Paul Kilduff: You’re listening to the AllBusiness podcast. I’m Paul Kilduff. If you’re getting this through iTunes and RSS feed or an online streaming-media player, you can hear interviews with other experts at AllBusiness.com.

Kilduff: Today, we’re talking with Ted Dively, the self-described ring leader of Group D Communications, a San Francisco-based technology consulting firm. Group D specializes in developing websites, networks, and implementing enterprise resource planning systems for small to medium-size businesses primarily in the San Francisco Bay Area. Ted, enterprise resource planning or ERP, what exactly is it? It sounds like a mouthful. Can you put it in a nutshell for us?

Ted Dively: No, but I can try and squeeze it down until it is as few words as possible, Paul. Enterprise resource planning has to do with taking all the various disparate bits of data that departments and divisions within a larger organization rely on and having them all talk together in one central way. So typically, a very simple typical example is I’ve got frontline sales, I’ve got accounting, I’ve got payroll, and I’ve got manufacturing, and distribution. Right there are five different systems potentially that we really want to have all integrated so that everybody can see everything in one centrally located set of data. And the reason we do that is because it streamlines the process and makes for a more efficient business environment which saves money and people don’t have to have proprietary systems all over the place. It’s a wonderful thing but it’s also kind of this nirvana we’re still shooting for.

Kilduff: So it’s not just networking computers.

Dively: No. No, not at all. It’s taking different systems--for instance, accounting. Accounting packages at the very low end, you know, everybody knows QuickBooks. Hey, QuickBooks, woo! Right? To very, very large custom accounting systems for huge corporations, taking that data and integrating that in a central way with, say, payroll so that the two can then be linked together in a way that allows people to very quickly do their work and see how those things are related.

Kilduff: So that the CEO of a company can always at a mouse click know what’s going on with shipping, what’s going with payroll…

Dively: Right.

Kilduff: …what’s going with human resources.

Dively: Right. When I first moved here back in ’91, I was then a long-term temp assignment when I got my feet wet in San Francisco and I was doing it at Blue Shield at that time and I remember somebody saying, “The CEO wants to see one thing everyday. He wants to punch a button and see the number.” And that’s really what it’s all about in a very, very simplified way. Being able to have all that information stored in some central way so that you can see what you need to see and it saves a lot of money if you don’t have to invest in different kinds of computers for the different divisions or units of a business. And you can sort of tie it altogether in a way that works. A great example, okay? We all know the names SAP or recall companies like that. They provide huge systems from the government on down to, you know, there Oracle is trying to get into the smaller business market now too but they’re huge, what we call back-end systems for accounting, human resources, and that sort of thing. Okay? What if you have a division that’s not human resources but you have a division chief who wants to be able to deal with his own payroll, at least see information, that sort of thing. What you can do is develop a database that actually will act as a client or a front-end to that larger system and allow that manager to see and manipulate the data in the larger big system in a very streamlined way. So that’s a very simple example. What we’ll do often is we’ll create a database that talks to the larger systems.

Kilduff: So when you go to a client, how do you know whether or not they’re going to need an ERP system set up?

Dively: Well, first of all, we pick their brains. What are your goals? You know, my job is a lot about asking questions. What are your goals? And most of the time, clients start spouting off buzzwords and technical terms that they really don’t understand and I’ll have to rein them in and say, “Don’t talk that stuff to me. Talk to me about what your needs are. How do you need your information to be accessed and manipulated? Let us help you craft the technical solution to that.” So a lot of my job is listening and then deciding, Yeah, this client needs this solution or maybe we can craft something that we can work together with a canned solution, whether it be small or large, to achieve their needs. And that’s really what we do, we assess their needs.

Kilduff: Are ERP systems primarily for companies that are selling things, items that you can put in a box?

Dively: That’s where they come from. Traditionally, the idea was linking manufacturing, warehouse distribution to the other corporate back-end stuff and then to the front-end which is, you know, sales, customer relationship management, that sort of thing. That’s the definitely the history of ERP. But these days, that model is being applied to just about any situation where you need to have disparate sets of data all be centralized and accessible.

