ERP Strategy

How to select the right strategy for Microsoft Dynamics 365 Business Central – and future-proof your ERP solution

How to select the right ERP strategy

Many companies have a strong desire to be future-proof. This is, of course, because it is difficult to predict the future.

It is impossible to say what your company or the market will look like in a few years and that is why an ERP solution needs to be both agile and flexible, so it’s easy to keep up with the times.

Microsoft puts a lot of effort into keeping up with current developments. Anyone who has followed Dynamics NAV through the years will agree that there has been dramatic development of the solution in a short time.

This development is sure to continue. It is just hard to predict the future. You should therefore keep your options open – and to do so to the greatest extent possible, you should stick with standard solutions.

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The all-inclusive subscription
Read about the Dynamics 365 subscription that includes frequent upgrades and unlimited hotline support.

All about Dynamics 365 Business Central
Dynamics 365 Business Central is a complete business solution with ERP, CRM og Business Intelligence.

Migrate to Dynamics 365 in only 5 days
With Abakion 365, you can migrate to Dynamics 365 Business Central in one working week.

Standard solution including upgrades

Is Abakion’s add-on solution better than customizing yourself? Yes, because we maintain it as a standard solution.

We don’t develop it for you alone. We maintain the solution for many customers, and all of them use the same solution. That is how we can guarantee that we will upgrade the solution to new versions without any cost to you.

Customizations are a poor alternative

The alternative is to customize the solution yourself. This lets you meet a real, current need for your business, but at the same time you have to give up flexibility and agility.

Customizations don’t give you options – they paint you into a corner.

There are a great many companies that feel trapped in old custom solutions that make it very difficult to take advantage of the new possibilities that they could otherwise benefit from when Microsoft makes new versions available.

Customizations are not only expensive to upgrade – they also hamper your agility and flexibility.

No binding

Does choosing Abakion’s solution bind you to them? You can choose to look at it like that, of course, but you can always unsubscribe and you can export all of your data in a structured format. You can also choose to switch to another NAV distributor and continue using our solution with them. We sell a lot of solutions through other partners, so you are free to choose.

You are certainly less bound to Abakion than you would be to a custom solution, in which case you are binding yourself to the past, unless you have lots of money to constantly develop and upgrade the custom solution.

It is also worth mentioning that our solution has been evaluated and certified by Microsoft. They stand behind the quality of our work with the “Certified for Microsoft Dynamics” certificate.

Can a standard solution cover your needs?

Being a bit sceptical is understandable. The ERP business has focused on customizations for many years, so it is a major change for many in the industry to have to work with standard solutions.

If you ask your ERP provider (who makes a living selling you consulting hours), he will say for sure that it can’t be done. The reason for this is that they only look at the solution that Microsoft provides – and they are absolutely right – it won’t meet all your needs. You need the additional standard-apps from Abakion to have enough options to avoid customizations.

Certified for Microsoft Dynamics NAV
Dynamics 365 and Dynamics NAV

Are you considering Dynamics 365 Business Central or Dynamics NAV?

In April 2018, Microsoft announced its new cloud solution Dynamics 365 Business Central. The solution is targeted towards the businesses that used to use NAV – actually, Dynamics 365 Business Central is the same solution as Dynamics NAV 2018.

Business Central and NAV are very similar

Dynamics NAV 208 and Dynamics 365 Business Central share the same user interface, because they are based on the same core design. They just have different names in the cloud and on-premise (at least for now).

Dynamics 365 Business Central is a solution for small businesses that are ready to “go standard” because they don’t need the advanced features found in Dynamics NAV. It is not possible to customize the Dynamics 365 Business Central solution, but you can buy “extensions” that will obviate the need for customizations. Does it sound familiar? That is because Abakion’s solution, that you are reading about on these pages, is following the exact same concept.

Dynamics 365 Business Central Extensions

Microsoft intends for Dynamics 365 Business Central to be bought just like you would buy an Office suite. It is only available as an online solution on a subscription basis. There’s an app store where you can buy extra functionality, just like you would on your phone.

Before the release of Business Central, Dynamics 365 was split into a Business Edition and an Enterprise Edition. Today, Microsoft offers you the flexibility to choose the level of each separate Business Central app yourself. That means you can have a Business-level ERP and an Enterprise-level CRM. This way, you can create a package suited to your exact needs.

Securing the future

The solution included in the Abakion 365 subscription is the best way to future-proof yourself. It is based on Dynamics NAV 2018 which has the same code base as Dynamics 365 Business Central.

