Selecting an ERP supplier - the pitfalls and practicalities
It's not just about the product
Workshop The selection of an ERP system is a pretty strategic decision for most companies. Software of this kind tends to operate at the core of your organisation, and can therefore have a big impact on business robustness, efficiency and flexibility.
Furthermore the time, resources and disruption generally associated with ERP implementations, not to mention the bandwidth consumed from a management and key personnel perspective, mean you don’t want to be revisiting your decision too frequently. Whichever way you look at it, ERP commitments are for the longer term.
With this in mind, whether you are looking at a comprehensive ERP system for the first time or replacing one or more existing systems that are no longer meeting business needs, you will want to make sure that what you put into place is as future-proof as possible.
From a product attribute perspective, this translates to requirements at an architectural level - openness, ease of configuration, extendibility and so on - and this is an area we have looked at in our previous packaged applications workshop. Feedback from readers in the past has also highlighted the importance of functional fit in terms of both scope and process specifics, though as we have discussed recently, there is an ongoing debate about the degree to which you should look for a package that fits your existing workflows, or expect to modify your processes (at least in non-differentiating areas), to match what the package supports.
Mixed up in all of this is the question of whether the package was designed and built with your type of organisation in mind. Smaller companies, for example, have sometimes struggled with implementing ‘big iron’ solutions designed for large enterprises.
Conversely, products with a smaller footprint can sometimes struggle to deal with the complexity of a larger group environment. Industry fit is also an important consideration, as the closer the package supports your business out of the box, the less work needs to done when configuring it to your needs, reducing both the cost and risk of implementation.
Mentioning organisation size and industry leads us to another aspect of ERP-related decision making, and that is the experience of the supplier. History has shown that software vendors used to dealing with big multinationals can sometimes fail to appreciate that the priorities and constraints of a small or medium-sized business are often different. And quite simply there is always a concern for a small business engaging with a large vendor that when push comes to shove, the vendor will prioritise the needs of its larger more lucrative clients over yours. Echoing the product level considerations, relevant industry experience will also have a bearing on how well the supplier understands and is able to empathise with the business priorities and practicalities in your environment.
This, of course, is where partners of the ERP software vendor come into play, as consulting firms, resellers and others can often bridge the understanding and empathy gap if the right programs are in place. Some of the above qualification questions then get redirected to the partner in terms of how well they are geared up to deliver a solution cost effectively for a business like yours.
Beyond that, there are a few things to bear in mind when assessing software vendors that have more to do with the way they run their own business. Apart from the obvious question of how financially stable they are and whether they are a candidate for acquisition (a key consideration given the ERP market consolidation we have seen in recent years), what about their commercial practices? Are they, for example, the kind of supplier that is open, transparent and predictable? Or do they have a history of hidden charges, the surprise imposition of new contract terms, unexpected hikes in maintenance fees and so on?
The key point is that it is as important to do your homework on the vendor as it is to assess the product fit. You need to be sure you understand and are comfortable with the way they operate, as once you are committed it is not easy to walk away or switch suppliers, so your leverage to resolve conflicts in your favour is always going to be limited. Because of this, speaking with user groups and reference sites is typically a very important part of the selection process.
It would be nice to think that all of the above is so obvious that everyone is already approaching ERP selections in a holistic and comprehensive manner, but the number of horror stories we hear when mismatches occur suggests that the basics are often forgotten or their importance not appreciated.
With this in mind, what are your experiences of ERP product and supplier selection? If you are going through an investment cycle now, what have you identified as your key selection criteria at a supplier level? And if you have previous experience of ERP decision making, what lessons did you learn?
Let us know your thoughts in the comment box below. ®
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