Kilduff: So can you give me an example of how you’ve implemented an ERP system from one of your…

Dively: I’ll give a very simple example because again, we deal mostly with small, and by small I mean very small businesses. Our typical client is anywhere from five to, you know, 50 or 60 seats, although we do work with units within larger corporate environments. A very small example is we have a client that’s running a big back-end database that’s done in technology called MySQL, which is a systems query line where it’s sort of an open-source version of a big back-end database. Now, we don’t want to spend a lot of time and money developing some huge custom solution for this unit within the business. So what we can do and have done is say, “Okay, what’s a cheap piece of software relatively speaking that we can then hook into this big back-end system?” So we’ve actually developed databases in a program called FileMaker Pro because FileMaker allows us to hook into the big MySQL database on the back-end and then it acts as a window on that big database. So it allows the unit we’re working with or the remote office we’re working with to tap into the greater corporate resources and we’ve done that for several of our clients over the years.

Kilduff: So you don’t generally buy the software from a big software company to implement ERP then for your clients. You’re able to do it on your own?

Dively: Well, the answer of course, as with all this stuff, is it depends. It depends on what the needs are of the client. Very often, with my company, we walk into a situation where you have a corporate enterprise with in-house staff, IT staff, and they’re bringing us in because we bring in some expertise that they may not have in house. So we are able to say to them in a less political way, “This is what we think you should be doing.” And we can add our skills to that and we can help them figure out, “Do you need to buy big software? What do you have already?” You know, maybe they’re running a big Oracle database and they just aren’t quite sure where to go next. That’s a lot of what we do. We’ll craft solutions to either implement something from the ground up or to in a modular way, link into things they already have. That may involve buying software and/or hardware but it probably doesn’t.

Kilduff: One company that I know you did help with not implementing but assisting in running their ERP system is a nutritional supplements company called Nutraceutical, am I saying that correctly?

Dively: Yeah, Nutraceutical. NutriCorp, we call them. They’re based in Utah and they’re one of our larger customers and it’s a great example of this stuff at work because basically we’re hired to work with one or two groups inside the larger organization and what we’ve done is develop ways to hook those groups into the larger back-end systems and help streamline that process so that, for instance, the graphics unit because NutriCorp puts out their own catalogs, they actually develop their own mail order catalogs in house and they have a whole unit that does just that. We were able to take that unit and whip up something for them that links into the larger system so they are an integrated part of the overall whole. So yeah.

Kilduff: And they do put on a bunch of different products under different names, right?

Dively: They do. Yeah, they do and what they’ve done in the last few years, which is really interesting and it makes the IT situation more challenging and interesting for them and for us because they do have in-house staff for IT, is that they’ve decided to instead of fighting for space on the shelves at health food stores and those sorts of places for their products, to just start buying health food stores outright. So they’ve got a guaranteed shelf space. So what they’ve done is they have expanded their business beyond just creating and distributing and selling their supplements into buying stores. So now, they’re in the retail business too, which greatly enhances the sophistication of what they need to do. Because now we’re talking linking in retail sales in disparate physical locations into the greater whole. So now, they’ve got payroll for their retail people. They’ve got sales for all the various retail locations all over, California, Utah, Arizona, I think even Nevada mixed into the back end so they have to have all of that stuff work together and again, so that the people who wear the ties and sit in big offices in corner windows, then push the button and see the number. That’s what it’s all about.

Kilduff: And on the other side of that, that customer that goes in and buys some of these supplements at the cash register, that’s registered at the warehouse?

Dively: Right.

Kilduff: What have you, well, you know store number XYZ needs another box of that stuff.

Dively: Exactly, so it all plays into the just-in-time delivery of stuff from the warehouses and it helps, again, this is a great example of streamlining the process. You don’t have to have tons of stuff stored in warehouses. You can keep just enough on hand and get it to where you need it to go quickly and having integrated systems allows for this to happen in a cost-effective, quick way.

Kilduff: It’s like you’re building Toyotas. Just in time, isn’t that what they do?

Dively: Yeah, yeah. I’ve always thought that was an unfortunate acronym.

Kilduff: Is there a downside to any of this? I mean, do you go in sometimes and you figure, “This company really doesn’t need an ERP system.”

Dively: Downside? I don’t know if there’s necessarily a downside but anybody who’s thinking of implementing something like this, if your company’s getting big enough that you’re really seriously considering this, you need to be aware that to do it right is going to take quite a commitment of time and money.

Kilduff: It can take up to three years, can it?

Dively: Yeah, and of course. If you’re working with governments, it takes even longer and the costs can escalate and things change and you know, it’s just like building something. It’s like building, you know, an office building. Suddenly, requirements change. You have to go back and rethink everything. So the downside, it’s not really a downside but you need to consider everything in the most minute detail before you even, you know, put pencil to paper.