Our solution is actually being hosted on the same Microsoft servers as Dynamics 365 Business Central. It is pretty unique that Abakion has been given access to the Dynamics 365 Business Central environment. We have only been allowed access because we always participate in Microsoft’s pilot projects.

The solution provides you with the full functionality from Microsoft right now – and it is future-proof because Microsoft is already hosting it.

You have just read about the future-proof ERP strategy.
Now take a look at the Abakion 365 offering:

“In the following article, I have gathered 15 years of experience with implementation of ERP systems. From this experience, I have made 7 recommendations that will help you through a successful and profitable ERP implementation or upgrade.”

Sune Lohse, Chief Strategy Officer, Abakion A/S

Sune Lohse hos Abakion

7 recommendations for your ERP strategy

Today you just cannot wait for years to get value from your ERP investment. Those days are long gone.

These years the ERP market is going through a fundamental paradigm change, or disruption if you like, and as a customer on a ERP system you will have to navigate through all the new possibilities.

It is no use to implement ERP in the same way as in the 90s. Long analysis processes, development and heavy implementation and training is no longer your road to success. This method is obsolete due to market forces.

The paradigm shift forces ERP suppliers to meet the rapid changes that companies have to operate in every day. ERP systems must be dynamic and scalable, also in terms of functionality and not least, data structures.

Intro: A healthy and flexible ERP system

Why is simply thinking about changing or upgrading a company’s ERP system so heart breaking?

Moreover, how do companies have an earthly chance of preparing for unpredictable technological developments?

I constantly hear in the media that technological changes are happening faster than ever and that we can hardly keep up with developments.

I hear that it is difficult for companies to create strategies for more than six to twelve months in advance because the world is in constant motion.

Our way of understanding our own business and value chain is changing faster than textbooks can write it down, and if we are not ready to act in this new reality then we will fall behind.

ERP Strategy Recommendations

Who can foresee what Europe will look like in just six months’ time? If there will be new technology available that threatens the business area that one is in, or if the business trends mean that the market moves in a different direction to that we had anticipated?

I myself experienced the rapid development of technology when in 2012 I was responsible for the town’s annual midsummer celebration.

We considered investing in a wireless credit card terminal for EUR 3,500 to accommodate those people who did not have cash. More through good luck than good sense, we did not buy the terminal.

The following year we managed all payments via the app MobilePay, which none of us had heard of in 2012. The expensive wireless card terminal was suddenly outdated and could have been a bad investment for my small local community.

ERP implementations are still huge projects

Customers today cannot wait for years to get value from the investments they make today in ERP systems.

Strangely enough, we still implement ERP solutions as huge building projects, with a very long payback time.

We mistakenly believe that developments in the next decades will take place at the same speed as in previous decades.

– though this is quite naive when we look back at just the last five years of development!

Today most ERP suppliers’ implement systems in the same way as in the 1990s, with long analytical processes, long development processes and long training processes.

This method is now obsolete due to market forces, and today we can see that some of the major ERP systems are losing market share due to this.

A blog post I highly recommend is”The death of big business (as we know it)”, written by Christian Lanng.

He explains how our current business paradigm will die in the near future, and about how little we are preparing ourselves for this.

Among other things, Lanng describes how in the ERP industry we lag behind in our ability to carry out implementations in a flexible, integrated and cost-effective way. He assumes that the traditional ERP solutions will continue to be heavy behemoths with immovable data foundations, and so claims that these are ill-suited to the customer requirements of today and of the future.

I certainly agree with him that it will be the death of ERP suppliers if they do not wake up soon and take action.

I think on the contrary that we will experience a fundamental paradigm shift also from the traditional ERP systems.

A shift where the systems that win new markets are those that can meet the rapid changes that companies have to operate in every day.

A shift where the foundation is not locked in, but where systems are dynamic, and it is possible to turn them up and down as needed, both in terms of the number of users and server power, but also in terms of functionality and not least, data structures.

It is a foundation that can be scaled up and down for all parameters.

Are we to throw “good money after bad”?

There are many companies using ancient ERP systems. That is not ancient in comparison with the stepping-stones in Pompeii of course, but seen in comparison to how new their mobile phones or computers are, their ERP systems are deeply outdated.

Even the operating systems, e-mail systems and all the other software they use is newer.

So why do ERP systems lag behind so much? There can of course be many reasons for this.

