How to Fix Your ERP (Pt. 1)

A practical guide for high-ambition contractors.

Major thanks to Philip Constantino, Project Executive at Fort Myer Construction Company in DC and CloudRig Advisor, for contributing to this guide.

For Part Two (The fix),
see here.
Contractors have an ERP problem.

The question we get most frequently from execs, always curious about how their competitors are operating, is, “What should I do about my ERP? Are there better options out there?”

We’ve never had a great answer.

At first, because we didn’t know enough about the most commonly-used systems (Vista, Spectrum, Foundation, Sage 300, Quickbooks). Now, having learned them over years of working with customers, because we can’t strongly recommend a switch.

Switching ERPs is substantially more painful and costly than contractors anticipate. ERPs by their nature touch many parts of the business. Whatever you’re switching to is likely to be tough to implement. Studies show that implementation services alone will be 2–2.5 times your original software budget and that switching will disrupt your business for 12–18 months. Contractors on the market for a new ERP are typically in for a world of surprise and hurt.

Of course, answering “Don’t” to the question “Which ERP should I switch to?” doesn’t really solve the problem. The question is common because the pain is real, as anyone that has spent 5 minutes in one of these ancient systems knows.

ERPs' promise to construction was to manage every critical business function—payroll, job costing, HR, business intelligence, field management, equipment management, customer relationship management, and more—out of one tool, thus removing the data silos that kept contractors from delivering jobs efficiently and profitably.

But in reality, most of these capabilities are so hard to use and so infrequently updated that customers haven’t touched anything beyond the core bookkeeping functionality in years.

ERP vendors have set themselves an impossible task in trying to be everything to everyone.

First, because innovative and intuitive products are born of focus, and companies trying to do it all can’t give each feature the focus required.

Second, because legacy providers have to devote substantial resources to maintaining core systems that are often more than two decades old and can’t keep up with users’ evolving requirements.

Third, because, no matter how hard they try, ERP providers can never really escape their legacies as accounting systems. A “field system” to an accounting vendor means one that makes it easier to open a PO or bill for T&M, as opposed to one that helps foremen hit production targets or superintendents set a smart three-week lookahead.

Good accounting is obviously critical, but software that reduces everything to an accounting problem can’t deliver on other key functions—especially those related directly to the field and to production. ERPs don’t equip Superintendents to identify targets and get the resources they need to deliver, PMs to monitor earn/burn or build accurate projections, or controllers to efficiently complete WIP (a key accounting workflow!) because they’re so divorced from what’s happening in the field.

So,what’s a contractor to do? Switch out the ERP, take on 18 months of business disruption and employee retraining and hundreds of thousands of dollars in unexpected costs? Bring on consultants billing indefinitely by the hour? Live with a system that doesn’t really work?

Contractors can start by recognizing that, regardless of the system they’re using for accounting, they don’t actually have “ERP problems”. Really, they have PM problems (“It takes me 3 hours to figure out what this job is going to cost based on what we’ve done in the field”), superintendent problems (“Foremen don’t understand how production rates impact the job”), COO problems (“I don’t know where I’m making money, losing money, and why”), controller problems (“WIP takes 4 days because I’m chasing PMs to tell me what’s happening in the field”), etc. And they have one blunt (and typically outdated) tool they’re trying to solve all of them with, the ERP.

How can you solve all these problems? Start by looking at how other industries have tackled the challenge.

Most other industries—manufacturing, energy, utilities, defense, pharma, etc.—take a hub and spoke approach, in which the ERP serves as the source of truth for financial data, and into which different users plug in tools built to solve their specific challenges.

Take manufacturing. Every manufacturing company uses an ERP like SAP or Dynamics to house their core financial, transaction, and inventory data. But different people across the organization use different tools for their own key workflows—

Everything ties back to the ERP, so companies have one source of truth, but individuals benefit from tools that solve their key problems better. A manufacturer running exclusively on SAP can't operate as efficiently or innovate as quickly as one taking this hub-and-spoke approach.

Contractors will benefit from a similar approach. Rather than reluctantly rolling out their fifth ERP field extension in 10 years in yet another bid to get foremen and superintendents to speak accounting’s language, contractors must find tools built for the field and capable of translating the field's inputs back into the language of accounting under the hood.

The pushback here is always “we don’t want another point solution.” But we’ve found that contractors’ real concern is double data-entry and numbers that don’t match across systems—tools that don’t integrate, in other words. We sympathize, because integration with legacy ERPs has traditionally been difficult and costly.

Modern technology has solved this problem, and contractors can and should require painless, out-of-the-box integration with any ERP as part of their criteria when evaluating software.

They’re also concerned occasionally about price. But this concern is also misplaced. Check out a pricing slide from an ERP, with its unique lines for payroll, invoice review, HR management, equipment management, a field plugin, and more. Contractors aren’t saving by buying all their tools from one vendor.

Part Two of this article (out next week) walks through our take on a smarter way for contractors—namely, how you should think about assembling the right tools (or “stack”) to operate as efficiently as possible based on you size and business model. A sneak preview of the two key lessons, gleaned from years of conversations with market leaders—
  1. Your stack should evolve as your business grows.
  2. Your business is unique. Find and assemble the tools that serve it uniquely well, rather than settling for a monolith out of fear of point solutions.

Part Two, which details how your stack should evolve as your company grows, is

To see how CloudRig solves the PM, Ops, and Finance problems outlined above, sign up for a demo below and visit us at Booth 227 at the 2024 CFMA Annual Convention.

Get in Touch

See how CloudRig can unlock your operations today.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.