Functionality and adaptability are the key features in selecting software that run your business. It ranks first in the priority list of selection criteria for enterprise resource planning solutions. Although such features and functions are important to keep in focus, catering to the present needs only can put the future of the business in jeopardy. One needs to optimize between the present as well as the future.
The 2016 Mint Jutras Enterprise Solution Study found 88% of companies perceive that they face a certain level of risk in their business and industries being swept by new innovative products, new marketing techniques, new business models or a combination of all these factors. Adding to these new risks there are more traditional and fundamental risks like expansion and growth, organizational restructuring, regulatory changes and so on.
All these risk factors can have a long lasting effect on business application requirements, making adaptability- the ability to easily innovate, evolve and change- even more important than current present functionality. It is thus prudent to prepare for the unpredictable as disruptive forces are almost inevitable in this digital economy. We do live in changing times, after all.
Risk Due to Digitization
Internet is the most thriving platform as its economy breathes life into itself every passing moment and it creates risk that weren’t even imaginable a decade ago. It was not a slow evolutionary change which could be anticipated in time but it all happened in a bang and took off from there. Digital disruption can emerge from anywhere and the survey depicts how people see those risks.
Comparatively, the threat from new, innovative products might pose lesser risk to business processes and business models but it pushes the companies to constantly invest in innovation and technology to be able to thrive. Opportunity can come and go in a jiffy. Thus, it is important to have a flexible ERP solution which although necessary is not sufficient for the company to capitalize on the opportunities that markets keep making.
New marketing techniques might include subscription mechanisms which can replace the method of outright sale of products. As an example, software companies which used to offer perpetual licenses now offer subscriptions to software as a service (Saas). These changes are important as they alter the way a company invoices, collects revenue and manages cash. A competent ERP accommodates such changes and makes operation easier.
It gets even more difficult to adjust with new business models with its inherent unpredictability and newness. Whatever the case, you do not want your ERP solution to prevent you from adapting innovative techniques. An adaptive ERP which evolves with the changing needs of the business is what is required.
Moreover, as risk can come from a combination of factors, it is even more important to continue current revenue schemes with these new opportunities.
Handling the More Traditional Forms of Risks
There are threats which emerge from sources other than the digital economy. Growth and regulatory changes being two most important ones amongst them. Growth can be indirectly effected by digitalization as the internet has leveled the playing field for globalization. Thus innovation and advancement can come from any corner of the world and spread everywhere. This has also opened doors for new markets to emerge and a larger consumer base. There are unprecedented growth opportunities as a result.
Expansion is the way to take advantage of such opportunities and it can be done through mergers and acquisitions. Both of these processes can disrupt the functioning of the enterprise and put added burden on finance, accounting and compliance reporting. It can also require the whole organizational structure to be reformed. It is important to allow such changes as quickly and efficiently as possible.
Changes initiated by growth brings about alteration in the methods of accounting and reporting. Apart from the executive management bringing in changes, the law and regulatory bodies can also introduce new methods which are mandatory to be followed. Such laws have been introduced in 2002 with the Sarbanes-Oxley Act and the convergence of standards and reporting requirements of International Financial Reporting Standards (FRSs) and US General Accepted Accounting Principles (GAAP).
The most recent and most significant of these are the upcoming changes to revenue recognition as a result of the merging of accounting standards (ASC and IFRS) which place new functional requirements on ERP. These changes are potentially the most significant ones that accountants have faced and thus an efficient ERP is the necessary support required to carry them out.
Inevitability of Customization
Innovation has gained importance over the years and in order to accommodate them time and again, the processes as well as the entire business model need to be fluid. Companies cannot afford to stagnate and rely on minor customizations by playing with source codes to deal with changes; they need to do more.
Modern-day ERP solutions are thus much more configurable, allowing the users to tailor and personalize the solution according to the specific and individual needs without including costly and invasive customizations.
If your current solution does not allow the customizations as listed, then it eats away the chances of innovation and has to be immediately done away with. It is as simple as that.
Lessons Learnt and Key Recommendations
An ERP which is an “all-over” may manage the present requirements but the future needs are more important to cater to. When sudden changes knock at the door these ERPs are not competent to adapt and as a result may become obsolete. The threat of disruption posed by digital economy can weaken your business and push you at the rock bottom if the system solutions remain stagnant.
Here are some recommendations that will help you befriend change and benefit from it:
- Change the current system if it is rigid and monolithic.
- Change it if it is unable to connect easily to new devices and platforms as and when required.
- Change it if it is unable to customize through configuration and tailoring.
You need to make a lot of assessment and evaluation to upgrade to a new ERP solution and the result is worth the effort. All that is needed is a fluid system that bends and moulds itself according to changing scenarios and new challenges. The future that your business is facing is unpredictable. It is best to work with change, when change is the only constant.