Focus over the last several years in tech has been on advanced technologies. A tightening financial market may drive a move back to the basics. Here’s how tech leaders can prepare.
The economic news as of late has been rather gloomy, with central banks raising interest rates, corporate CEOs predicting a recession and digital currencies and financial markets gyrating wildly. While no one can predict financial markets and economic conditions with consistent certainty, the days of “cheap money” and a focus on growth and innovation are being tempered.
A shifting economy and lingering effects from the pandemic have triggered newfound interest in old-fashioned enterprise systems. Today’s tech leaders might regard Enterprise Resource Planning software and tools like SAP, Oracle, Microsoft Dynamics, NetSuite and others as digital relics. However, at many companies, these systems serve as critical barometers of company performance, and they provide both a measuring stick and a means to control costs in areas like the supply chain and accounts payable.
Is it time for belt-tightening?
Depending on your organization, tech spending may still be charging ahead with little concern about economic conditions. At larger organizations, annual budgets that were locked in during rapid growth may still be at play, and the economy in the U.S. remains in a strange situation where markets are faltering but unemployment remains at historical lows as wages continue to rise.
However, pervasive inflation is creating economic headwinds and, if nothing else, forcing companies to manage and account for prices that are fluctuating weekly rather than predictably rising a few basis points on an annual basis.
If you haven’t received a request already, your colleagues in the C-Suite are likely increasingly concerned with core areas of the business and managing the costs of items — from raw materials to office supplies and end-user technology.
ERP software generally covers these core areas of the supply chain, receivables, accounts payable, order management and consolidated financial reporting. Suppose your organization implemented an ERP years ago. In that case, the calls for monitoring and cost reduction may require tech leaders to dust off old technical documentation and find resources to update these systems. If most of your business is run off spreadsheets and ad hoc reports, it may be time to investigate ERP.
Should you consider ERP software solutions?
That handful of spreadsheets that lag reality by a few months might have been sufficient to run your company in boom times, but if you’re being asked for consistent data on a more regular basis, ERP could be the answer. Thankfully, the large, complex in-house systems that were the hallmark of the first wave of ERP systems have been replaced by modern cloud-based variants.
As with any technology program, there’s typically an initial decision on whether the company should attempt to build a solution or acquire one from a software or SaaS provider. When it comes to ERP, most functions are focused on the back office and areas that are unlikely to be strategic differentiators for your company. Part of the benefit of buying ERP software is that these processes come baked into the software.
Where companies go wrong with considering ERP is attempting to do significant customization to force the software to match the way they’ve always done things. Unless that approach offers significant strategic benefit, you’ll usually find that training and adopting a new process for accounts payable is cheaper and faster than attempting to reengineer your ERP software.
Focus on the decisions, not the mechanics
As you implement a new ERP or enhance your old system, focus on the decision-making capabilities it provides your leadership team. An excellent dashboard is of little benefit if it doesn’t show rising raw material costs in a manner that allows someone to understand and mitigate those costs quickly.
As a tech leader, you should have enough working knowledge of your business to understand where economic metrics like inflation, procurement delays, and production problems could impact your business. Look for existing or new tools that help highlight these areas or provide proactive notification of potential issues. You’ll be part of the solution to a business problem rather than just a shared service.
Tools like ERP might seem like yesterday’s news, but they can effectively address today’s challenging business environment when wielded by a savvy tech leader — if you let them.