Do industry-specific ERPs matter in 2022
I was chatting recently with the principal of an architecture firm. She was describing her firm’s workflows and I was describing how they might work with different ERP systems – enterprise resource planning (basically fancy accounting systems). The more we talked the more it seemed like NetSuite would be a good fit for the firm. But she asked me,
“We’re an AEC (architecture, engineering & construction) firm… don’t we have to use an ERP built for architects?”
It's a good question and the answer (like the answer to most good questions) is: It depends!
What’s the difference?
You might think that if an ERP is built specifically for your industry, it’s going to be a good fit for your workflow. But in my experience, the capability of project ERP software doesn’t change that much from product to product. There are some true outliers but mostly they have the same underlying functionality.
Of course, some are stronger in some areas than others. For example in Sage Intacct Projects, the resourcing functionality (where you measure the capacity of your team) is really granular; you can schedule people down to the minute and track who has what certifications and skills. In Unanet the options are not quite as detailed but you can assign project tasks via a graphic user interface that many people find easier to navigate than the grid in Intacct. One is not better than the other; they’re different.
However, a big differentiator between project ERP’s is how they handle materials costs. For example, Big Time, like most systems, can tell the difference between time and expenses, but it can’t differentiate between a project budgeted cost that requires a purchasing workflow (like construction materials) versus an incidental expense (like lunch). NetSuite Project Management meanwhile has completely separate workflows for a few types of project costs. Again, one of these is not “better” than the other, but if your projects need a purchasing workflow, one of these is a clear winner.
Another differentiator worth mentioning is change orders. Some system aren’t great at “snapshotting” what’s approved or linked to a written agreement outside the system. Some are really good at it. For example, the recommended workflow for this in Sage Intacct Projects is a child-project to the parent, which does the job, if inelegantly. IT Associates ProCim meanwhile has a regimented Project Change Notice workflow. It just depends on what is important to you and your workflows.
What makes it an industry-specific ERP?
Some ERP systems are (or claim to be) purpose-built for a specific industry, or have evolved into widespread use in a sector. For example, Deltek is famous for its AEC products but was originally developed for government contracting.
The evolution makes sense: government contracting requires stringent audit controls and has detailed reporting requirements. This lent itself to complex construction projects, and other related professional services followed along.
But when you look at the functionality of most ERP systems, few of them really stand out as being truly industry specific.
For my dollar, “industry-specific” needs to go beyond marketing and really bring the goods for a complex sector. Here are some examples:
If you’re a general contractor, you might be tracking retainage (money held back by your client from you, or by you from your subs). If you’re doing public sector work in California you’ll need to track percentage-to-completion carefully and know when that retainage is due to manage cash on your project.
If you're an advertising agency carrying media costs, your cash flow lives and dies by tracking pay-when-paid in your accounts payable process.
If you’re a property management company that has trust accounts for your clients, your accounting can get complex in a hurry. Double that if you have your own service teams working in your own vehicles.
If you’ve got an extremely specific need, I definitely see the value in a purpose-built product, but let’s face it, a lot of the ERP marketing out there targeting industries (especially AEC) is all hype.
Tradition and the human element
Even if industry-targeted marketing is mostly hogwash from a product functionality perspective, there is a compelling reason to consider a product traditionally associated with a sector: Experience. If you’re hiring fast, and you have the system that a lot of other firms like yours have, new hires have a better chance of being up to speed on your systems faster than if you have an ERP system that no other firm like yours has.
The very real flip side to this argument, however, is with experience comes bad habits.
I always take the position that I’d rather hire for soft skills and train for hard skills.
So do they matter or not?
I know I know… TL;DR what’s the bottom line?
Even if you’re an architect or engineer, and your project cost workflow consists of time and/or fees plus expenses, and you’re not acting as a general contractor and you’re not tracking construction costs within your project accounting environment, and you’re not doing public sector projects with very specific reporting requirements… what’s the difference? Why not open yourself up to the many more modern, more flexible and better-developed systems out there than what was the industry standard ten or twenty years ago?
You want my advice? Focus on the best fit for your workflows. If you need help defining and optimizing your workflows or evaluating and selecting technology – or simply need more advice – drop me a line at joe@teelexinc.com