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An Epicor White Paper

9 Reasons to Retire YourHomegrown ERP Software SolutionBefore its Too Late


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Reasons to Retire Your Homegrown ERP Software Solution Before its Too Late i

WHITE PAPER

Table of Contents

Introduction ii

Reason 1:

Vulnerability and Isolation of Knowledge 1Reason 2:

Immediacy and Breadth of Data 2Reason 3:

Data Duplication and Discrepancies 3Reason 4:

Lack of Testing 4Reason 5:

Lack of Vision/New Advances 5Reason 6:

Shortcomings in Systems Architecture 6Reason 7:

Costlier Than You Think 7Reason 8:

No Built-in Learning Management System 8Reason 9:

Lack of Ability to Easily Integrate 9Conclusion 9About Epicor 10


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Reasons to Retire Your Homegrown ERP Software Solution Before its Too Late i i

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Introduction

In todays complex business environment, it can be very challenging

for in-house IT professionals to keep up with the pace of changenecessary to sustain a competitive advantage.

Whether the homegrown IT system you have seems "fine" for now,or your company has developed strong loyalty to a custom-builtsolution, these options cannot offer you the level of protection andsecurity of an outside enterprise resource planning (ERP) solution.

ERP system installation is often thought of as the most risky,expensive, and disruptive investment a distributor can make in theirbusiness. However, you must also consider the inherent risks of ahomegrown solution. When you argue against a potential system

switch with costs, pain, and efficiency concerns, you should take alook at them as they exist in your current system.

Compared to a robust ERP system built by a well-establishedsoftware provider, homegrown tends to be fragile and lacking in-depth support. And while a custom-built system may seem to offercontrol and flexibility, it may actually lock you into a suboptimalsolution. Some basic questions to consider include:

Is software development really your core competency? Can you spare the programming resources? Do you have the years and the capital to develop, test, and fine-

tune your application?

What happens if you lose the precious few resources that cansupport and maintain your older technology?

What is your visibility into emerging technologies and industrybest practices that other distributors are using?

Is your system truly integrating information and processes fromall functional divisions of your organization, or do you havedisparate data sources running your business?

Cost-effective ERP solutions meet distribution organizations

demands by leveraging existing applications and technologies, whiletaking the burden off your internal development resources.

For all of these reasons, it is in your best interest to partner with aleading ERP provider, in order to advance your operations to the nextlevel of efficiency.

To help answer the above questions and explain the realities of anERP system, we have compiled the top nine reasons to weigh theadvantages of an outside ERP over your homegrown system.


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Reasons to Retire Your Homegrown ERP Software Solution Before its Too Late 1

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Reason 1:

Vulnerability and Isolation of Knowledge

Using a homegrown solution can raise numerous challenges. Forexample, what happens if your IT director is no longer with thecompany? Or the programmers who developed the original applicationmove on to other projects, other jobs, or retirement? You may becoding in yesterday's technology, and will find it hard to replaceresources who are familiar with and competent in those environments.

Who will take over development of the current system, and how willthey get up to speed on the application? With only a limited staff ofcustom programmers, its unlikely that you are taking full advantage of

the ideas and innovations of other leading distributors or industryconsultants. You may never be able to develop capabilities at the rate ofthe rest of the industry, and competitors in your market will pass you.

Items to consider

What are you planning to do about areas of the system that were codedby people who left the company years ago? Typically, there are certainareas that everyone is afraid to touch because they are not readilyunderstandable and not coded to standards. If you try to remodel those,will they ever really work the right way?


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Reason 2:

Immediacy and Breadth of Data

Even if you were to successfully reface your homegrown system to amodern graphical user interface and port to a relational database, youwill still be technically challenged by the core foundation of a customsystems millions of lines of business code. Moreover, a homegrownsolution is unlikely to include some of the advanced data capabilities ofmodern ERP systems:

Batch System vs. Real-Timeolder custom systems are usuallyupdated via batches (daily or monthly), and it is extremely difficult torewrite all the logic into a 100 percent real-time system. Batch

systems also typically have lengthy day-end, month-end, and year-end processes.

Limited Historyhomegrown systems often have limitedtransactional history, as the data is purged every few months. Thisforces you to refer back to paper reports or information that isstored in a separate document imaging system.

Limited or No Drill-Downsolder systems have limited drill-downcapabilities where you can view summary information including paidA/R invoices, POs, A/P invoices, and GL entries.

User-Friendly Interfacehomegrown systems typically lack theability for end users to customize the interface and information totheir specific business needs, make them more efficient, and viewdata that is most relevant to their job function.