  1. In the first place, it is obvious that if it takes one to two years to implement an ERP system when the world is changing as fast as it is, then the system is already outdated before it comes into operation.
  2. Secondly, there are many corpses on the market. I have met many customers who cringe when it comes to speaking about upgrading their system because their experience is that upgrading is something that costs a lot of money and creates a lot of cultural noise and frustration in the business.
  3. Thirdly, the company might have paid a lot of money for the current system, which is full of modifications that you cannot face up to tackling or having to start over without the modifications.

So how can customers ensure that their investment is profitable?

ERP suppliers are forced to get into action

There is no other way around it. ERP suppliers have to learn how to implement solutions with the best functionality much quicker than is the case today.

It must be scalable functionality which makes it possible to choose exactly the functions that are needed.

And with a flexible foundation where you can easily edit and change things as the world changes around you.

Moreover, with a much smaller and continuous investment that reflects the customer’s current size and economy instead of the enormous implementations one sees today.
The solution should create value for the customer from the start and with implementation in several stages, so you can meet the customer’s greatest needs first and then build on the system and create more value.

This is undoubtedly a huge paradigm shift for us ERP vendors!

Seven recommendations for a healthy and flexible ERP system

We have collected together experiences and wishes from our customers as to how they want to grow their ERP solution in line with their business.

From this perspective, we are giving our take on how to have a healthy and flexible ERP system, which is compatible with the unpredictability of the future.

In subsequent chapters, I will describe the seven recommendations we give to our customers when they are considering the acquisition of a new ERP system.

Lets have a brief look at what we will be going through:

Overvej en Cloud-strategiConsider a Cloud Strategy

We see it happen all too often at companies: the ERP solution is brand new, but business needs have changed during the project, and the new and expensive ERP solution seems already obsolete.

Fokusér på værdi og forandringsparathedFocus on value and readiness for change

ERP systems today can do all sorts of interesting things. However, when users only need fifty processes, the rest of the processes becomes an obstacle, as the system is difficult to use.

Vælg Best Practice skalérbar standardfunktionalitetSelect “best practice” scalable standard functionality

It is crucial for the future ERP systems to allow customers to select deep functionality for exactly what they need – and deselect when they do not need them anymore.

Hav en strategi for fleksibel håndtering af stamdataHave a strategy for flexible management of master data

One of the hardest things about working with master data is setting it up correctly from the outset, but with the right ERP-tools, you can be your own system developer.

Vælg løbende driftsomkostninger frem for store investeringerSelect ongoing operating costs rather than large investments

We tend to think about development and operation of ERP systems in an outdated way, out of sync with reality.

Overvej en strategi for opgraderinger, hvor kun relevante data er medConsider a strategy for upgrades where only relevant data is included

It is something of a paradox that ERP systems constantly collect more and more data, while we can’t clean this data up in any other way than by starting over completely.

Vælg en behovsdrevet ERP strategiSelect a needs-driven ERP strategy – perhaps with different platforms?

Everybody has worked with a single mantra for many years: Put the entire company and all its activities and processes and records of this and that into a single ERP system. Is that really the best way?

Consider cloud strategy

1. Consider a Cloud Strategy

Why is the company’s brand new ERP solution already obsolete – and how do you avoid it?

We see it happen all too often at companies: the ERP solution is brand new, the largest and most expensive servers have been purchased and after spending one or two years and thousands of hours on implementation, they are finally ready to put the solution into operation.

Instead of being happy about finally reaching their goal, new developments and changing business needs have passed them by – and the new and expensive ERP solution already seems obsolete.

It is difficult to keep up with technological developments. We find that customers outgrow their ERP solution too quickly.

The perception of what provides value often has changed once the solution is ready to launch.

Companies find it difficult to assess how their world is going to look in just a year or two, and it is hard to predict whether to scale the systems for growth or stagnation.

Mobile phones are a good example of how the times have changed. Ten years ago, it was normal to have a phone for five years; today it is normal to get a new phone every two years.

Has the house become too small?

It is of course much easier to replace a mobile phone than an ERP system, so the comparison is probably not entirely fair. Maybe we should compare an ERP system to buying a house instead.

When you are young and you buy a house, you may have fewer resources and expect to have two children. But then it turns out that you had three children, and as time passes your needs for the house itself also change.

So should you move or build an addition? It is often a complex and troublesome task under any circumstances, and many companies imagine it will be the same with their ERP system.

You built a foundation that is not big enough and it is difficult and expensive to have it replaced. The solution is called the Cloud.