Kilduff: Of course, the other side that I know can vary are the costs.

Dively: Yes.

Kilduff: Tell me about that.

Dively: Well, again, if you’re getting into software and hardware, the costs vary depending on what you need. The amount of time you devote to this, of course, affects costs both in terms of labor and software and hardware, mostly labor. The longer it takes, the more it costs and as you change requirements, if you get into the middle of it, you change requirements; it’s going to cost more. So that’s definitely something to consider. That’s why--I have a brother-in-law who works for Oracle actually and this is what he does. He goes around and says, “Well, we can build that for you but it’s going to take this long and cost this much and if you change it, it’s going to add on the cost.” And that’s what they do and you just need to keep your eyes open because it will cost a lot.

Kilduff: But there’s no one software program…

Dively: No.

Kilduff: …that’s going to fit everybody’s company, right?

Dively: No, there are proprietary systems. I mean, you can look them up on the web. That’s the beautiful thing about the internet, it’s all out there for you to find. There’s plenty of proprietary systems. I think I mentioned Oracle, SAP--there are a bunch of other ones, PeopleSoft, and so on and so forth that exist for doing this kind of thing. And then there’s open source, which is a whole wonderful flowering of technology that competes against proprietary systems. So the idea is developers have whipped up this stuff and they’ve made their code publicly available so you can evaluate all the various products out there, see which one is best to meet your needs for your project, use them and then enhance them in any way you like. And the deal is, of course, all you have to do then is make your code available as well. So it’s sort of passing it forward. “Hey, I downloaded this particular open-source package for doing ERP and we’ve made all these kinds of changes and enhanced it and now we are making it available to other people to use as well.” So that’s a great new way of moving and it’s very sophisticated, complex, bigger direction with your company and tying all of these data together centrally, but keeping your costs down too.

Kilduff: So how much does this cost? Was it free to get this?

Dively: Free except for your labor.

Kilduff: Wow!

Dively: Yeah, that’s the whole idea of open licensing. The open-source community, I urge you to look into that if you’re thinking of developing software or going in this direction anytime. You want to look at, is there something available that is an open GPL, an open license that is open sourced that I can potentially use? And it’s the deal, it’s just the deal. I get to use this, the product of other people’s sweat and ingenuity and if I make changes and enhance it, I have to make that available to other people to use as well. You don’t give, to get anybody your data, obviously, but when you take an open-source thing and enhance it, they deal as you share that. And you know, you’re making it better for everybody and what the corporate giants are starting to do now is take a lot of that, bring it in to their way of doing things, and add their magic on top of it.

Kilduff: And there’s nothing illegal about this?

Dively: No, in fact, Apple is a great example of doing that. They’re taking open-source software and enhancing it and tacking on the Apple magic and then turning around and selling it to all of us.

Kilduff: So, if you say you do all of this, say you implement an ERP program or system and it’s all there but your staff, your people that have been there 20, 30 years, whatever, they don’t buy into it or they don’t get properly trained or they want to keep doing things the way that they always had. Isn’t it kind of worthless at that point?

Dively: Yes, and you really hit it. If people aren’t properly trained, it doesn’t do you any good. You can have the best systems in the entire world but if people can’t or won’t use them, your time and money is wasted. Just like anything else. If somebody doesn’t want to learn how to properly drive their vehicle on the road safely, well then, they shouldn’t be doing it and it’s a waste of time to give them a car. You know, it’s the same thing.

Kilduff: What about the CEO, say, or, you know, some other top executive at the company that insists upon tweaking the software to make it do the things that they’ve always done so that they’re comfortable with it but that throws everything off. Have you heard about this happening with your piece of study?

Dively: No, but I imagine it does, just like anything else and that’s the way it works. Or the CEO’s or the CFO’s brother, you know, is a vendor and they really like their product or they golfed together and, you know, with somebody high up in the chain and said, “We’re going to use this and, by dictate, this is what you’re stuck using.” I’m sure that happens. That doesn’t happen very often in my end of the market because, again, my end of the market is small to medium and those businesses tend to be more focused on how do I get it done quickly and cheaply and they don’t have a lot of that infrastructure, that bureaucratic corporate infrastructure to worry about. They just need to find out what your needs are, make decisions, and get it done. And the staff is usually small enough that people who refuse or are incapable of learning stick out and the company can deal with those people.

Kilduff: Harshly.

