Observation Deck

Investing in the Right Technology

ERP software helps providers drive efficiency, but what’s it worth to you?

• By Rob Boeye
• Nov 01, 2016

We often see the latest and greatest technology hit the market this time of year, before the holidays. You may even find exciting products at Medtrade that could help your business. Though your best investment is something you have probably considered for years: an enterprise resource planning (ERP) software system. As technology has advanced from legacy software to on-premises ERP to cloud-based, so has the need of providers to manage all aspects of their operation with one system.

Industry leaders know that having the right technology to manage and streamline business efficiency is crucial. They use one database to manage billing, order status, payroll, referral intake, sales and more. They see the benefits with increased productivity, cost reductions and peace of mind.

ERP software systems aren’t new, but they are becoming more essential with our changing landscape. With rising compliance and regulation concerns, and more competition, providers need solutions that improve operations. Some providers have a small staff that must regularly work overtime hours to complete all tasks, while other providers want to move away from their paper-based system.

Technology should be thought of as an investment. When you buy a house, you are investing in that property and in your future. The same can be said for technology. You are putting money and time into your business and its future. It’s not an overnight process, but the result can be rewarding from a financial and operational side. The question is: what you are willing to invest?

Manage Expectations

The ERP software market has seen growth the last few years — a 3.8 percent increase in total revenue from 2012 to 2013, to a 7 percent increase in 2016, to an estimated nearly 8 percent growth by 2021 — but there is still resistance to adopt from some in the industry. Cost and time are major reasons.

I read a report that said less than half of ERP implementations ran on schedule and just a quarter of the implementation costs were on budget. Providers have to manage expectations when deciding about ERP software.

What should you expect to spend on your ERP? It’s common for companies to spent 3 percent of their estimated annual revenue for cloud ERP. For a company with around $1 million in revenue, that is roughly $30,000 annually for ERP software while a company with an annual revenue in excess of $50 million can expect to spend $1.5 million or more. With more advanced technology on the horizon and a greater demand for its services, some companies may spend 5 percent or 10 percent of their revenue. Have flexibility with your budget in anticipation of rising costs.

As for implementation time, many buyers want to deploy an ERP system within six months. The timeframe for each company is different. There should be a level of expectation, determined by certain factors. A large company with thousands of employees and customers in many states can have a much different implementation time than a smaller provider. You must determine how the solution fits your needs, in addition to the number of potential users, application and customization level.

Other implementation time factors that providers should consider include staff training, ERP data migration and system customization. Training will provide the users of the software with the knowledge and support to prepare for when the technology is fully implemented. A test scenario should be used to simulate realistic business conditions. This will help discover possible critical issues, and ensure the system works as intended. Also identify the individual staff who will be responsible for implementation and training, and discuss the workflow for usability and effect.

I work with team members that train users on every aspect of their new system. A hands-on, one-on-one experience gives providers the chance to ask questions so they are prepared to go live. Just remember that fully implementing a system can take months or even years.

Insufficient testing of an ERP system can lead to problems for the business and its customers. This is what happened to the Hershey Company in 1999 in perhaps the most well-known case of ERP implementation failure. The company’s ERP implementation upgrade of its SAP system was expected to take three years. Implementation time was fast tracked and there were unforeseen issues, leading to the company being unable to fulfill $100 million worth of orders for their busiest time of the year (Halloween/Christmas). Problems with order fulfillment, processing and shipping meant distributors who ordered the products could not supply them and lost credibility. Hershey lost $150 million in sales, and its stock price dropped 8 percent in one day.

The ROI Factor

Nearly 60 percent of buyers cite the need to improve data integration between different processes as a top reason for seeking an ERP system, according to the ERP Software Buyer Report for 2015. ERP software can connect data on everything from customer information to sales orders to regulatory compliance.

I hear from many industry leaders and HME providers that talk about the benefits of replacing their legacy systems for business models with cloud-based systems capable of keeping pace with a new level of performance. With more employees working out of the office or at remote locations, accessibility and connectivity access are main reasons that hosted Internet services are overtaking on-premises network servers.

This is why attitudes of providers who have been resistant to adopt ERP technology are changing. ERP systems integrate all aspects of a company’s operations, providing opportunities for cost reductions and improved productivity. Organizations may not have the resources to fully manage areas like quality control, compliance guidelines and customer complaints. With ERP software, data is collected securely and accurately, through all steps of manufacturing and distribution processes. This enables providers to increase visibility and transparency into every aspect of their operation. They feel more in control, and that is something we all want to have.

When selecting a solution, HME providers should take into account not only their current needs but their needs for at least the next few years, weighing the benefits and drawbacks. Here are some benefits of having ERP software:

• Integrates data analytics.
• Tracks revenue metrics for sales, inventory and receivables.
• Improves billing payments/collection.
• Replaces paper reports.
• Provides more up-to-date reporting.
• Provides a secure network.
• Tracks regulatory compliance.
• Streamlines workflow.

With our industry facing many obstacles such as reimbursement changes and competitive bidding, it’s essential to have technology to rely on. As I mentioned before, think about the technology like an investment. By investing in technology for your business, you are investing in its future and in yours.

This article originally appeared in the November 2016 issue of HME Business.