Large SAP customers use Dynamics NAV as their ERP solution

Having a Cloud strategy is not just about whether to have your own servers in the basement or whether you can feel secure storing your business data with a hosting partner.

Cloud is very much a question of how quickly it can be implemented.

We have a customer with headquarters in Denmark, running SAP as their ERP system, but their substantial growth in Asia cannot be supported by this large ERP system because implementation and setup takes such a long time.

That is why they chose a Dynamics NAV solution on Azure Cloud as a temporary system at some of their locations a few years ago, so they could get started quickly.

It turned out to be so effective that all of their locations in Asia are now running “temporary Dynamics NAV solutions in the cloud” (whether or not they will ever roll out SAP there is anybody’s guess).

With the Cloud, the ERP system can be almost as flexible as a mobile phone

You can change the setup on your mobile phone quickly and easily so it always matches your current needs.

Shouldn’t the company’s ERP solution be just as quick and easy to set up, so it can quickly be adapted to changing business needs – for example, to keep up with the company’s growth in the Asian markets?

There is neither time nor money for a long implementation process and rigid ERP solutions.

With the Cloud, the company gets the necessary flexibility and rapid implementation that many companies need.

The Cloud is like a huge mansion where you are only using one small room

When you need to upgrade or replace your ERP solution, you should consider using a Cloud solution. Having a Cloud strategy is like having a huge mansion at your disposal, but only paying for the amount of room you use.

You can start small and grow as the need arises. And you can even decrease the amount later, “when the kids leave home”.

Setting up an ERP system as a Cloud solution is quick. The technology is so flexible nowadays that the ERP system actually takes more time to set up and upgrade than the technology behind it does.

So in terms of servers, performance, data space, RAM and all these complicated things – we can actually change it just as fast as we can on our mobile phones.

So the only thing still missing is for our customers and ERP vendors to be better about implementing standard ERP solutions instead of customized solutions.

Once that happens, customers can update their servers and ERP solutions so seamlessly that they will hardly even notice it themselves.

Value and changeability

2. Fokusér på værdi og forandrings­parathed

Being prepared for change is the greatest challenge when upgrading an ERP system

ERP systems today can do all sorts of interesting things. They have become major systems that support thousands of processes.

However, when users only need fifty processes, the rest of the processes becomes an obstacle, as the system is difficult to use.

Implementing a new ERP system should be about change management and examining processes rather than making system customizations.

You probably know the feeling all too well: technology with a world of options you never use. When I was young, we bought hi-fi systems with sub-woofers, tuners and equalizers that let us adjust every possible parameter. Very few people knew how to use them, but it seemed cool, and there were lots of flashing lights.

It is not enough for functionality to look cool.

Since the days of my youth, many technical products have evolved in a direction where the focus is on user needs and value creation. The picture looks somewhat different, however, for developments in ERP systems, which are lagging behind.

The problem with ERP systems is that a lot of the additional functionality does not create value for the user.

Some functionalities and features have probably even emerged simply so suppliers could differentiate themselves from competitors – or perhaps just because the technology made it possible. Even though development is, in spite of everything, at a turning point, we still see systems with so much functionality that the sheer complexity becomes an important argument against the system.

To be fair, there is a good reason that ERP systems have been developed with so much functionality and so many features.

There are, after all, a lot of different needs in the marketplace, which ERP solutions have to be able to meet.

I believe it should be as easy to configure ERP solutions as if they were apps on your phone. More on that in the next chapter.

It is the process, not the system that creates value?

The point of this chapter is that ERP systems do not create value in and of themselves. The systems only create value by supporting value-adding processes for the users.

It is therefore essential that you focus on the processes that a new ERP system has to support and ensure they actually create value in the value chain. The challenge is, that we as humans often favor the technical capabilities “we have always had in the old system” instead of reviewing whether the process is due to the original capabilities in the system or the most efficient process – as well as whether the processes has changed.

Time and again we encounter customers who have customized their old systems in ways that do not create value today.

And the faster the world changes, the harder it is to predict whether a process that has to be supported today will continue to add value in a year. Is customizing even worthwhile?

How can we know whether customizations will create value a year from now?

Today our customers do not want modifications made to their systems.

In the past, customers paid for analytical processes to find out everything the system could do and how to customize it to fit their needs. That is no longer the case.

Today, customers ask how the system supports a particular process. Our customers generally only want to hear about the parts of the system that they need.

They want to be able to talk about how their existing processes can be supported by the functionality provided.

