Part II: The Value Proposition in Software Upgrades
This article is the second of a multi-part series. Read Part I Here
Once the value propositions have been established, those values need to be viewed in light of how your business will work better with new software. While company size and revenue impact the budget for new software, the investment in new solutions needs to align with the value assigned to the opportunity.
Examples of value in new software capability include:
- CRM software that is web enabled to allow remote salespeople to see the entire relationship of their customers and leads with the company.
- Engineering software integration where BOM’s in the CAD system can be easily copied into the ERP system, eliminating duplicate work between the two departments.
- Forecasting capability for the supply chain managers where a customer’s forecast can be uploaded directly into the MRP system.
- Bar code enabled warehouse management systems (WMS) where the warehouse staff has full visibility of multiple inventory locations for an item as well as the ability to see the next pick ticket on a handheld or tablet device.
There is a relationship between cost and value in this decision. A small company need not invest $300,000 to $500,000 on new software given that the value to the company is more modest than that sum. Alternatively, a large company may be able to find strong solutions for a few hundred thousand dollars that offer significant value to the company because of its “new” capabilities in comparison to the capability of the current solution.
While there is no exact calculation that can be made, there are ranges of solutions that should be able to be developed for reasonableness. Management needs to learn the ERP marketplace and discuss which potential solutions should be considered. Since so much of ERP software is sold by named or concurrent users with separate costs for additional/optional modules, understanding ahead to time that the cost of a potential solution is $5,000, for example, per concurrent user with a budget for implementation cost similar to the total software investment may be a good guideline for a company of a certain size to utilize.
Ensuring a Successful Upgrade
When a new or upgraded system is selected and implemented, it is important to return to the original value proposition to review what has been achieved and how the anticipated value has been realized. Without checking against original value goals, the management team can’t conclude that the transition was successful. Achieving original value proposition goals is a great measure of how the company achieved the value they set out to realize. Good companies set up ongoing metrics (key performance indicators) to measure the continued value of the software solution as it impacts their future state business practices and processes.
Harry Landsburg, DVIRC’s Director of Business Process Technology Consulting, has worked with over 300 companies to document how their business processes can best be supported by upgraded or new software. His approach to relating the way his clients operate to the technology marketplace results in a better selection and implementation outcome. For more information, learn more or contact us.