Implement a new ERP solution. Now is an excellent time – HANS PETER BECHTBKconsult
Although the world economic outlook is gloomy just now, it doesn’t impact all companies the same way. One thing is sure; the Corona-crisis will not last forever. As we gradually approach normality, there is nothing wrong with considering how to be best prepared for the busy times ahead. Of even consider implement a new ERP solution.
It’s May 2020, and the world economy is suffering from COVID-19.
“As a result of the pandemic, the global economy is projected to contract sharply by -3 per cent in 2020, much worse than during the 2008–09 financial crisis. In a baseline scenario – which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound – the global economy is projected to grow by 5.8 per cent in 2021 as economic activity normalises, helped by policy support.”
Source: The International Monetary Fund, April 6, 2020
The contraction of the economy during the lock-down is much deeper. It maybe 25 to 30 per cent, and some industries are even harder challenged.
The projections from IMF, which includes estimates for the individual country, is not encouraging reading.
Where these estimates are valuable to policymakers and global enterprises, they are less interesting for small and medium-sized companies and their suppliers. On a micro-level, however, the variations are significant. It’s like the old joke . A person with one foot in boiling water and the other in an ice bucket on average is doing fine.
Where some industries are affected negatively by the Corona-crisis others are affected positively. Whether you are operating in one or the other makes a huge difference.
Companies were very differently bolstered as the crisis hit. Some were already suffering, while others were well consolidated. The bottom line is that there are plenty of companies which may or may not be affected that are still able to operate and to prepare for the future.
Corona crisis will not last forever
When you shift your gaze from the 2020 estimates to the 2021 numbers, you will realise that the Corona crisis will not last forever and that we are about to become very busy. When we get busy, then software-related expertise becomes a bottleneck. Therefore, if you believe that your company will make it through the crisis, now may be a great time to do an update of your business software infrastructure. And it is time to consider to implement a new ERP solution.
Act now – pay later
Just recently I saw an advertisement from IBM offering customers to undertake their project now and defer payment to 2021. Such an initiative is an indication that they have people sitting on the bench with nothing to do.
IBM is not the only software company with highly skilled and experienced software professionals on the payroll that have been released from projects being delayed or put on hold.
Now is an excellent time to implement a new ERP solution
If you are in a position to run an IT project just now, then you can get the best minds available on very favourable commercial terms. That’s why now is an excellent time to implement a new ERP solution. Wait twelve months, and the situation will be completely different. Prices will increase, and skilled people will be hard to find.
When implementing business software, the human factor plays a pivotal role. The same software can become a success or a failure depending on the people on the project. Take advantage of the situation and prepare yourself for a busy 2021 by streamlining your business software platform. Your best people have time now, and so do your service providers.
Software is eating the world
The great benefit of operating in the software industry is that we are always a part of the solution.
When companies want to:
- improve productivity,
- reduce costs,
- expand production,
- improve their product and services ,
- enter new markets,
Information technology and especially software is always an integral part of the change.
New needs related to the crisis
Marc Andreessen made this observation in his renowned 2011 article in the Wall Street Journal. It has turned out to hold true.
Many software developers have been very busy since the Corona crisis hit us. It’s because suddenly there was a need for new apps, functionality and reports to handle the situation.
However, many projects have also been stopped or delayed making our people idle.
Instead of accepting the situation, we should take a virtual meeting with our customers and those in the pipeline and explore opportunities. Maybe there are ways to continue the work, or maybe there are other projects from which our customers can benefit.
When neither the customer nor you have the financial means to undertake projects that otherwise would be meaningful and profitable, then it’s time to talk to the banks. Despite the crisis, there is plenty of cash out there, and the interest rates are low. Governments in most countries have a broad assortment of subsidising programs in place to help companies through crises. The support includes programs supporting digital transformation. If the business plan is sound, then the chances for funding are good.
Shaking off the paralyses
Knowing that the 2021 post-Corona environment will be crazily busy, we (the customers and you) must shake off the paralyses. Business software projects consist of software, people and maybe some hardware. Despite the current financial turmoil, these resources are available. Letting them sit idle is an awful waste. Bringing them together to do meaningful projects should be possible. Especially when it may require thinking outside the box and inventing new means of collaboration.
From time to time, I get inquiries from companies that can’t afford to pay for my services. As my involvement may be crucial for their success, they offer to pay me with shares or warrants. Sometimes I find the projects so intriguing that I accept. Accepting shares for cash changes the relationship entirely and makes the pre-sales qualification much more detailed. Being a vendor and a shareholder are two fundamentally different roles. But in the current situation, that format may be one way of moving forward.
The opportunity cost of software is always zero
Work now and pay later, like the IBM proposal, may also be an option. The opportunity cost of software is always zero. And if the opportunity cost of your people is zero too, then you are better off working now and getting paid later. You will need a contract that gives you ample flexibility when the opportunity cost changes. Being tied to an agreement with huge opportunity cost is not acceptable to anyone.
Go for “fit for purpose” and pick your customers carefully
As the opportunity cost of the software doesn’t change when the economy picks up, you should look for projects where the customisation, integration and implementation effort is relatively limited. This way, you reduce the risk for both you and the customer. Projects that can be completed within three months could be ideal for special deals in the current environment.
Not all customers can be eligible for special deals with innovative or deferred payment. When doing deals that depend on events in the future, we are exposed to higher risk. The future may turn out differently than expected, and mostly it does. With innovative and flexible terms, you as well as the customer must have the option to renegotiate along the way. Only an amicable and trust-based relationship can accommodate changes that are acceptable to both parties.
When times are tough, some customers try to take advantage of the situation. And they suggest contracts where the payment is performance-based. There is nothing wrong with performance-based agreements as long as you are only measured on your performance. The fundamental principle that you should only assume responsibility for the risk that you can control remains intact, especially during a crisis.
While software service providers may be fully responsible for the failure of a project. But they will never be fully accountable for its success. Without the customer’s dedicated contribution, projects may fail. It would be best if you never assumed responsibility for issues that only the customer can control. And in a constructive relationship, no one will suggest that you do so.
Always look on the bright side of life.
Yes, we are in tough times, and yes, it isn’t straightforward to see when and how things will get better. But it is what it is, and we must get the best out of it.
When the winds of change blow, some people build walls, others build windmills is an old Chinese proverb. The darkest nights produce the brightest stars is another adage, reminding us to look for the opportunities instead of dwelling on the problems.
Although the world economic outlook is gloomy just now, it doesn’t impact all companies the same way. Also, one thing is sure; the Corona-crisis will not last forever. As we gradually approach normality, there is nothing wrong with considering now how to be best prepared for the busy times ahead.
When we put our minds to something, it’s incredible what we can accomplish.
Stay safe and look ahead.