5 Reasons Why You Must Consolidate Disparate Systems with ERP Software
How many separate software applications do you use across your entire business? 10? 20? 50? Your gut might say those numbers seem high, but when you consider the tools used by every team in your organization, they add up quickly.
This is particularly true for small and mid-size businesses. You start off simple, with a basic accounting system and a bunch of spreadsheets. Then, slowly over time, you add new systems into the mix as the need arises. First a CRM (Customer Relationship Management) software, then an inventory system, perhaps a project management tool, and the list goes on. Before you know it, you’re running the business with 10 or 15 disparate systems – and none of them are integrated.
Many companies operate this way for years. You add workarounds to your systems. You might even hire more people to handle the highly manual processes. You can usually manage through the pain for a while. But there comes a time when you have to ask: How are disparate systems impacting my business?
In short, the impact is significant (and costly). But let’s dig into the five major ways your disparate systems are crippling efficiency and costing you money.
1. You’re losing time to manual processes
A certain amount of manual effort is unavoidable – you can’t automate everything. But there’s a lot that you can do to free up your team to focus on higher value work. When your team is getting bogged down by manual effort, it typically impacts the business in one of three ways:
Managing data – Exporting data from one system and importing into another, or worse, manually re-entering the same data in multiple systems is not only time consuming but prone to errors.
Delivering to customers – Simply finding information takes too much time. You’d be surprised how much this can hold up the work, delaying delivery to your customers.
Compiling reports – When your data is stored in separate systems, it can take days – or even weeks – to pull data, reconcile it and compile into usable reports you need to run the business.
2. Data entry errors make your data unreliable
The average benchmark for manual data entry is a 1% error rate. That seems like a low percentage, until you start adding up the manual entries into your system each day. Then consider how many times that data is moved from one system to another. The impact of that 1% starts to multiply.
Now consider this scenario – you have the same data in two different systems, but the data doesn’t match. What’s the cost to dig into that discrepancy and figure out which version of the data is correct? It might be tough to put an exact number to it, but the 1-10-100 rule illustrates the cost of quality quite well.
Prevention: It costs $1 to verify the accuracy of data as you enter it.
Correction: It costs $10 to correct or clean up data inaccuracies after the fact.
Failure: It costs $100 (or more) if you do nothing to correct the data.
Obviously, the ideal is to prevent data inaccuracy with proper processes, systems and training. But this is very difficult to achieve when you’re running disparate systems. There are simply too many data entry points and opportunities for human error.
3. You lack access to information
When we talk with SMEs looking to upgrade to an ERP software solution, one of the most common complaints is that they lack reporting capabilities. As we’ve touched on, quality reporting is a challenge when you’re pulling data from multiple systems and trying to combine them into something that makes sense. Quite often, by the time you have the report in hand, the information is already stale, so you’re making decisions based on old data. Or you take every report with a grain of salt, because you know there are significant inaccuracies in your data. Any way you look at it, running disparate systems will always put you at a disadvantage when it comes to getting true visibility into your business. That limits your ability to make timely, informed decisions and often leaves you managing by gut instinct.
4. Your IT landscape is increasingly complex to manage
You might look at the cost of an ERP system and think it’s too expensive. But running a collection of disparate systems can be surprisingly costly. First, there’s the cost of the systems themselves – whether you’re paying a monthly subscription, or you’ve purchased perpetual licenses, there’s a cost to use each solution. You may also have maintenance fees associated with perpetual licenses to stay up to date with the latest features.
Things get significantly more complex if you have integrations between any of the tools, as you have to keep upgrades and maintenance cycles in sync to ensure your integrations don’t break. With every tool or integration you add to the mix, the complexity of your complete ‘solution’ increases. You’ll need more sophisticated IT resources to properly manage and maintain this, whether you hire them internally or outsource to an IT services company.
5. Training staff on multiple systems is cumbersome
Onboarding new employees and getting them fully up-to-speed takes time. But that time can increase ten-fold when you have a complex network of systems to train them on. Because you use different systems for different tasks, your processes are more complex. Naturally, it will take longer for new employees to wrap their head around the processes, get used to each user interface and understand where to go for information. Then consider the impact on data accuracy. In most cases, you’ll see a brief spike in data errors with a new employee, as they understand their role and your processes. But when you already have a high error rate, combined with a lengthy onboarding time, the impact multiplies quickly.
If you’re feeling any of this pain, these challenges aren’t new to you. As a leading ERP partner, helping small and mid-size companies overcome these challenges is what we do. What we’ve talked about here will reinforce what you already know – you’ve outgrown your stack of disconnected systems. It’s time to upgrade to an ERP system, simplify your business and drive growth.