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Welcome to the latest edition of the Finance and Accounting Technology Briefing, a biweekly newsletter jointly produced by StrategicCFO360 and The CFO Leadership Council. Our goal is to help finance pros make confident technology choices and give software providers a better understanding of their customers' needs.
Please note, the inaugural Finance and Accounting Tech Expo at the Javits Convention Center in New York City is right around the corner! More than 1,900 executives have registered to attend the event, taking place October 29-30. To register, go to the "Upcoming Events" section at the bottom of this newsletter.
If you have feedback, ideas or product, people and company news for the Briefing, please email the editor at vince@CFOLC.com. We look forward to seeing you later this month!
Preventing ERP Heartbreak
Why buy an ERP system? Vendors tout many key benefits, including increased productivity, better data capture and analysis, a faster order-to-cash cycle and lower labor costs. On a September earnings call, Charles Salameh, CEO of Sangoma Technologies, offered that ERPs even boost employee morale: "You're dealing with just one system rather than multiple systems," he said.
Sounds great? Savvy CFOs know it's a long, arduous journey to this land of information and productivity riches. Of the 131 ERP implementations Panorama Consulting studied recently, 34 percent exceeded budget (the most popular reason being unforeseen technology and staffing needs), and 31 percent went over deadline.
More proof: quarterly earnings calls are littered with tales of ERP installations and upgrades costing public companies' sales and profits and denting earnings guidance. And the bugs don't always show up immediately.
Footwear company Caleres, whose brands include Allen Edmonds, Sam Edelman and Franco Sarto, migrated to SAP's cloud version in the second quarter. After the system went live, Caleres saw delays in key operational reports and "a lack of visibility into the tools we rely on to drive our business day in and day out," said president and CEO Jay Schmidt (according to an S&P Capital IQ transcript). The price tag for Caleres: an estimated $10 million to $15 million of lost sales or as much as five percentage points of growth.
With all the war stories over the years, why would a CFO take such risks? The fact that many companies do speaks to the value of such systems, as well as their criticality: all software cutovers have glitches, and because changing ERPs is like getting an "organ transplant," as one Intuit executive put it, even hiccups can be calamitous.
In addition, if a company has a legacy ERP that needs replacement, most CFOs wouldn't throw out the idea of having an ERP altogether.
But do you need an ERP system? "Best-of-breed tools that talk to each other—be it project management tools, collaboration tools or project management platforms that focus on workflows—have siphoned away many of the functions of traditional ERP systems," says Mark Sue, CFO of Breathe Media Network and co-chair of The FENG’s technology group.
But heavily regulated industries with traceability and accountability requirements, including manufacturing and pharmaceutical companies and other sectors with supply chains and inventory, "find quite a bit of value in an ERP," he said. "One size does not fit all, and a company's focus, processes and end markets often dictate the tools."
Newer offerings for the midmarket like Odoo, ERPNext and Gravity Software, may help bridge the gap for companies that outgrow QuickBooks but don't need the scale of SAP.
Kadidia Cooper, CFO of 10,000 Degrees, a nonprofit college scholarship provider, is in the middle of replacing a "relic" ERP. The company chose Gravity for its versatility and flexibility and because functionality is constantly being updated. Cooper said that the price tag is more palatable and implementation more manageable. However, even in this case, the selection process took nine months, and the first phase, which included setup and transferring historical data, was longer than forecast.
Management shouldn't underestimate the process of adopting even more user-friendly, lower-cost ERPs. As research firm ERP Focus warned in a recent report, CFOs and the rest of management must be meticulous about exactly which features and modules the company needs and what it expects the ERP to deliver in financial value. "One of the biggest pitfalls in any tech investment is the potential to be oversold."
"Sometimes, despite the best planning, you may find that you need to re-engineer some of your internal processes; this can take time and resources that you had not planned for," according to ERP Focus. "If this won't work, you may need to go back to your vendor for customization you didn't originally budget for." That, in turn, can mean retraining, too, resulting in unplanned time and more resources, which is not something a CFO ever likes to hear. Read the full story>
—Vince Ryan, editor, The CFO Leadership Council. vince@CFOLC.com
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We asked Denise Feece, COO and CFO of Sequel Wire and Cable, what software and systems the Argos, Indiana-based manufacturer of copper insulated wire uses to run finance and operations.
Sequel uses Rubicon as its main source transactional system. Rubicon is an industry-specific application for the wire and cable industry. On top of Rubicon sits Prophix, our one source of truth for all things analytical in both the financial and nonfinancial areas of the business. We outsource tax preparation only because there are people smarter than us in those areas who are better equipped to keep up with all of the tax rules and changes.
Sequel started in 2019 as a greenfield facility, so we had the opportunity to start from scratch. Prophix was a part of our vision from day one, as we have a strategic goal to be a level 5 company on the CPM maturity curve. Additionally, our vision was to be cloud-centric and avoid a bank of in-house servers that would require additional people to maintain.
A new implementation we're working on will take our plant floor management and visibility to a new level. An immense amount of data is available from the programmable logic controllers in our equipment. So, we're trying to determine the best way to harness and turn it into usable information to manage our business better.
What's your joy, and what's your headache?
My joy is seeing our vision become a reality in terms of data availability for our organization. My headache is the typical growing pains and being able to keep up with everything. Our stack makes it more palatable than it otherwise would be.
If you could wave a magic wand, what would you make software companies do for you?
One, help me understand how to apply AI to our everyday business so that we can harness the power of the new technology. We know there are benefits; we aren't sure where to start and how to best take the leap into the new world while managing risk and security. Two, help everyone on my team have a deep understanding of the tool so that they can provide maximum input to our business. Different learning styles and [paces] make it challenging to meet deadlines and commitments to the business.
What's your best piece of tech advice for others in your job?
First, find a tool and learn everything you can about it. Only by learning as much as possible will you be able to harness the power of the insights that will become available. Second, look for the small wins and work on the snowball effect. It's always hard to find time to implement new ideas, but once the first idea is in place, more time will open for implementing other ideas.
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