How to Bite the ERP Bullet

WHEN JANNA RONERT, ORIGINALLY A FARM GIRL FROM NEBRASKA, founded Image Skin Care company 11 years ago in Palm Beach, Florida, sales of her specialized skin-care products swiftly expanded to 50 countries around the world. As sales exploded, Ronert recognized that having separate information technology (IT) systems for such functions as finance, manufacturing, inventory and human resources was no longer working. “In managers’ meetings each week, all this information was flowing in, but it was a river to nowhere,” she explains. “We had to bring it together into one system.”

As CEO, Ronert did not have anyone on her staff who could install an Enterprise Resource Planning (ERP) system that would tie all those functions together, so she hired a COO, Kevin Patrick, who had deployed the systems at other companies. Patrick turned to Effective Computer Solutions, based in Ponte Vedra, Florida, which was a channel partner of the German software giant SAP. They were able to install SAP’s Business One system in about 90 days and launch it two years ago. The total cost, including equipment and training, was $300,000. The ERP system is physically located on Image Skin Care’s premises, but the company moved other functions to cloud computing. The end result was a hybrid system—part on-premise and part in-the-cloud. “It was worth every single penny and more,” Ronert says.

THE ROI ON ERP
What the system allows the company to do is to gather information on what types of its products are selling in different climates around the country and the world, giving it clues as to how to adjust its manufacturing and inventory levels. “That’s where the deficiency had been—in capturing information from our sales arm and disseminating that to the rest of our people,” Ronert explains. The end result has been better decision-making about how to manage the company’s product portfolio. “In Florida, where there is sunshine 300 days a year, sunscreens and protection are key products for us,” she explains. “But where I’m from in Nebraska, we only see the sun six months a year so hydration and protection from other elements becomes very important.” With sales north of $25 million a year, she anticipates migrating more functions to cloud computing.

As smaller companies reach a critical point in their growth trajectories, the vast majority face IT decisions like Ronert’s. They are tough calls because smaller companies don’t always have separate IT staffs. The company’s finance people may use Intuit’s QuickBooks for accounting, but manufacturing, supply chain, distribution, human resources and other functions have grown up with different, non-compatible systems.

Aside from needing to make better, faster decisions, CEOs of these companies find that large customers, suppliers and partners demand timely information when doing business with them. “The requirements for integration today are greater than ever before,” says Joshua Greenbaum, a consultant at Enterprise Applications Consulting, in Berkeley, California, “You have to be able to live in an extended supply chain with very complex demands and very rigorous service levels. You’d better upgrade or you won’t be able to do business.” The advantages of basing an ERP system in the cloud—meaning in the hands of a technology giant like Microsoft or Amazon—are rooted in being able to pay a monthly licensing fee rather than having to lay out the big bucks to buy and maintain your own system.

CEOs can also easily ramp up their use of the services when their businesses enjoy a sudden spike in growth. “In a traditional environment, you go through a procurement process and then, three or four weeks later, you get a piece of equipment,” says Alex Rooney, vice president of SAP’s channel partner Vision33 in Irvine, California, “But if you’re in the cloud, I can spin up another server and expand your infrastructure in 10 minutes. You’re paying for only what you use.” If a company’s business declines for any reason, perhaps because a peak buying season passes, it can cut back on its consumption of services and software. “It’s leaps and bounds ahead of what you can achieve with a traditional infrastructure,” says Rooney.