it surprises me that a business will make a major financial commitment to buy the software. And then skimp on the implementation costs!
That pretty much guarantees that the business will struggle to get the benefits that the system can deliver.
It also typically creates a bad feeling between the business and the software vendor as it’s very probable that the business needs the hours that the vendor took out of the quote and an argument ensues when that becomes obvious.
I understand that every business (and agencies are no exception) has financial pressures, but the cost of the implementation is just as important to the success of software as the software itself.
In an ideal world, you should take the total vendor quote and add at least a 20% contingency. If budget is a problem, then negotiate the rate NOT the number of hours.
If you think that’s fantasy, I once worked with a client that told the vendor to increase the hours AND told them that they would pay the top rate if they provided their best resources to guarantee the success of the project. They then asked for the CV’s of the team to make sure that’s what they got.
Far too many agencies do not close off an implementation project properly. They do not do a proper assessment of the success or failure of the project and check to see if the new software is delivering the expected benefits.
Obviously, this is impossible if there was no business case written in the first place.
But even agencies that go through the trouble of writing a business case rarely do this exercise. They are so desperate to get back to the day to day of running the agency, that they don’t check to see if they are getting the expected returns on their investment.
It’s therefore not that surprising that the owners/principals see their ERPs as a cost.
So, what can you do now?
To get the most out of your software, you need to treat it as an investment.
It’s not too late to put together a business case for your current software and assess what benefits it’s currently giving your agency. If these benefits do not exceed the costs, then you should ask why.
The chances are that you are not investing enough in getting the most out of it. That means being on the latest (or a recent) version and that everyone is trained to use it properly.
As your business evolves you should constantly review the system to see what new features it can benefit from.
If after all that, the benefits are not outweighing the costs then you should look for one that does.
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