Items to consider

Lack of rapid access to required information also may require extrahands to manually track down the data, causing you to overstaff yourcustomer service department.


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Reason 3:

Data Duplication and Discrepancies

It can be quite challenging for company employees to get the data theyneed directly from a homegrown solution. If you plan to port data on anightly basis to a data warehouse on an open database like MicrosoftSQL Serverfor reporting, there may be data discrepancies betweenyour legacy system and the data warehouse.

You should ask yourself, if your reporting is going to be done off a SQLdatabase, why not have a core business system that runs off SQL, sothere doesnt have to be a translation layer between two separatedata structures?

Refaced custom systems usually have areas of the system that dont fullyintegrate with other areas, creating inefficiencies by doing duplicatework and creating disparate (and possibly conflicting) data sources.These areas can include such important functions as direct billing andA/R cash receipts.

Items to consider

Where will the data reside after a remodel? If not in a SQL-baseddatabase, you may always have compatibility problems with off-the-shelf packages such as Office, MapPoint, BI, CRM, etc. If you have tostruggle to pull data ad hoc, your decision-making may be hampered by

a lack of information.


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Reason 4:

Lack of Testing

Homegrown systems clearly are not receiving the benefits of otherleading distributors knowledge and experiences. On the other hand, anERP software company has to sell its solution to thousands of customersand end users. This means there are many more end users involved inthe beta testing and ensuring the software does what it needs to dobefore it is released.

What better way to instill confidence in your system than to have adedicated QA team and hundreds of other users testing it to make sureits rock solid? How many people test your internally developed

applications, how much industry experience do they have, and howmany meaningful scenarios can they come up with?

Items to consider

The wide-ranging testing in real-life scenarios by leading ERP companieshelps bring best practices to bear. You may have coded a process intoyour system because that was the way it had always been done at yourbusiness, but there may be a better process that you are missing (andothers are using, giving them an advantage). Considering theinterdependencies of an ERP solution and the global nature of manybusinesses today, who is best prepared to ensure that the forecasting

logic is correct, for example, or that European accounting rulesare followed?


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Reason 5:

Lack of Vision/New Advances

Up until the year 2000, it was fairly common for distributors to writetheir own business systems, as it was believed this provided acompetitive edge. Now, however, technology is evolving at anexponential pace, making it nearly impossible for small IT shops to keepup with the changes in solutions that a business needs to remaincompetitive. A distributor with an in-house IT staff for its custom systemis actually at a competitive disadvantage today.

Best-selling author Geoffrey Moores book, Dealing with Darwin,outlines a blueprint for sustaining a competitive advantage. The key

principle is to focus on what is coreto your business and providesdifferentiation, and outsource contextto someone who is better at thatthan you.

The key question is, Should we be in the software developmentbusiness when our core competency is as a wholesale distributor?

Items to consider

The critical problem is vision. Effective systems development requiresa single vision translated into architecture. But instead of beginningwith a vision, custom IT shops often begin with bullet points or a listof different goals and expectations.

No matter what your IT department tells you, they are not a softwarecompany and cannot possibly operate like a best-in-class one. There

just aren't enough great programmers to meet the demands withinthe distribution industry.

Software companies are in the business of not only developing theirsoftware, but also making sure their customers are happy, andstaying on top of new trends and advances that can benefit them.


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Reason 6:

Shortcomings in Systems Architecture that Lead to Workarounds and Patches Basedon Tribal Knowledge

In most cases, distribution employees want systems to meet theirimmediate needs, and they want delivery yesterday, at the latest.When IT doesn't deliver, employees are apt to create variousworkarounds, causing the company to lose the economies of scale thatcan be achieved by having everyone adopt standardoperating procedures.

A major concern with a homegrown solution is that custom IT shopsdon't understand systems architecturethe ideas that front, middle,

and back offices have different functions and different requirements. Acustom IT system, for example, might have good front-office analyticsrunning in real time, but may not be able to perform credit riskmanagement because the middle and back offices use batch processing.

After all, risk management requires linking current order entry inputswith data from legacy back-office systems to provide up-to-dateexposure information. Fixing these shortcomings inevitably leads topatches, add-ons, and workarounds.

Equally disastrous is asking each employee what they want from asystem without having a method to cut the project down to the

essentials. "Companies fall into the toy store syndrome," explains aconsultant. "Everyone wants something, so they decide to write specs."

TD Bank Group reportedly spent $4-5 million by first asking everyonefor a wish list. It quickly had a massive list, and three years later,there was still no software to show for its ambitious plans.


