For many growing companies, investing in enterprise resource planning (ERP) software looks a bit like marriage does to a teenager: It’s a thrilling but intimidating bridge they assume they’ll cross one day … just as soon as the stars align and they’re 100% certain they’re making the right decision.

But in business, as in life, things are rarely that simple. Organizations often find themselves taking the plunge even when they’re investing resources they don’t quite have—and inviting a level of disruption that will leave them with no way back to the status quo.

The ERP decision point can arrive sooner than expected—sooner than it did before cloud deployments removed some of the capital assets (hardware) required, with modern systems available in forms that are more modular, less complex, and more industry specific.

So how can a business leader of a midsize, growing company best time their leap to ERP? What are the clues and indicators, the flashing lights on a business dashboard, that tell leaders it’s time to upgrade their systems? To answer this question, we reached out to some happily ERPed leaders for their insights and reflections on how to know when it’s time to Go Big.

Flashing light No. 1: Growing pains

A definition of terms may be helpful here.

ERP stands for enterprise resource planning, and enterprise, in business parlance, is a rough synonym for company or corporation that connotes greater size, stability, and complexity.

Enterprises, in a word, are big—and the most straightforward reason for a company to make the jump to ERP is that it has grown, is growing, or expects to grow imminently into an enterprise.

In the simplest cases, a happily upward-trending line on a growth chart can be all the impetus executives need to pull the trigger and invest in ERP. Look, we’re becoming an enterprise! Ergo, let’s invest in the software that enterprises use to plan their resources!

But knowing it’s coming doesn’t mean it can’t catch you unawares. For many businesses, the first clue that it’s time for ERP is when existing systems start struggling to keep up with the pace of growth—a lack of capacity that manifests as bottlenecks, inefficiencies, and other obstacles to productivity.

That’s how it was for We Fabricate, a Dutch manufacturing startup specializing in quick-turnaround custom prototypes and molding. Arno van der Heijden, who oversees the company’s factory operations, says the company was already enjoying rapid growth when he joined two-and-a-half years ago—propelled by an order for “millions and millions” of molds to make COVID-testing swabs during the pandemic. According to van der Heijden, the whole operation was running on “a relatively unknown small administration software system” in tandem with “an open-source ERP system with no integration to the financial administration.”

We Fabricate continued to grow, acquiring two Dutch startups in the energy sector and expanding into China. The company’s leaders found they were spending ever-larger amounts of valuable time managing a “complete mismatch between the financial administration and the logistics administration,” van der Heijden recalls—and their accountant, in particular, “was not too happy.”

For an ambitious tech company committed to “future-proofing” its operations as much as possible, this cluster of growth-related software headaches gave new allure to a powerful, integrated ERP system—and the decision was made.

We Fabricate’s founders settled on a market-leading provider and retained consultants to smooth the transition. Twelve weeks later, the system was up and running. The company is now in a phase of “triple-digit growth,” with 13 separate legal entities tracked and coordinated in a single system—truly an enterprise in the grand sense of the word.

Looking back, the only real speed bump came early on, van der Heijden recalls—and it’s one that many tech-sector companies may encounter. We Fabricate’s founders all have backgrounds in software and engineering. When it first became apparent that their existing systems were struggling to keep pace with the company’s growth, the founders’ first instinct was to try coding and engineering their way out of trouble. Surely with a splash of fresh code here, a little data plumbing there, these problem-solvers could invent a bespoke solution to their problems for a fraction of the cost of an off-the-shelf ERP.

And maybe they could have. In earnest discussions, though, the team soon determined that keeping their systems fit-for-purpose would be an ongoing project, not a one-time fix, and that savings in time and money could prove both meager and short-lived. We Fabricate went big and has never looked back.

Flashing light No. 2: Competitors are winning

Simple growth isn’t always the catalyst. The decision to upgrade to an ERP system can also be spurred by the uncomfortable recognition that competitors are gaining a competitive edge through their own more efficient and streamlined operations.

How do you know you’re being out-ERPed by a rival?

Sometimes the news will reach you directly through word of mouth or the corporate grapevine. For many growing companies, after all, the jump to ERP is a badge of success and a milestone worth crowing about.

Others, though, are cagier. According to Guy Couillard, a longtime SAP consultant and CEO of Montreal’s Baton Simulations—which builds gamified training modules to help companies get the most out of ERP systems—something as simple as a competitor’s slick new Web site can be your first clue of an upgrade on its backend. If the prices in its online store are constantly updated, for instance, with targeted promotions and “Out of Stock” messages appearing dynamically, that can indicate the kind of automated integration of storefront and inventory management systems at which modern ERPs excel.

For more proactive sleuths who are curious about a competitor’s ERP status, Couillard has found that inquiries to a company’s customer support desk can be surprisingly informative. “If you need to talk to three or four different people to get an answer,” he says, “that’s usually a clue of lack of internal integration”—whereas reps who suddenly have wide-ranging information at their fingertips could well be basking in the glow of a new ERP system.

Flashing light No. 3: Missing talent, missing paychecks

So far, so intuitive. ERP is computer software. It stands to reason that a need for it would first reveal itself in the technical realms of business, such as Web sites and inventory management systems.

This is not always the case, however. According to Guy Couillard, even an area as superficially human-centered as recruitment can be a business’s first clue that it’s time to blast off for Planet ERP.

