Fighting Global Recession – ERP Way

We are facing one of the worst global economic meltdowns. Everyone is scrambling for safe shelter for his money. The first reaction of the corporate to the economic recession is normally cost cutting across the board.

Enterprise Resource Planning(ERP) is a supportive package for the business and is still considered by many companies as a necessary evil rather than an investment. So, if the business is down, the need for the ERP seems to be down and the first reaction is to have a sharp cut on ERP expenses.

But, is the cost cutting, the only strategy for minimizing the impact of global recession, at a time when the corporate have already started considering ERP as a good investment and a booster for business growth?

Global economy has its own cycle. After each boom, it also goes through recession and after each recession it has to come back to the boom period.

ERP managers should therefore consider this lean period of business as an opportunity for improvements in ERP and for increasing the rate of return on ERP investment in the long run. Economic cycle has to see bright days again. So, the wise man is the one who utilizes the bear phase to get ready in the bull phase. Cost cutting without effecting the performance of the ERP should only be a part of the strategy instead of being the only strategy.

For survival in global recession ERP strategy can be broadly classified in 2 parts 1) Cost Cutting without effecting the performance of ERP, 2) Utilising the lean business period for increasing the ROI for ERP investment

Cost Cutting:

ERP Support:There are 3 ways for ERP support:

o In-house support
o On-site support by external resources
o Internet-delivered remote support

The best approach could be the combination of On-site support and internet-delivered remote support as 70-80% issues can be solved by remote support. Remaining issues can be resolved on site. Server Maintenance: Setting up and maintaining your own server can be very expensive, looking at various costs incurred on such items as Staff, Electricity, air conditioning, Space etc. Server outsourcing to a data centre looks a better option AMC and License Cost: You can also renegotiate with the ERP supplier for license fee and AMC based on the latest or forecasted headcounts

Utilising the Lean Business period:

Normally the volume of business is reduced in the recession period. With the reduced business, availability of resources is easier. Due to reduced workload, management can also concentrate on the ‘important but not urgent issues’ which are normally ignored when the business is in full swing.

So, these resources along with management attention, can be used in many ways to increase the rate of return on ERP investment and to prepare ERP in a better way for the coming boom period.

Some of the ways suggested are:

ERP Optimisation: This lean period can be used for optimizing the ERP processes or introducing the new processes as per the present and future business requirements.

Data Cleaning: This lean period can be utilized for eliminating the duplication of the data and removing the data inconsistencies

Training of end users: Most of the end users could be having some amount of idle time. So, this idle time can be utilized for enhancing their ERP skills. They can be trained for advance functionality of ERP. This training could give very good returns once the business is again in full swing.

Training of suppliers/customers: Some of the applications of ERP may also require training for external agencies like vendors or customers. These external agencies can also be trained in this period.

Build Control: In a running business and high profitable years, the companies do not pay attention to the control & risk areas in the system. This may someday cause big financial losses. We have many examples like 7 Billion dollar fraud of Societe Generale SA, one of the largest bank of Europe, by a junior staff simply due to insufficient controls in the system.

So, ERP managers should also concentrate on the loop-holes/ risk prone areas in the system like excess or inappropriate access of the activities or the fields, to avoid any unforeseen disaster.

Data Analytics: ERP managers should also analyse the data generated in the past years to find out any data inconsistency or fraud through the system.

Implementation of ERP or new applications for ERP: When there is no business in the market, you can get the best deal in all respect. To survive in this period, suppliers give the best discount. Also, due to less number of projects, you can get the best resources which otherwise are busy on more lucrative foreign projects. Selecting ERP: When ERP is implemented in the company, it becomes backbone of the company’s business. It can affect your business in positive or negative way based on the quality and suitability of ERP to your business. Yet, the companies select the ERP like they are purchasing any other product.

Every company has a unique business model. So, before selecting the ERP, one should analyze the suitability of the ERP to the business. There are many ERPs available in market with very low cost to very high cost. Companies should do the cost benefit analysis of the ERP based on the size of the business before finalizing the most suitable ERP.

Their can be many other strategies for surviving the recession period based on the individual business. But, the approach should not only revolve round cost-cutting, it should also be seen as an opportunity to strengthen the muscles of the business to gain the maximum and achieve fastest growth once the boom period is back.