Dively: Oh well, harshly, I mean, remedials rating. “You will learn how to use this.” No, I don’t know what they do.

Kilduff: At what size will a company be at the point where they can do this themselves or can they have the kind of IT support that they can do this themselves or at what point do they need to bring somebody like yourself in to set up one of these programs? Can you describe that?

Dively: Again, that depends. There’s so many answers in my business. It all depends. It depends on what their needs are. If you want to take on the cost of having an in-house IT staff with the expertise, you’d better have the revenues to pay for that. More often than not, especially in small to medium businesses, they don’t have the budget to have on-site, full-time IT staff. What they typically have is someone or some ones who have shown interest in this sort of thing and have kept them going over the years but who also have other jobs within the business and they say, “You know, we really need to farm this out.” And that’s when they come to a consulting company like mine and say, “Hey, you guys do this stuff for a living. We want you to help us do it.” Even the largest companies don’t do everything in house. The largest corporate companies will bring in expertise from other vendors to help them with their particular needs, whether it’s payroll or accounting, warehousing and distribution. They just, you know, like everything else, it’s cheaper to have somebody else do it for you because you don’t have to pay their health, their benefits, deal with their personnel, that sort of stuff.

Kilduff: Let’s go back to training your employees for a second, though. How, again, I know that I’m sure this varies but there must be some cost associated with this and of course, the time associated with this to…

Dively: Right. We find training actually to be the cheapest investment, though, of all of the entire process because what we’re doing is giving people the skills to deal with things on their own. Not only use the systems but maintain them in the long run. So our job, in addition to just creating the system, is to document everything very, very well. I call it the beer truck philosophy. If I get hit by a beer truck, I want people to be able to pick up and carry on without me. Yeah, I know, I tell clients that and they kind of, “What?!” They sort of holler a little bit. But seriously, we document everything and then we train people, key people. And then we allow them to train others, you know, teach people to fish.

Kilduff: So it sounds like this is really the future that if you were to start a business from scratch today, it would almost have ERP elements set up right from the beginning.

Dively: Sure. Well, I mean, ERP in the broadest sense can be the simplest thing like I have to do payroll and accounting at my business and I’m a one-man business or I’m a husband-and-wife business, we have to do payroll and accounting. Technically, having those two sets of data available to you to look at all at once in one place, that’s ERP.

Kilduff: So, it’s really not that complicated when you talk about a really small implementation like that.

Dively: Conceptually, no, and at the smaller end of the scale, it actually gets much simpler because people’s needs are very straightforward, payroll, accounting, sales, customer relationship, how do we have all those things talk?

Kilduff: It’s not as complicated as it seems but at the same time, the more you delve into it, you pull back layers of the onion and it gets even more complicated as you keep talking about it.

Dively: Well, the whole idea is planning, planning, planning. Needs assessment and planning. We talked about it earlier, what drives the costs? Unexpected changes. You need to know really down to the minutest detail before you do anything, what they really need to have happen. And on this day and age, where people are saying more and more and more, I want my interaction, my user interface to be a web browser, it even becomes, okay, how does that look? Where are the buttons placed and what do they do and where does that take you on the screen. Seriously, these are considerations most people don’t even think about and we sit down and say, “Okay, if somebody clicks on make a new invoice, where does that take them? How does it look? Where do you want that button to be on the screen? How is the invoice laid out?” If they want to run reports, what does that mean and how does that link to your SQL database and whatever the back end is, whether it’s MySQL or PostAddress or some other product that does that. How does that all work together? So yeah, you have to really sit down and literally sketch these things out on paper. We always tell our clients, there are two phases to a project, designing it and making it. Designing it literally is interviews and then paper and pencil.

Kilduff: So literally, someone going to your website to order something, if you’ve got ERP implemented, their order is impacting inventory, the warehouse, and all the rest of that?

Dively: Sure, sure. And depending on how that was built on the back end, there may be more or less human interaction. It is simple as WebStore simply sends email that says Ted Dively ordered this widget and you need to fulfill the order. And other ones are much, much more automated.

Kilduff: Ted, it’s a brave new world of enterprise resource planning systems.

Dively: It is.

Kilduff: Thank you for joining us.

Dively: You’re very welcome. Thanks for having me.

Kilduff: You’ve been listening to an Allbusiness podcast with Ted Dively of Group D Communications. Send your feedback on this show and suggestions for topics and guests to podcasts@allbusiness.com. I’m Paul Kilduff, thanks for listening.