Why? Because most modern ERP systems now offer HR modules, either as standard or an easily integrated option, and most modern HR modules enable the targeting, screening, and onboarding of new job applicants. A competitor’s Web site may be reassuringly drab and undynamic, but if it’s consistently beating you to the best and brightest talent on the market, you shouldn’t necessarily take it as a personal slight. Recruitment woes can signal the need for ERP by tipping you off that your competitors are using HR-integrated ERP to find and hire talent with superior efficiency.

There is more to HR than just recruiting, of course. Amy Grubb, a longtime ERP consultant with a focus on human capital management, says she’s lost count of the number of times she’s seen a growing company make the jump to ERP after issues emerge in their management of flesh-and-blood assets.

The core problem, says Grubb, is that many growing companies have a blind spot when it comes to the challenges of managing an expanding workforce. Leaders tend to assume that if their standalone payroll systems can reliably get paychecks on time to 10 employees, then expanding the workforce to absorb another 10, or 100, or 1,000 employees will simply entail typing in the names, addresses, social security numbers, and banking details of new workers as they join the company.

But, says Grubb, when workers are added, the complexity of managing their compensation often multiplies. More workers will eventually mean more kinds of workers, for one thing—hourly employees, part-timers, agency contractors—each category with its own tax status and payment schedule. As the workforce expands, the group may become eligible—or lose eligibility—for different insurance packages or retirement schemes. And as the total payroll bill increases (along with other outflows), it becomes exponentially more important and difficult to rectify a catastrophic payroll mistake, if one occurs. A company with only 10 employees can usually find the cash to keep everyone fed and housed for a week or two if the payroll system crashes. But a business with 1,000 workers doesn’t have that luxury and needs a stronger, more integrated system that will help it identify and address the problem in the event of a payroll breakdown.

It’s in the nature of HR, says Grubb, that problems within it have a special power to grab leaders’ attention. More than once, Grubb has seen a panicked call from an employee who can’t pay rent because of a payroll glitch become the trigger for a company moving to ERP. Business glitches that jeopardize basic human needs such as food and shelter have an emotive and universal resonance that often inspires systemic change.

Flashing light No. 4: External forces have you scrambling

When asked by a reporter to identify his chief concerns upon taking office in 1957, British Prime Minister Harold Macmillan is said to have replied, “Events, dear boy, events.” Indeed, sometimes the impetus for a jump to ERP comes not from internal troubles or envy of the competition but from the wider external world and forces beyond anyone’s control.

Global disruptions:  During the COVID-19 pandemic, for instance, and the ensuing supply chain crisis, it became brutally apparent that businesses within the same ERP family were much better placed to manage and resolve disruptions than partnerships between businesses that were each winging it with their own software bundles. Not only that, says Couillard, but “remote work is a lot easier when everyone’s sharing the same system.” Even if the work-from-home boom one day subsides, it may leave behind a generation of growing companies that upgraded to ERP for smoother coordination of a far-flung workforce but kept it because they liked it.

Environmental regulation:  Some governments—of the eco-conscious U.S. states and of other countries—are now demanding that businesses file declarations of carbon emissions, not just their own but of every partner in their value chains. Modern ERP packages make it fairly straightforward to reach this level of visibility. Again, depending on jurisdiction, this can make ERP what Couillard calls a “must-have,” even for smaller companies.

Admission ticket to a marketplace:  In high-stakes sectors like healthcare and defense, there’s a growing recognition that a lack of integration between businesses running different software systems poses an unnecessary threat to security and reliability. Particularly in defense, says Couillard, running full-scale ERP has become a de facto price of admission, even if the “enterprise” in question is still the proverbial two entrepreneurs in a garage.

Imprimatur of value in mergers and acquisitions talks:  In the eyes of the analysts and private equity types who appraise companies prior to an initial public offering or acquisition, ERP is a mark of quality, says Couillard. Like a home-seller installing granite countertops or a “rain forest” shower because buyers have developed a taste for them, some companies are upgrading to ERP, says Couillard—primarily because ERP, for all its real and expansive benefits, has become a standalone mark of quality and value in the eyes of people who buy companies.

Flashing light No. 5: Your know-how-everything-works veterans retire (or could soon)

On the other hand, it could be something else entirely. Couillard says that he’s seen more than one midsize company realize it needs ERP the day after a longtime employee’s retirement party. Everyone shows up at work the next morning, fondly reminiscing about the festivities—only to realize that what they thought was a smoothly integrated suite of “narrow functional systems” was actually held together by the knowledge and experience of a human being who is now unreachable on a silent retreat or long-awaited vacation.

This tracks with Amy Grubb’s point: Some growing companies postpone accepting ERP not because they don’t appreciate the value of computer software but because they don’t appreciate the value and complexity of human beings. They view ERP “as a commodity,” in Couillard’s words—another piece of technology to be bought and put to work, an investment whose value can be later assessed by the usual metrics of cost savings and increased productivity.

It is that, obviously. But despite its dry, uninspired name, enterprise resource planning software represents a way of doing business as much as a tool for doing business. Whatever the specific clues or triggers that inspire a business to invest in ERP, it will likely be remembered in corporate lore less as a milestone of historical growth than as a vote of confidence in a future that would be different from the past in certain key respects: more connected, more flexible, more robust, more—well—big.

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