So, whereas in the past we would conduct analyses, today we hold workshops with our customers. The starting point is to identify whether the customer’s processes can be supported by the standard functionality of the system.

The solutions have become so complex that customers expect us, as ERP suppliers, to be able to examine the customer’s processes based on best practices in the individual areas.

Embrace the culture and be ready for change

The most important exercise for customers today is to be able to change their processes rapidly to meet market demand.

Implementing a new ERP system should be about change management and examining processes rather than making system customizations.

We recently got a customer up and running, who by focusing on internal optimization of processes succeeded in spending only 35 developing hours in customizing their ERP system.

However, the change management process of reviewing and altering internal processes resulted in 500 hours.

The customer’s willingness to change in terms of their culture and habits, while basing the changes on what would actually create value for them, helped keep their ERP customizations to an absolute minimum.

The result is that the customer now has a largely standard solution with 100% focus on what would create value for them, and their processes reflect standard ERP system structures.

A secondary benefit is that future upgrades will be easy and cost efficient, while at the same time, it is easier to train new colleagues because the processes are more standard.

Choose best practice standard functionality

3. Choose best practice standard functionality

Future ERP systems must be based on standard functionality

Consider the amount of people who has an iPhone or a smartphone, and how infinitely much functionality, we have access to in the app stores.

We can choose exactly the functionality we each need, and with a few apps out of millions, we configure our smartphones to deliver exactly what we need – and often with very deep functionality of the individual apps.

We can even start using these apps without making adjustments to the setup or receive any training.

And best of all, it is easy to uninstall the app, when we have no need for the functionality anymore.

This is how ERP systems should work. But unfortunately it’s just not the case.

You can get anything you want as long as you got the money

With ERP systems it is virtually the other way around. Here is a clear ‘complexity conflict’:

If you want to have very advanced functionality, you have to invest in major ERP systems.

In the major package you also receive a lot of complex functionality in areas where we just wanted something simple.

It’s either all or nothing – like buying TV packages, where you are forced to buy the whole package with 50 channels, even though you are only interested in two channels out of the 50!

If you want smart, deep functionality in today’s ERP world like for example intercompany trading, advanced planning and scheduling, detailed inventory or smart forecasting, well, then you are forced to buy large, complex ERP systems that often cost tens of millions.

The market demands Best Practice standard functionality

The alternative to throwing millions in a huge ERP system is to find an industry solution that is tailored to the segment that you are in.

Unfortunately, our experience is that our customers seldom like the industry solutions as they also get far more functionality than needed. The industry solutions are not as expensive, but they still receive huge complexity to grab the few special things they need.

Our experience is that our customers demand Best Practice standard functionality.

They expect us to guide them and instead of getting a tailor-made ERP system they are looking for ‘apps’ or add-ons that can address their specific needs.

And ideally something that does not require a lot of setup and training to be useable.
This demand is continuously increasing. We have customers who has a tailor-made their solution for tens of millions over the years and now have a clear strategy of switching to 100% standard functionality – but of course the business essentials must be meet hence customers are now seeking add-ons from a world-wide perspective.

ERP providers have to improve in offering add-ons that works right out of the box and they have to be intuitive enough for the customer to use them without special introduction.

Scalable deep standard functionality

It is crucial for the future of ERP systems, that customers have easy access to deep functionality for exactly what they need and that they can deselect the features when their needs change.

Customers demand only to pay for the functionality they use and will only pay as long as it creates value for them.

We believe that a future-proof ERP system is to contain the opportunity to offer advanced, deep functionality in specific areas – and at a level that is affordable even if you only have 10 users on the solution.

We have a customer who has deselected our Warehouse and Shop Floor solution because they have outsourced their entire production and storage.

Therefore, they will naturally like to have all functionality relating to the production and storage out of the ERP system and stop paying for the functionality.

At the same time, they know that if they in the future take back their production, they can simply click it back in their ERP system.

Have a strategy for    flexible management of master data

4. Have a strategy for flexible management of master data

We have to do away with the notion that ERP solutions are set in stone.

One of the hardest things about working with master data is setting it up correctly from the outset.

It’s the same challenge as when laying the foundation for a house that later needs and addition built onto it: the future is different than you had expected, otherwise you would have laid the foundation differently!

But the only thing you can do is extend and add to the foundation, even though you would rather have redone it completely.

Plan to avoid frequent customizations

A lot of people still believe in the fundamental paradigm that an ERP system’s data foundation can’t really be changed.

