While many software trends come and go, systems integration continues to grow in scope and importance. Many companies, including those in the healthcare industry, rely on legacy systems that operate in silos. Accounting, CRM, HR, and other business processes are conducted using separate platforms that do not communicate with each other or only do so in a limited way. Increasingly, technology vendors are proposing to replace these silos with a single enterprise resource planning (ERP) solution. This article is the first in our “Enterprise Resource Planning in Healthcare” series. It provides an overview of ERP solutions and advice on vetting potential ERP vendors. Future articles in our series will provide insight into negotiating ERP agreements and successfully implementing an ERP.
What is an ERP?
Enterprise resource planning solutions promise to provide real-time, integrated management of an organization’s business processes. ERP solutions typically include a suite of integrated cloud software applications that collect, store, manage, and interpret business activity data from all departments and business units. ERP solutions integrate project management, business analytics, human resources (HR), customer relationship manager (CRM), finance, supply chain and other applications with the aim of offering greater visibility to managers, increase efficiency, reduce errors and save money.
With the growing popularity of ERP across all industries, many software companies are entering the ERP space. ERP solutions can be programmed from scratch through original software development. However, it is often faster and cheaper to build an ERP solution by combining companies through mergers and acquisitions or by integrating components behind the scenes through licensing agreements.
Potential Dangers of ERP
Although the benefits of ERP can be substantial, implementing an ERP solution is not without its risks. Implementing ERP is complicated, time-consuming and resource-consuming both financially and by distracting staff from their core tasks. While some ERP implementations can take as little as six months, the process can easily take over two years. Companies that do not operate in the technology space may not be well equipped to screen and select potential ERP vendors, negotiate vendor agreements, and oversee implementation. While any business should expect to encounter challenges in the implementation process, all too often getting to the other side of an ERP implementation is more like digging into a rockslide than moving a few pebbles.
In order to derive the maximum benefit from ERP with minimal implementation pain, an organization must carefully consider potential ERP solutions and have a solid understanding of its own business processes.
Verification of ERP solutions
When researching an ERP solution, healthcare organizations must allocate ample time to review multiple vendors. When verifying a supplier, consider the following:
- Ask and speak with references, especially in the health sector.
- Identify the most critical components for the organization and focus on those when finding the solution. Ask if the critical components were developed by the supplier or come from an acquisition. In the latter case, ask how long the purchased component has been part of the solution and how many customers are using it.
- Ask for examples of difficult implementations. Ask the provider what made implementation difficult and what they learned from it.
- Consider hiring an independent ERP consultant, especially if the organization’s internal information technology team lacks experience with ERP solutions or is simply understaffed. However, keep in mind that no external consultant will have a deep understanding of the organization’s business, and a consultant will not remove all the burden from the organization’s staff.
Once a nondisclosure agreement is in place and the organization has narrowed down its list of ERP vendors, it helps to be as transparent as possible about the organization’s business processes. Letting ERP candidates “look under the hood” will allow them to more accurately assess the time and cost of your particular implementation, resulting in fewer surprises for both parties.
It can also be helpful to obtain copies of standard contracts from potential ERP vendors when making a final decision between two or three solutions. ERP contracts can vary widely and legal counsel can provide information on key clauses such as warranties and limitations of liability. This can also be a good time to ask the ERP vendor if they are flexible with negotiating contracts in general, and specifically with implementations of the size the organization is considering.
Takeaways for healthcare innovators
A successful ERP solution will touch every aspect of an organization’s business, and a problematic ERP implementation could potentially disrupt every part of the business. Verifying the ERP solution is an essential first step in reaping the rewards of ERP.
For more on ERP contracts and implementation tips, check back for parts two and three of our ERP blog series on Health Law Matters.