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Reason 7:

Maintaining Your Homegrown Solution May be Costlier Than You Think

While on the surface, remaining on a homegrown system may appear tobe the least risky choice, there are many underlying challenges andtrade-offs associated with your current custom system environmentand there is often a price tag attached.

In-house development can be much more costly than it appearsfarmore so than partnering with a leading distribution managementsystem. Add up the salaries of your development team, the downtime inuser departments during all phases of development, and theopportunity cost of not putting developers on other worthy projects that

would propel your business forward. The time it requires to extractmeaningful data for executive analysis out of your database must alsobe included as a cost consideration.

The maintenance of custom applications is time-intensive, slow, andfraught with undocumented functionsand thats just for normaloperations. Dont forget the cost of downtime when outages occur. Thecomplexity of todays computing environments only magnifies thedifficulties and expense of implementing and maintaining thesecustom systems.


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Reason 8:

No Built-in Learning Management System to Maximize Employee Adoption andUtilization

The average end users utilization of an in-house system is typicallylower than on a standardized ERP, due to most of the inner workings ofthe system being tribal knowledge, as noted above. Distributorstypically dont hire professional documentarians, so they have limitedonline help screens. They also rarelyhave comprehensive user manualsor documentation for end users to easily understand how the programsand forecasting logic work. When people don't understand the system,they don't use it as frequently or efficiently.

Items to consider

The focus of homegrown solutions is often on the features and not onbest business process flows, so they usually dont have standardoperating procedures. Your old system may be familiar to your long-term employees, but it is likely to be quite foreign to new hires raised onMicrosoft Windowsand the Internet. How will you be able to recruitgood talent if potential employees don't want to work in a customer-built environment, but would rather access industry-leading tools andtechnology that will enable them to perform their jobs better?

Homegrown systems typically dont have robust learning management

systems to coordinate employees learning; e.g., by setting up trainingagendas with due dates, recording Web-based training classes to betaken on demand, or setting up tests to certify employeesunderstanding of various areas of the system. All of these can maximizeemployee adoption and utilization of the IT system.


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Reason 9:

Lack of Ability to Easily Integrate with Other Leading Technology Solutions

Your homegrown solution may not play well with others. Inparticular, if it cannot integrate with an eCommerce storefront, you maybe unable to offer customer-specific pricing and pull other ERP data intoyour online store without a lot of duplicate data entry or customdevelopment work. Web storefront adoption is projected to explode indistribution, as 98 percent of retailers have a strong eCommercepresence, versus just 18 percent of distributors. Leading distributors areinvesting heavily in eCommerce, as the younger generation expects tobe able to conduct all business in the same way they do Internetbanking and shopping online.

Conclusion

While your homegrown system may seem comfortable and familiar,chances are you are missing out on advanced functionality that couldgreatly improve your business operations, employee productivity, andbottom-line profitability. A leading ERP solution that is focused ondistribution will provide a modern technology environment now, whilealso offering forward-looking business applications such as integrated

eCommerce, business intelligence, and a comprehensive inventoryforecasting module. You owe it to your business to investigate optionsbeyond thestatus quo.


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About Epicor

Epicor Software Corporation is a global leader delivering business

software solutions to the manufacturing, distribution, retail, and servicesindustries. With nearly 40 years of experience, Epicor has more than20,000 customers in over 150 countries. Epicor solutions enablecompanies to drive increased efficiency and improve profitability. With ahistory of innovation, industry expertise, and passion for excellence,Epicor inspires customers to build lasting competitive advantage. Epicorprovides the single point of accountability that local, regional and globalbusinesses demand. For more information, visitwww.epicor.com.

Disclaimer

This document is for informational purposes only and is subject to

change without notice. This document and its contents, including theviewpoints and content expressed herein are believed to be accurate asof its date of publication, March 2012, but Epicor Software Corporationmakes no guarantee, representations or warranties with regard to theenclosed information and specifically disclaims any applicable impliedwarranties, such as fitness for a particular purpose, merchantability,satisfactory quality or reasonable skill and care. We welcome usercomments and reserve the right to revise this publication and/or makeimprovements or changes to the products or programs described in thispublication at any time, without notice. Epicoris a registeredtrademark and/or trademark of Epicor Software Corporation in the

United States, certain other countries and/or the EU. All othertrademarks mentioned are the property of their respective owners.Copyright Epicor Software Corporation 2012. All rights reserved. Nopart of this publication may be reproduced in any form without the priorwritten consent of Epicor Software Corporation.

For more information, contact Epicor Software Corporation:[email protected] www.epicor.com.

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