And when you have to add new sections to your foundation, you have to hire a system consultant and pay him to expand the foundation with additional fields – which is not only expensive, but also makes the system even more customized.

We surpassed this reality long ago – but not a lot of people have discovered that fact yet.

Healthy data will be unhealthy in six months

In an ERP upgrade project, the most energy and the greatest need for strategic decisions is at the beginning of the project.

But this is also the point when you have the least knowledge. As time goes by, you become wiser and the business and your needs continue to change; eventually you will want to change the master data structures.

It can be difficult to maintain your master data properly even if you are not in a situation where you need to upgrade.

But you have to change the data foundation continuously or you will end up drowning in poor and incorrect data.

Unfortunately, a lot of people have had experiences with a set foundation to which they can add on, but which they cannot rebuild.

That is why people often see the investment in an ERP foundation as a long and strategic investment – rather than seeing it as something flexible that can be changed in six months.

A lot of people still live by this outdated principle even though the technology to work flexibly with master data is available today.

Devise the master data strategy across functions for the entire supply chain

For a lot of our customers, we find that master data is something that develops in various functions and departments and in different parts of the supply chain.

For example, you can describe a product with a wide variety of information, which can be used in different places and in different contexts.

It might be product information to be published in the web shop.

It might be parameters used in a configuration program.

It might be files such as assembly drawings or machine applications for production, data for the development department or filtering data for the planning department.

Or it might be information to be included on the customer’s invoice, used for marketing or reported to authorities.

All these subsystems tend to develop in a decentralized way and each department ends up “owning their own fields” on the item card.

And this also means that a lot of different information ends up looking similar, because several departments use the same kind of information.

Instead of letting all of these subsystems live their own lives in a tangle of offshoots, you should devise a comprehensive strategy for your master data and build a flexible structure that makes it quick and easy for anyone to work with the same data.

The data structure should be defined at the top level – but data maintenance should take place on the “front lines”

It is one thing to have control over the foundation for the data structure, but quite another to maintain the data in a smart and intelligent way.

With master data, it is just like with clutter at home: The less you have thought about it and put good systems in place, the harder it is to keep things tidy. And then mum comes in and cleans up after the kids, who can’t figure out how to put things where they belong.

Everyone knows the phrase “garbage in – garbage out”, which is about how our digital assistants lose track of things when we only feed them junk.

And the trick is not to get the systems to guess what we are thinking, or to teach mum how to clean up after the children faster.

It’s all about creating logical and natural routines for the “input” and maintenance of data.

Give the responsibility for maintaining specific data to the users on the front line, who are the ones that feel the heat when it doesn’t work.
But bear in mind that this means giving the user responsibility in a way that makes it easy for the user to create and maintain data in a consistent structure that makes sense for the entire business.

With the right ERP tools, you can be your own system developer

There are already tools for some ERP systems that allow you to easily and flexibly customize and maintain your master data in line with changing wishes and needs.

In Microsoft Dynamics NAV, we work with a tool for master data management that is very similar to the logic that most of us know from Excel, which makes working with data very quick and easy.

For our customers, this means that they do not have to call a system developer – and wait for him to find time to come by – just to have a single data field added to their products, customers or suppliers, for example.

Now they can do it themselves.

Our customers even take care of mass updates and data maintenance by themselves, rather than having to have programs made for this.

But that’s just the tip of the iceberg.

I am convinced that the future of ERP solutions will offer many more solutions for master data management.

Choose ongoing  operational costs rather than large investments

5. Choose ongoing operational costs rather than large investments

We tend to think about development and operation of ERP systems in an outdated way, out of sync with reality.

The fact that most companies build large, fancy ERP systems is something of a paradox – they have a development and implementation time-line of five to ten years – when the same companies agree that their reality is changing so fast that they find it difficult to predict what their business and business model will look like in just a year or two.

It’s crazy to think that we know what the world will look like in ten years – or even in just two.

Everything is changing too quickly for us to predict anything about our future requirements and needs.

So why do we decide to invest huge sums of money developing and implementing ERP systems in the same way that we always have done?

In such a way that we think we know about the future needs of the business and that we can take everything into account as long as we are thorough enough in the analysis and development?

In a way that we think that a carefully planned (and often very lengthy) implementation process ensures the future success of the ERP? And in such a way that we think we can predict whether the ERP project’s ROI will last – despite the fact that things are changing faster than we can manage to code a line?

Does the same ERP system fit a company for life?

When I bought a house many years ago, my kids were small and the need for space was limited.

