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Wednesday, 4 March 2015

ERP systems in SME companies

Over the last decade ERP systems have become more affordable and popular as MicroSoft has entered that market with its product Dynamics AX (DAX). While MicroSoft originally advertised that product for the SME market, it now uses SAP as a comparison (

In my view, Dynamics AX is a good product if you use it for its true purpose. I feel that more and more European companies consider DAX for the wrong reasons: penny wise, pound foolish. To date I still notice an increasing need for DAX specialists. It's probably related to its commercial success rather than solving the problems during implementation.

In essence, DAX is designed for standalone American SME companies that have single currency ($), single language (English), single jurisdiction (USA), US payment systems (cheques), basic / limited segregation of duties. It's very user friendly as a user can do nearly anything in the system which makes perfect sense in small companies. Consolidation, multi-currency, multi (European) jurisdiction, multi-user, multi-language, mature segregation of duties and authorisation matrices, inventory valuation, and European (non cheque based) payment systems are a problem. Having an Internal Audit department and introducing DAX is really asking for trouble.

Some years ago I joined a company that was already involved in a DAX implementation. I was told that the ERP system would be implemented before year-end. I was astonished by that time frame as I had never ever seen such an ambitious time line in my entire career. Today DAX has still not been implemented and SAP is already being considered as its successor. Consolidation, multi-currency, multi-user, multi-language, and extensive detailed segregation of duties and authorisation matrices were amongst the main problems. The core problem was even far worse as the business specific application software did not match the company's business model. That only came to light after an ever increasing number of user change requests.

In my view, ERP decisions in medium sized companies are taken by the wrong persons. That person, usually the CEO, hardly even works with an ERP system. As far (s)he is concerned it is just pushing the famous "button" and it should "just do it".

Involving the users is easier said than done. Moreover, most users do not have company wide tasks and are only interested in optimising their own tasks. They also tend to think in 'as is' rather than in 'should be'. Why bother changing a proven successful daily routine?

The only other person with a company wide scope is the finance director. He/she needs to cope with the system on a daily basis. It is in her/his basic interest to minimise future IT problems and to minimise total cost of ownership (TCO). For the very same reasons, consultants and ERP suppliers should not be in selection phase despite what they always tell us. The independence of many consultants is biased anyway due to commercial links with suppliers following specialisation.

Do not expect "eternal" gratitude after a successful migration. As often success in the backoffice is only measured by the lack of failure. Commercial front office success pays everyone's salaries including yours. Just deal with it.