Enterprise Resource Planning systems. That’s the WIKIPEDIA expansion of the ERP acronym. For those who haven’t worked with these solutions (really, systems is a bit of an oversimplification), it may look like it’s a pretty simple thing. But like many things IT, it is anything but simple.

Pausing the actual process to get to a point of an implemented ERP solution (don’t worry, I’ll get there), the actual purposes these solutions are meant to address are indeed complex. Using my own oversimplification, consider having one integrated solution that looks at a business from the onset of a transaction (call, order, etc.) to the actual delivery of an item (widget, car, beverage). That’s an ERP’s purpose in life. It tracks the transaction, reports on it, makes complex decisions about how to handle exceptions, interacts with suppliers, and in an ideal world, helps bring efficiencies through improved visibility. Yeah, it’s pretty cool stuff.

And, yet, I would wager that the majority of companies thinking about implementing an ERP do not fully appreciate the complexities involved. There are a vast number of IT consulting firms that are quite happy to help a company–ANY company–implement an ERP solution. Like anything consulting, there is a pretty wide span of competency. The better consulting firms will scare the heck out of prospective customers. (No, I’m not kidding. Well, not entirely.) They will explain the implementation path in great detail, and will leave the prospective client with a lot of things to think about. The customer will know that their business will feel pain. On the other end of the scale, there are the ERP consulting firms (or practices within a consulting firm) that will present themselves as experts, will dazzle the customer with beautiful slides and buzzwords, and will present a team that implements these solutions in their sleep. “Not to worry. We’re the best in our field, we have great customer success stories, and we believe your implementation is very straightforward.” (Really?!) Which would you choose? Well, probably the second scenario. Most of us want to believe that everything is going to go well, and that we’re in good hands.

SMB…another acronym?!

Now let me throw in a second wrench to this article: SMBs. This isn’t a technical acronym, for a change. It simply means “small/medium sized businesses.” Why is this a wrench? Well, small and medium sized businesses are the least prepared for an ERP implementation. If they do indeed require an ERP solution (I’ll cover this in a bit, too.), they will likely fall in to a pretty standard profile as an SMB:

  • They’ve grown organically over the years, or they’ve grown through small acquisitions.
  • As they grew, their focus wasn’t on creating and documenting processes, their focus was on customers, product, and growth management. Simply, they needed to grow their business profitably.
  • The money went to where the need was greatest to achieve that growth. That most likely wasn’t an investment in finding efficiencies in moving through various internal processes/teams. (Caveat: They likely did this reactively, however, to keep customers happy, or keep money from walking out the door through waste.)
  • They have small teams that wear many hats. Consequently, there is a lot of “institutional knowledge” that is maintained in the mind of one individual. (We call this a single point of failure in IT terms, by the way.)
  • They’ve generally accepted that their processes work for where they are. But, at the same time, they grudgingly accept that they might not work as their growth continues–or this business transforms.

I could add several more bullets above, but the ones I’ve noted are there for a very specific purpose. I promise, I’m going somewhere with this.

So, the stage is set. On one hand, we have a very complex solution. On the other hand, we have a resource-starved small/medium sized business. The two are about to wed. Uh-oh.

“And, who are you?”

Before I get further, let me answer a pretty logical question: What makes me an expert? Nothing. Nada. I’m not an expert by any means. In fact, I’d argue that anyone claiming to be an expert would have to limit that statement pretty substantially in this realm. What I base this article on is a substantial amount of research (literally, thousands of hours), my own experiences in SMBs where ERP solutions were implemented, and other SMBs that realized they weren’t ready. I’ve seen, and experienced, successes and failures.

I’ve also worked with more consulting firms than I can remember. At one point or another in my own career, I’ve worked with all of the bigger U.S.-based consulting firms (Accenture, IBM, E&Y, Capgemini, HP), and a couple of the bigger India-based consulting firms (Wipro, Infosys, Cognizant). I’ve also worked with the solution providers’ own consulting “arms,” (Oracle, Microsoft, etc.)

I’ve also been directly responsible for, or involved with (at various levels of exposure) ERP evaluations and/or implementations that utilized the following vendors’ solutions:

  • Microsoft
  • NetSuite
  • Oracle
  • SAP

“We need to implement an ERP system.”

Remember the two ranges of consulting firms noted above? This is an excellent opportunity to note the difference between the two. Again. The better consulting firm is going to challenge that thought. “Why do you feel you need an ERP system?” “Have you considered the costs and benefits?” “What are the issues you’re facing today?” “What do you anticipate the issues will be if you do not implement an ERP solution?”

The less optimal consulting firm is going to be focused on one thing, and it’s probably not the prospective client (think: billable hours). This firm will not spend a great deal of time on determining the need, rather, their questions will be tied to understanding if there is enough to fund the work going forward. Sadly, I’m not kidding about this. I know of more than one example where it was very clear that the only qualification the company was interested in finding was whether or not the client could afford to pay for the licenses and fees over the very long, arduous process. I do want to say that these firms are not the rule, but they’re out there.

I recently received a call from a friend seeking advice. He works at a midsize company that is using QuickBooks, and they’re ready to move to an ERP solution. I asked what else was driving the assertion that they were in need of an ERP solution. His answer wasn’t very reassuring: “Well, our CFO doesn’t think that what we have will continue to support us well.”

Without knowing any detail of my friend’s company, but trusting my friend, I can imagine that they are indeed outgrowing their current accounting system. What I was failing to understand, however, is how a leap was made from needing a more robust and scalable accounting system to needing an ERP solution. And this, I’m afraid, is one of the most common things I’ve either seen, read about, or heard from colleagues: the equivalent of a single progression step from a two-seat airplane to a Boeing 747. Both very capable for their purposes, but very different to fly.

