Why Midsized Companies Dread Upgrading Their ERP—And What They Must Do About It

Posted on September 4, 2018

Growing midsized companies must embrace ERP technology with strategic and tactical planning.

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Its contemporary colonial-brick headquarters nestles below Lehigh University. OraSure Technologies prospers in the heavy industrial belt once dominated by Bethlehem Steel. At its South Side Historic District location, the $175M revenue business is a leader in the development, manufacturing and distribution of oral fluid diagnostic and collection devices and other technologies designed to detect or diagnose critical medical conditions.

Back in 2005, with $70M revenues, metrics and experience showed OraSure’s leadership there was a need for change. They knew significant growth was coming, and while the system was adequate at the time, they weren’t happy with batch/lot management and traceability. They had to improve their MRP. And they weren’t confident their financials and inventory systems were capable of sustained growth.

But too many midsized companies dread upgrading their ERP. They are fatalistic. They’re convinced the upgrade will be a mess—and a bloodbath to boot. As a result, they continue to run the business inefficiently with all kinds of compliance risks and wasting millions of dollars. By the time they are forced to act, they do so without planning. They make poor choices, implement poorly, spend more millions, and extend the period where they are running poorly.

A typical approach avoids overinvesting in IT. C-suite pressure focused on short-term profits keeps IT lean and salaries and headcount low. The instinct resists overinvesting at any point and keeps planning to a minimum. Their logic prioritizes sales and quarterly profits. After all, as the thinking goes, all they have to do is “get through” the disruption of any upgrade.

Embracing ERP planning

Growing midsized companies like OraSure must embrace ERP planning. They must scale their infrastructure as sales ramp up. This is not something you do after the fact. Companies led by CEOs who favor sales, press to sell, sell, sell. But, they underinvest in company infrastructure. They let things like IT and talent acquisition go. When they push that too far, the company finds itself unable to deliver what they have sold. Everybody runs around putting out fires, too busy to take the time to build up the infrastructure. It is a terrible thing, and some companies never recover.

Instead, as sales start to increase, they must scale up the company’s infrastructure, so it keeps pace with the growth of sales and supports more seamless expansion. Investing in IT planning and IT leadership up front saves a bundle on implementation and efficiencies as the business scales upon a solid foundation. Getting there is half the fun!

Practical Steps

The overarching goal at OraSure was to buy an ERP platform that would grow with them, where they wouldn’t have to either replace it or cobble together disparate systems to fully support their growth. Scott Baker, then Project Manager, supported the research culminating in choosing SAP’s All-in-One solution in 2006, and they went live in 2007. Their leadership found ways to transition successfully:

1. Enable better management. You cannot make good decisions about an ERP installation or overhaul without really understanding business. The IT upgrade must be led by a business executive who is more than a technologist.

2. Know your internal team and their capabilities. Accountability for the transition requires an able team. The quality and experience of the team are paramount. OraSure, for example, had only one person—Scott Baker—fully dedicated to SAP. Shortly after their commitment to scale their infrastructure, he expanded the internal team to two to three people periodically supplemented by consultants, and it has remained steady for the past 11 years.Baker, today the most senior IT leader at the company as Director, Information Services, ultimately created an internal IT team with two functions. One is to support end-users as needed, usually detecting and fixing bad data that slips into the system and causes problems. The other function is planning, designing and implementing new projects, often teaming up with outside resources.

3. Understand the details. ERPs help run the business, so to make good decisions you must know the details. Those who lead operations (and in a midsized company that is often the entire c-suite) must be involved in a rolling 5-year plan for the organization. Planning shows them just how the business expects to scale. They must understand the requirements in detail. This five-year planning is not just about vision and mission. It is the detailed strategic and tactical plan for the operational scale-up over five years and the various loads placed on each department.

4. Develop IT consultants you can trust. Such change requires a steady IT consulting partner to whom you can turn. This is not a learn-on-the-job project. If you have not been through this kind of project before, you cannot anticipate the problems and opportunities. This includes external partners who add expertise and bandwidth during crunch time. The load on IT may double or triple as systems are upgraded. It makes no sense to employ specialized talent all the time—and you probably cannot hire them. You cannot keep a staff of 20. It makes more sense to partner with a VAR (Value-Added Reseller) with whom you have developed deep trust.

5. Choose the right software platform. The company must be strong and current on the ever-changing technology environment. It needs a system it won’t outgrow for a long time supported by a company that will still be strong decades from now.

6. Develop a roadmap. IT system changes are expensive, and if you don’t start with the end in mind, you can find yourself at a costly dead-end. You want to tackle the upgrade in as few steps as is practical, like mountain climbing. You climb a few feet and drive a piton into the wall before you continue to climb. Taking it one step at a time is less stressful on the organization and easier to control. Prioritizing sub-system implementations is vital. The planning is everything. Read more about creating growth-enabling practices and processes here.

OraSure launched its ERP with specific modules: finance and controlling, materials management, quality management, production planning (MRP), sales and distribution (order to cash), and warehouse management. They had purchased an “all in one” solution, but only implemented the most needed modules at the start, knowing that others were on the roadmap.

• In 2011 they invested in SAP’s Business Objects toolset.
• In 2014 they converted a Canadian acquisition to their SAP platform.
• In 2015 they turned on a module purchased back in 2006 to support new higher compliance requirements.
• In 2016 they activated another original module to lift customer complaint tracking.
• In 2017 they purchased SAP’s shipping add-on and implemented.
• Plans for a 2018 system expansion are already locked and loaded.

7. Secure full-alignment. A successful upgrade takes the trust and support of all management leaders—and the end-users. Taking the time to get full alignment will pay off mightily when the going gets tough during implementation—as it always does!

Having an IT system that supports growth rather than impedes it is well worth the investment.  With a strong, business-oriented IT team and proper investment and planning, a growing business can avoid the messy bloodbath that many of their competitors will experience and, instead, will focus on strategy and growth.

Since their decision to implement SAP, OraSure has doubled their revenues, added products and acquired and grown locations. They have launched many products, and their “new” system, now 11 years old, has supported those launches and their varied needs. The business has never had to slow down or run inefficiently because of their ERP system. They have had many compliance audits, and the system was shown to both support best practices and deliver strong reporting that satisfied regulators. And they can deliver financial consolidations easily and on time.

Invest in forward-looking IT

I met Scott Baker at SAP’s Sapphire Now 2018 Annual Conference where he was looking 3-5 years ahead and considering the right time to migrate his system to the next generation of SAP products. Like OraSure, growing midsized companies must embrace ERP technology with strategic and tactical planning. They must plan five years ahead in a volatile business environment that demands that planning be dynamic and forward looking. Only commitment, intelligence, and trust enable an effective transition.