But I also knew that in 10 to 15 years they would be teenagers and want their own big rooms (preferably with a separate entrance and a private bathroom), and in another 20 years when the kids left the nest, we wouldn’t need big rooms for teenagers any longer but a small guest room instead.

So should I buy a too-big house from the start – or buy a smaller and more suitable house and then move to something bigger when the kids grow up?

Today, a lot of companies are faced with the same dilemma when buying an ERP system that I was faced with when buying a house:

Should we buy an ERP system for life, or should we move out and move around whenever our needs and desires change?

But as ERP providers, we should advise our customers differently – because another possibility exists.

Drop conventional thinking

We need to put an end to decades of conventional thinking about ERP development and operations, where most ERP providers are focused on the customer’s “go live”: We conduct an analysis, we go live, we solve problems (if we are clever, or lucky, we can sometimes solve problems before we go live).

Millions later, the project transitions from development to operations. Customers can call technical support if they run into problems, or we can just start a new development project.

With cloud computing, cost and value-creation go hand-in-hand

Conventional thinking is about thinking in developmental stages.

Instead, we should think about implementations in a different way and understand the ERP solution as an ongoing operating expense, just as we have done with heat and electricity and everything else.

ERP is something that we subscribe to all the time, it is a cost that is constant, and something we can turn on/off.

With cloud computing, the ERP system can be scaled up or down so that it always fits your business needs.

This means that the company’s ERP costs are proportionate to the value created.

The company only pays for what it uses – and that’s what it’s all about.

ERP as a cloud solution is not just hot air

All of our new ERP customers since 2014 have chosen a solution where they only pay for what they use.

All of them.

The extent to which customers are ready for the cloud actually surprised me.

Instead of investing in hardware that will become outdated, our customers rent their hardware, and we provide ERP as a scalable, standard functionality via subscription licenses.

In fact, we’re probably just seeing the same tendency in ERP that is also the case for society in general: we are moving from owning to renting.

As ERP providers, we can’t just go with the flow… we must lead the way.

upgrade strategy

6. Consider an upgrade strategy that only includes relevant data

We need to be able to clean up ERP data in ways other than by starting over completely.

It is something of a paradox that ERP systems constantly collect more and more data, while we can’t clean this data up in any other way than by starting over completely.

It’s like only being able to clean up your attic by throwing everything out entirely.

Whether we’re talking about attics or ERP systems, the right solution, of course, is to keep what you can use and throw the rest out.

Allow yourself to pick and choose

My attic is pretty full and I use it all the time to store odds and ends. But I don’t clean up the shelves in there very often – I don’t throw things out to make more room and organize things better.

I might go crazy every five years or so and clean it up, but honestly, it is more likely that I won’t clean it up until I have to move.

Then I find myself standing there with all the moving boxes and thinking: Why on earth did I save this? And then I throw two-thirds of it out and pack the rest into moving boxes which I take to my new attic and put away neatly.

It’s exactly the same thing that happens with ERP system databases.

They get filled up with things and just keep getting bigger and bigger: old transaction data and blocked item numbers, customers and vendors that are no longer used.

If the ERP system is ten years old, then the database is filled with ten years of clutter and superfluous data. Simply because we do not really have a mechanism for removing the data that is no longer being used for anything.

Does a good clean-up mean throwing everything out?

Unlike the situation with my attic at home, companies and ERP providers can’t clean things up by sorting through the data.

They are left with the choice of either upgrading and moving all of the data over to the new system – or throwing it all out and starting over.

If the company chooses to start over, then it has to start with a totally clean database every 5, 8 or 10 years – and employees will have a headache because all of the historical data is gone.

It is necessary to maintain access to the old system, where you can find old sales orders and other necessary information.

Even new employees are taught how to get into the old system!

Relevant historical data should be saved – and the rest thrown out

It makes no sense to make an almost clean cut between the old and the new system when upgrading.

You can’t work properly with BI (Business Intelligence) without a history for selected data, and the company won’t be able to take proper ABC measurements.

On the whole, you’re left with the feeling that you can’t catch your breath after an ERP upgrade.

It is simply part of the paradigm that we as ERP providers have to do away with.

The solution is to take what you need along in moving boxes. And when the company starts using the new attic – the new database – they’ll of course need to put up shelves and set things up as needed – regardless of how the old attic was organized.

Always take the top third along

As an ERP provider, we have to develop ERP systems that give companies a real opportunity to sort through and clean up their data so they can always carry the top third over to the new system, rather than having to choose between ‘throwing it all out’ or ‘taking it all along’.