Stark Reality

So, why an article about SMBs and ERPs? Well, my belief is that there is a very small subset of small/medium sized businesses that can justify a full ERP solution, and a minuscule number that are perfectly prepared for an implementation. More plainly, for the subset of SMBs that truly would benefit (note those two words in sequence, as that is the real test of whether a business should have an ERP solution) from an ERP, most of them are swimming upstream. Here are some things that I’ve learned throughout the years:

  • ERP solutions are not cheap. For an onsite solution, and a mid-sized company, don’t count on spending anything less than $1 million. If a consultant is telling you that they can implement an ERP system for less than $1 million, inclusive of licenses and equipment, they’re lying. Really. Walk away. It’s just not going to happen. Even IF they come back with fancy spreadsheets showing that it will be less than that, focus on the overall consulting costs. Even if they give you a “fixed bid” proposal, you can pretty much count on a lot of “out of scope” discoveries throughout the process that will explode their costs. If it’s an online solution, it is certainly a lower cost of entry. (No equipment to buy, no up-front licenses to buy.) But, the long-term “subscription” costs can be substantial. Oh, and for those companies that love to focus on their EBITDA, the majority of the costs are expense items…that is, no benefit of depreciation. (I should say I’m not giving tax advice by the way.)
  • ERP implementations are not fast. The fastest I’ve ever seen a solution implemented was seven months. And that was for a company that had an existing ERP solution, and was moving to a cloud-based (offsite) solution. The more complex the company, the longer the implementation. I cannot give an average, as it really is variable…and very tied to specifics of each company. Eighteen to twenty-four months would be a rough estimate for an on-premise solution.
  • ERP implementations have a huge impact (negative) on productivity, during the implementation, and for about eight months after. During the implementation, count on every business unit that will interact (either directly, or indirectly) with the ERP solution losing key people for the purpose of documenting the existing state of their areas (processes, pain points, etc.). Further, training toward the end of the implementation project will consume people’s time. After implementation, anyone that is “touched” by the solution will likely need to change how they work, and how they interact. Many will be frustrated; it’s hard to do something a specific way for years, only to have it changed by a solution that is put in place to “improve” the workflow.
  • ERP solutions are never “implement and forget.” This is a huge mistake that many SMBs make. First, they go in with the thought that the implementation of the system will solve all of their business issues. Wrong. If they’re done right, they will expose other business issues that weren’t visible in the past. And, yes, those most be handled. Second, unless a business is going to have zero changes for the rest of their existence, their “tweaking” of the ERP solution will never end. As the business changes, the ERP must change. It wouldn’t really be smart to spend a huge chunk of change on a solution, only to let it fall behind the business. And, finally, nobody will ever be happy with reports. Ever. Even if the reports are custom-made during the implementation, there will always be people who hate them. The reports will either have too much information, not enough information, irrelevant information, or the “wrong interpretation” of the business. An individual in one area of the business will dispute data in a report that another area of the business swears is absolutely perfect. Yeah. Fun stuff.
  • ERP solutions require people. Forever…or as long as the ERP solution is utilized. Onsite, or offsite, successful ERP solutions need, at a minimum, a very strong business analyst…someone who can understand the business, understand the pain points, and find solutions for those pain points. (Either by themselves, or by working with more technically-inclined people who are very familiar with the ERP solution’s capabilities.)
  • ERP solutions require upgrades. For onsite solutions, hardware and software will go through upgrades. Don’t ignore this cost on the front end of the project. They can be substantial. Even “vanilla” implementations inevitably require a bunch of work during a software upgrade. Hardware upgrades are a bit easier, but also costly. Offsite (cloud) solutions are less bothersome, but there will still be potential issues that can impact a business. If new functionality is added, for example, and it is relevant to the business, people need to learn that functionality–and then how to leverage it appropriately. And, for both onsite and offsite solutions, changes in the software will likely mean more user training/retraining.
  • It is very rare to find a true cost of ownership at the front end of an ERP project. The focus is usually software license cost, equipment cost, consulting costs, and other “hard” costs. Rarely will one see the lost productivity cost detailed. Why? It’s hard to quantify at times. But, if the plans are well documented, and they show what resources will be needed, and for how long, it can be calculated. And it should.


Small and medium sized businesses need to be especially careful with ERP selections, if in fact they need them at all. Multibillion dollar companies likely have large teams, and/or budgets, that can buy a pretty successful ERP implementation. (Though, there are many stories about companies of that size that have had disastrous results.) SMBs usually do not have the luxury of large teams, large budgets, and existing documentation showing processes and workflows. Further, since SMBs generally have smaller teams. the “people with the most intimate knowledge of key areas (subject matter experts)” are the same people who will see their time significantly allocated to an ERP implementation. This is an important consideration. It’s a zero-sum game. If those people are critical to the ongoing operation of a company, something needs to be done to accommodate for the time allocation. Staff augmentation, an elongated implementation period (which generally means more cost), or a staged implementation (which also means more cost), are some solutions. I know it sounds like common sense, but some miss this as well: try to do the most labor intensive portions of an ERP implementation during the slower times of a business’s cycle.

Most importantly, it is critical to ensure that the selected consulting firm has the client’s best interests at heart. And that starts at the front-end of the process. If it seems that the consulting firm is spending less time on validating the need for an ERP solution (or validating the size of the ERP solution needed), and more time asking about budget and time, beware.