Lessor: Successful change requires thorough preparation

“Well begun is half done.” This old saying holds a great deal of truth, especially when faced with a replacement of your company's ERP system. In connection such a replacement, Lessor's CFO, Michael van Straten, opted for a thorough pre-analysis that turned out to have several advantages. The analysis has, among other things, ensured Lessor a much better overview of the company's system landscape, minimised the risks associated with the replacement, and enabled Lessor to choose the most appropriate ERP solution for their business needs.

It's a grey November day. The wind is stripping the red-yellow leaves from the trees, and they slowly fall onto the grass outside Lessor's office in Allerød. We have arranged to meet Lessor's CFO Michael van Straten at the office, which is half-empty since many of the company's employees are working from home due to Covid-19.

“To understand the starting point for our ERP project, you need to know a bit of history,” says Michael van Straten and explains that Lessor was originally a family business founded by the Fich family in 1972. It was a family of programmers and this fact has left its mark on the current ERP solution that is characterised by many specially programmed modules because a solution was coded a solution whenever needed.

“Our ERP solution, which we still have today unfortunately, is a rather old NAV solution. And actually the problem is that it’s a very 'customised' solution with many integrations to various other systems, etc.,” explains Michael van Straten, continuing:

“It worked well for the Fich family, and actually it was quite a good system. But our needs have changed over time, and we have lost some knowledge and experience as the Fich family has left. So, when I started working at Lessor two and a half years ago, I was faced with a system I didn't know in detail that couldn’t meet the needs of today. So, we created a parallel reporting setup in SQL, which works quite well, but not ... well enough,” he says smilingly and adds: “It's just good enough to cover our needs, but whenever we need more details and more analyses, it requires much work.”

When the Fich family was still at the helm of Lessor, there were no external reporting requirements other than those associated with the annual accounts. However, in 2016 the company was acquired by the Nordic private equity fund Axcel, and in 2018 Lessor was sold in record time to the American company Paychex, whose clear ambition is was to accelerate Lessor's growth and take market shares – first in the Nordic countries and Germany and, subsequently, in the rest of Europe.

Naturally, the new ownership and ambitious growth plans resulted in stricter requirements for the support functions’ deliverables and, consequently, in a number of organisational changes. In Finance, the reporting requirements became stricter, and it was difficult to be compliant with the existing ERP solution.

Michael van Straten joined Lessor right after the acquisition by Paychex, and from the start, he considered it important to ensure that the financial systems could meet business needs. Therefore, Michael van Straten quickly focused on a replacement of the ‘mothership’: the old ERP solution with all its specially coded solutions and integrations to systems across the business.

It became clear to Michael van Straten that it was important to get an overview of the entire system landscape connected to the ERP solution to minimise the risks associated with a replacement. But getting that overview and a good recommendation for a new ERP solution turned out to be more difficult than first assumed.

Initially, Lessor reached out to a NAV partner to request a review of the system and a proposal for a new solution. The NAV partner proposed an updated version of Lessor's old ERP solution, but that was not what Lessor wanted.

“My idea was not that we should reuse the old solution, but that we should end up with a new, simpler solution,” says Michael van Straten, continuing:

“And that's the problem when contacting a supplier directly: They sell what is stacked on the shelves. And they sell what they can. They don't necessarily have an interest in coming up with a better or different solution – they are locked by what they can do. And I wasn’t very satisfied with either their approach, their report, or their review.”

That’s why Michael van Straten subsequently contacted one of the company's other partners for an alternative proposal. But once again, he received an unsatisfactory proposal. This time the scope was far too comprehensive with unnecessary reviews of things that would make the project too large and too complex.

“That’s not what I needed – I need a pragmatic approach to the project and a brief summary of a solution based on a review of what we have today – both in terms of a process overview and from a technical viewpoint, enabling us to analyse what we have today and what we need in the future,” explains Michael van Straten, who subsequently contacted Basico.

“And that was the proposal that Basico presented, and the task that Basico helped us to solve. It was a relatively short-time project, but a really good project. I think we got exactly the documentation and the overview we needed. What I got from Basico was a very fine diagram of our system landscape, so that I could see which systems were connected and used for what. And that made it possible for us to consider how to replace the different parts,” says Michael van Straten, continuing:

In addition to the visual system landscape, Basico provided a matrix with detailed descriptions of all identified data connections and an overview of the business' desires for a future solution – and Basico facilitated a strategic workshop for Lessor's management, the purpose of which was to identify the preferred roadmap for the upcoming ERP implementation.

“So, we got an 'as-is' picture, and on top of that we could draw our 'to-be' picture. It has given us a great degree of certainty to get the overview, thereby knowing how to replace the different elements. It has made it possible to start working on various elements without everything collapsing. So, it has been a very important prerequisite for the project's success.”

Michael van Straten explains that the overview provided by Basico has triggered many thoughts because it led to the realisation that Lessor didn’t just have a standard system, and that a replacement of the ERP system would impact the entire business:

“It was a very important realisation that we had to look at an overall solution capable of managing all parts of the business.”

