How many of us have had an underwhelming experience with a new ERP system, only to find ourselves wishing we had instead upgraded and enhanced the “old” system?
New ERP systems have the allure of allegedly delivering one-stop solutions and free flow of data and reporting. While this digital narcotic is enticing, we believe that, for a private equity fund with a 3-7-year exit horizon, the bar for full ERP implementation should be high – very high.
According to Panorama Consulting Solutions, “The #1 reason for selecting a new ERP system was to replace the old system. While this isn’t necessarily a bad thing, it shows that we see too many companies replacing systems because they [think they] have to – not because they want to pursue a larger business transformation.”
A practical alternative: Supplementing an existing system with today’s third-party reporting/data tools, combined with savvy FP&A personnel and processes, enable practical organizations to get what they really want from their current systems — operational, actionable management information and visibility — rather than ripping out existing systems and putting in a new ERP product to increase visibility into business performance.
Investors contemplating the installation of a new ERP solution should instead consider the following value points of third-party reporting/data tool overlays and upgrades to FP&A capabilities:
- Shorter time frame (4-8 months)
- Lower investment risk
- Overall team familiarity – company personnel processing transactions use the system they know
- Significantly less capital investment
- Executive team focused on value creation activity
Further noted, Kyle Ludwig, CMF Principal – Strategic FP&A, “Enhancing the organization’s production of timely, actionable information through existing reporting tools and upgraded processes should be the default position. For private equity funds with shorter investment time frames, the return hurdle for a new ERP solution should be very high.”