Should a growing SME move from desktop accounting software to a cloud alternative or upgrade to cloud ERP?
It’s one of the hardest questions facing a successful business. Unfortunately finding the right answer is getting harder. Both options are improving so quickly.
Cloud ERP is on a tear. The largest competitor by licences, NetSuite, just got a lot bigger since its US$9.3 billion acquisition by enterprise software giant, Oracle. At its annual conference in Last Vegas this week NetSuite announced it would rapidly expand its sales force and introduce a rapid-implementation program that slashes rollouts to 100 days or less.
This will mean NetSuite will sell to smaller SMEs which previously would have baulked at the cost of customisation.
On the other hand, cloud accounting software is becoming much more powerful than desktop software. It can extend its useful lifespan by connecting to dedicated cloud applications with more functions or processing capacity.
The most extreme example I have found is Australian e-commerce company Kogan. It used Xero and Unleashed, an inventory management app, to push through $170 million in annual revenue.
At the Accounting Business Expo in Sydney last month, Kogan CFO David Shafer also revealed that his company was making about 10,000 transactions a day through Unleashed – to audible gasps from the audience. Unleashed rolled up the transactions into one daily transaction before pushing it into Xero.
It makes sense to stretch cloud accounting software until your size demands moving to an ERP. The annual subscription for a handful of connected accounting and business apps works out to several thousand dollars. An ERP starts at $20,000 to $50,000 a year depending on the number of modules required. Once you add overseas subsidiaries, e-commerce or advanced inventory it quickly passes $100,000 a year.
However, all that money pays for higher levels of efficiency in operational processes, critical for achieving scale.
A wrong decision either way can be deadly. A company can stall because its systems can’t keep up with new business, or it could blow tens of thousands of dollars customising a platform that is excessively complex.
NetSuite is betting big on this rapid-implementation program called SuiteSuccess. It is essentially a best-practice playbook that pre-configures KPIs, dashboards and workflows for 12 industries (with more on the way).
The SuiteSuccess sales process centres on a three or four-hour phone call that hammers out the key workflows in the customer’s business. At the end of the conversation the business understands how the ERP can improve the way the business functions rather than replicate the status quo.
The sales call forms the basis for the implementation. All the information on workflow design is fed straight to the implementation team. If a demo account was set up it is converted into the production account – the conversation on workflows continues and none of the earlier work is lost.
In the past year NetSuite tested this model with 300 companies in eight industries and claims it has had very solid results. Customers went live 60 percent faster, lowering implementation costs by 18 percent, McGeever says.
The ongoing dialogue resulted in very high customer satisfaction. About 90 percent of this group were referenceable accounts, which is astounding given the reputation of ERP for trainwreck implementations. There were only four change orders in those 300 implementations, McGeever says.
Oracle is pumping millions into NetSuite to fuel a huge growth spurt. But although NetSuite is opening new sales offices all over the world, it won’t start selling in a new country until it has a localised version of the SuiteSuccess program to underpin it.
McGeever says the program is his number one project. It is quite remarkable how much attention the company is giving to SuiteSuccess. The senior team are hailing it as the key to selling ERP on a much broader scale than ever before.
The biggest question is whether this program will be as effective outside the US and with NetSuite’s partner consultancies.
In smaller markets such as Australia and New Zealand the partner community hasn’t always rolled out ERP as effectively as NetSuite’s in-house team. NetSuite can’t afford for partners to bungle up implementations, with or without rapid-implementation programs.
In fact, Xero CEO Rod Drury recently talked about a company that ditched NetSuite and went to Xero instead. That company may have been oversold in the first place, but it also points to the effectiveness of the cloud accounting app-plus-ecosystem approach.
To ERP or not to ERP; either option is much more attractive than it used to be. How to get the timing right? Now there’s a good opportunity for a business adviser.
Accountants and bookkeepers who become more familiar with the power and limitations in the cloud accounting ecosystems would be in a better position to make the call.
Sholto Macpherson travelled to SuiteWorld in Las Vegas as a guest of NetSuite.
Image credit: Eureka Solutions