Michael van Straten explains that he lacked an overview of Lessor's system landscape before starting collaborating with Basico, and that he needed to find out what the NAV solution was connected with:

“Because our NAV solution isn’t a NAV solution. It is a comprehensive IT system that can do anything plus a little extra. But I didn't know about the system’s connections,” explains Michael van Straten, elaborating on why he wouldn’t just make a simple system replacement and, subsequently, examine the need for development:

“If I just removed the NAV element, I risked that the whole house would collapse. That's also why I've had a very cautious approach to our project. Of course, you could just have proceeded and installed a new Business Central system and hoped for the best making 'on-the-fly' development, but it wouldn't end well. It would have resulted in a project out of control with a soaring budget – I've seen that before. And it doesn't end well.”

Michael van Straten explains that he’s aware that, from a technical system perspective, he has been very cautious regarding the consequences of his choice in connection with the ERP project, as he wasn’t willing to risk Lessor's invoicing not working, or the company losing data.

This caution was partly due to the fact that Lessor's product manages something very sensitive, and therefore it was extra important to minimise the risks associated with the project: “Payroll is one of the most important things in a company. If you have payroll problems, you have huge problems.”

Michael van Straten points out that it may be valuable to get the right advice if your company is faced with a complex system and process upgrade, such as replacing an ERP system.

“You must plan properly and take your time because it's easy to contact a couple of suppliers for an offer and then choose the best or less costly solution. At the risk of buying what the supplier wants to sell. So, I believe that it’s good to involve a third party like Basico to get an overview of what you have to work with,” says Michael van Straten, pointing out that Lessor could have chosen to accept the offer from the original ERP partner if they had delivered better work in terms of overview and analyses.

“Looking back today, I realise that it would have been a huge mistake,” says Michael van Straten, adding that it's easy to end up with a solution that looks good on paper, or that just happens to be the best one on your desk that day.

“Today we have a much better solution that embraces the entire business and prepares us much better for the future, so it's important to take your time to go through things once more , and I – for one – can recommend contacting a third party for advice, since it's very important that your advisors are independent and can advise you on the best solution for your company – and don’t just aim to sell the product they happen to have on the shelves.”

Michael Van Straten has more than 17 years’ experience with strategic financial management in international companies. He is originally from South Africa, where he qualified as a Chartered Accountant. He began his career at Grant Thornton and has subsequently been working for companies such as Servest, Lumigon, Sysmex, and Maersk.

Actually, a job at Maersk initially brought Michael van Straten to Denmark. He started with Maersk in Cape Town and was later offered a job at HQ in Copenhagen. Today, Michael van Straten has a Danish wife and family but he regularly goes to South Africa to visit friends and family, play golf, and drink good wine.

Michael van Straten joined Lessor in June 2018 – when the private equity fund Axcel had just sold Lessor to the American company Paychex, which has ambitious growth plans for Lessor.

The solution that Lessor subsequently arrived at is a 'best-of-breed' solution, where Lessor has cut out all unnecessary intermediaries and unnecessary development by going directly to the system providers with the aim of adapting the company's processes so they can work with the systems' standard solutions.

This entails several advantages.

Firstly, it is an extremely cost-effective solution and, secondly, the solution prepares the company for the future, as the standard solutions will make it much easier to replace the systems in the future – a significant advantage given that, previously, the ERP system had an expected service life of more than ten years, whereas now the service life has typically been significantly reduced due to the acceleration of technological developments.

“My purpose with the entire project is to end up with a simple system that works well, is simple, easy to understand, easy to upgrade in the future, and cost-effective. You can spend a hell of a lot of time finding a customised solution, but it's not necessary. You can save a huge amount of time, money, and irritation by taking a standard solution, accepting it, and adjusting yourself to it,” explains Michael van Straten.

Rather than going for a large, complex 'one-to-rule-them-all' system, Lessor has chosen to focus on the surrounding systems, where PSA becomes an important core, and the ERP system essentially becomes a 'financial shell' that doesn't have to encompass everything because the other elements are considered separately.

“Now we have chosen a solution where Microsoft Dynamics CRM manages our client-facing part, JIRA service desk and JIRA software manage all recording of time in our professional services, and our PSA solution Progressus manages everything else such as invoicing, accruals, etc. – and finally we have Business Central that actually attends to standard AR/AP accounting. On top of it all, we have Power BI, which is our reporting tool,” explains Michael, adding proudly that they have just kicked off the PSA solution for the service team and, at the same time, started a demo of Business Central.

Thus, Lessor will have its new ERP solution within a couple of months, expecting to go 'live' by June 2021 at the latest.

“And this solution forms a sharp contrast to the original offer from the first NAV partner, which it would have taken 9-12 months to complete. Now we’ll have a much more agile and standardised solution,” concludes Michael van Straten with a satisfied smile.

Therefore, things may have changed since the publication of our articles - the participants may have moved on to another job, and the world may have been turned upside down by American presidents, Chinese bats, and other change agents - you get the point. Nevertheless, we hope that you'll read our articles and maybe even be inspired by them.