In my previous blog on Technical Debt, I explained the concept of technical debt using software architecture as an example, and described the saw-tooth pattern of well-run businesses that consciously accrue technical debt for a period before investing time in paying off the worst of it.
The technical debt metaphor also describes the challenges of businesses maturing from the inception stage to one can make a good business case for ERP and beyond.
All companies have technical debt, not just software companies. Your accounting or ERP software is a source of technical debt because it works exactly as the software engineers imagined it rather than exactly as you imagined it.
Most companies don’t go out and build accounting software from the ground up to suit their needs because existing accounting and ERP solutions do most of what they need well enough and building from scratch is expensive.
With software projects, technical debt is usually invisible to all but the software engineers. With ERP projects, the technical debt is visible throughout the organization, but unlike software engineering projects, businesses tend to think of technical debt in ERP projects as an expense, when in fact they are just paying off debt.
New businesses face a lot more pressing challenges than choosing an ERP system. The cheapest, most expedient choice is to run the business with Excel or an entry-level accounting system while growing the business. As the organization grows, business processes evolve around these tools and the people that use them. These business processes are not going to be the most efficient way of operating, but they are good enough.
Until they are not.
One day the accountants will realize that they spend a full week doing month end; or the company will start bleeding customers because the customer service doesn’t know what is in stock; or the warehouse manager will do a stock count and have to pay good money to haul expired inventory away.
In technical debt terms, these problems are all interest costs associated with the accumulated debt. The technical debt on the many, defensible, short-term decisions has accrued to the point where the business needs to pay off that debt; upgrading from an entry-level accounting package to ERP is how you do it.
Once you implement ERP, your business won’t be free of technical debt and you will no doubt incur more as the business matures.
Funds spent on business process improvements, better configuring your ERP system, additional modules, and customization should be viewed as a means of paying off technical debt created by every little operational compromise you make to get an accounting or ERP system under budget. Each compromise gets magnified as you grow resulting in another round of improvements.
The moral of this story – don’t let technical debt cripple your business. If your company has grown beyond the capabilities of a simple accounting system, look at investing in an ERP solution. If you have been using an ERP system for some time, look at how you can make more of it; or replace it with a more suitable system.