We have to be able to offer our customers flexibility and choice.

How many years of records do you want to carry over? Three years? – Great, then we’ll just carry over the last three years of the customer, vendor, financial and inventory records.

Is your chart of accounts (COA) outdated? Instead of spending 50 hours in-house struggling to make a new one, we can populate your old chart of accounts with three years of financial history in our best-in-class COA.

Are there products, customers and vendors that you don’t want to carry over into the new system? Then we’ll just leave them where they are.

And so on…

Money saved by upgrading from NAV 2015 to NAV 2015

We actually have a customer that we upgraded from NAV 2015… to NAV 2015.

Simply because it was cheaper for the customer than to keep fiddling with trying to set up NAV 2015 on top of the old database and setting up accounting and creating number series and this, that and the other thing.

Instead, the customer chose to move to our NAV 2015 standard solution.

We extracted the desired data out of the old system, set it up in our standard system with 200 tables and showed the customer the new COA.

The customer was happy with it; it was posted and put into use.

Everything just works; the customer runs its production with warehouse and add-ons and all the bells and whistles, exactly as it suits them and their needs.

The customer brought what they needed along in their moving boxes. Nothing more and nothing less.

Choose a needs-driven ERP strategy

7. Choose a needs-driven ERP strategy

We are bound to one ERP system – why exactly is that?

We have worked with a single mantra for many years: Put the entire company and all its activities and processes and records of this and that into a single ERP system.

But why limit ourselves by being bound to one ERP system when we can choose a needs-driven ERP strategy and take advantage of the benefits of working on multiple ERP platforms?

“We run SAP throughout the company, from inbound logistics to after-sales service.”

Maybe you’ve read a similar statement from a satisfied CTO. You may also have read about the satisfied Board of Directors gazing upon the result of several years of strategic work: The head office and all sales offices and factories worldwide have finally moved over to the same ERP platform.

But is it a goal in itself to be bound to the same ERP platform?

Or have companies just not had any other options until now?

For many years, ERP providers have been putting a lot of effort into telling customers why they need to choose SAP or AX or NAV, or one of the other ERP solutions, and why their solution is the only right one.

So the customer is bound to the provider, who of course offers some add-ons, which means the customer is even more bound to the provider.

And it’s all rubbish.

ERP providers need to acknowledge that the market is at a point where we need to get away from those kind of constraints.

Instead, companies should be able to choose a needs-driven ERP strategy, which requires us as ERP providers to do with two things: We shouldn’t always be pushing customers and solutions toward ever greater complexity, and we need to think about all of the various ERP platforms together.

Customers want less complexity

Maybe you have recently upgraded to Windows 10 like I did. Were you unhappy with Windows 8?

Was there anything in Windows 8 that kept you from completing your tasks? Or did you, like me, upgrade simply because the opportunity was there and because Windows 10 has a few new features?

What if, down the line, you and I find that Windows 10 is too big and complex; can we automatically downgrade to Windows 8 – and maybe even keep the two Windows 10 features that we really like?

Can customers today easily switch between the various ERP platforms, and can they switch back to older versions again?

We see, for instance, a lot of Dynamics AX customers in Norway who say they do not want to upgrade to the new AX. It’s not because it is too expensive. They just don’t all have the need – it’s huge, it’s complex, and it’s too difficult.

Instead, they would rather go over to a NAV solution, which can give them just the extra features they need. So we as ERP providers develop the desired add-ons so we can fill the gaps that exist between the ERP systems.

ERP platforms should be capable of integration

Another mindset that we should do away with is the strategy of having only one ERP platform.

Take the company Nilfisk for example: They have an SAP strategy and run SAP at their headquarters, but they run NAV at their 80 locations around the world, which we then integrate with SAP.

Or imagine, for example, a company with locations in Europe and China, which finds that the business and users in China have different needs for the ERP system than they have in Europe – well, why not use another ERP system in China that meets their needs?

It might make sense to have more than one ERP system – and they can all be the right one – even within the same company.

Who will win the future?

The future belongs to ERP providers who choose to open up their systems and collaborate with competitors and partners.

So customers can run AX where they want, and they can run NAV where they want, or SAP or whatever – and we as ERP providers can integrate the systems in an appropriate way, so it all works together.

Now you have your ERP-strategy

Now you have your ERP strategy

Thank you

I hope you have found inspiration to make your next ERP project more profitable.

Best regards
Sune Lohse