Land Mines - Endangering ERP Selection Projects
Top Ten Things to Know and Avoid
- in Selecting and Arranging Cost & Terms for New ERP Access
1. Operations Should Own the ERP Project
ERP projects are fundamentally about improving business processes across various company functions, requiring strong leadership to manage changes effectively. The project should be led by operations-focused executives and team members, not IT, to better ensure business alignment and overcome challenges to success.
2. Beware of Cloud ERP Hype
Cloud ERP solutions are typically managed by the ERP provider, with access provided through a subscription model. While the cloud option offers easier hardware and software management for both parties, it primarily benefits the seller by creating greater control over the customer—especially with how subscription-based costs can quickly escalate. Therefore the Cloud ERP hype is intense. Notwithstanding, for most major ERP sellers they have options for customers to access ERP remotely, without the big negatives.
3. Inaccurate and Biased Long-Lists of ERP Candidates
ERP long-lists generated by advisors are often incomplete or biased. Web-based listing tools are almost always seriously inaccurate and incomplete—and some sites exist just to sell visitor's names to software vendors. If a buyer's long list is not known to be concretely defensible, then this introduces uncertainty that will compound throughout the ERP selection and implementation project.
4. ERP Project Scope is Wrong
The business processes that ERP should support are dependent on the buying company's size, industry, process complexity, existing business applications status, and general business process functionality domain of the ERP reviewed. This is called the ERP scope or domain. If the ERP scope is not well established, errors are introduced into the selection process and can result in wrong modules or components being purchased, and even the wrong ERP being chosen. Proper ERP scope definition is crucial to avoid compounding errors throughout the implementation.
5. Lack of Understanding of Modern ERP Capabilities
Modern ERP systems offer powerful tools for configuring applications and creating custom workflows. If these capabilities are not recognized or valued during selection, they may be underutilized or misused, leading to a limited implementation that fails to achieve its full potential.
6. Using the Wrong Functional Requirements to Shortlist ERP Options
High-value, non-routine functional criteria, within the legitimate ERP scope, are essential for effective ERP screening. Using external information with representations about broad ERP functional capabilities, or processing such a list to ERP sellers to answer, is actually counter-productive to an orderly selection process (see our white paper on this topic).
7. Overpaying for ERP Access
Companies routinely pay about twice the necessary amount for initial ERP licenses or subscriptions. An even larger problem are amounts paid over time, especially with ERP subscriptions. However, with effective negotiations, it’s possible to bring ERP vendors in line with buyer-centered cost and terms, regardless of vendor claims (see our white paper on this topic).
8. ERP Commercial Terms are One-sided in the Extreme
Contracts provided by sellers of ERP business applications leave the buyer with little useful control in the commercial relationship—with a few rare exceptions. Efforts to improve commercial terms are thwarted by the multiple layers of obstacles the sellers deploy—so the typical terms are largely accepted. The bottom line reason for such commercial terms is ERP companies want unbounded options to easily raise ERP access costs over time. Notwithstanding, commercial terms for ERP access can be fixed to properly support buyers’ legitimate interests (see our white paper on this topic).
9. Implementation Costs and Methods Overly Influential in ERP Selection Decision
Statements from candidate implementers on ERP implementation costs and their ‘market leading’ methods are largely irrelevant in an ERP selection decision. This is because implementers have no serious way to estimate costs for a particular prospect's implementation, and methods among implementers of similar ERP solutions are overall the same with only style and nomenclature differences. What is relevant is the talent and capacity of the specific people proposed for your project, hourly costs for various implementer personnel, and proper contractual relationship control. For well-established ERP packages (which the short list should be comprised of) there are typically multiple options to find talented implementation personnel, arrange reasonable rates, and fix contracts.
10. Not Leveraging ERP Selection Work to Improve Readiness to Implement
Selection projects should include an investigation of current business process objectives, weaknesses, and improvement ideas. All with an eye to alignment to the longer company strategy. This work should be organized and developed before the formal implementation—as it forms important background discovery to support the business process and metrics design phase of the implementation. Absolutely do not depend on ERP implementers to extract and develop this critical background information (see our white paper on implementation control).
What Defines a Highly Successful ERP Project?
A successful ERP project is one where an informed ERP choice is made, favorable costs and terms are secured, and the implementation proceeds efficiently. After go-live, successful projects demonstrate reduced operational costs, lowered stress on the team, and improved competitiveness and agility. Each of the ten factors above represents a risk area to avoid in order to set the foundation for ERP success.
Access our White Paper on The Top Ten ERP Selection Land Mines to Avoid
ERP Selection – Leupold & Stevens
Long term ERP license costs were initially very difficult to calculate. Working with EAI-SoftSelect we were able to insist on a predicable ERP license fee approach and achieve much lower initial and ongoing license fee costs.
ERP Selection – Provo Craft
EAI-SoftSelect was a great partner throughout the process of choosing an ERP solution. They helped us control the terms throughout the ERP buying process, and we achieved impressive results in reduced ERP license fees.
Having an experienced partner like EAI-SoftSelect, helped us negotiate for the products we need and set our expectations for the process of implementing these solutions.
ERP Selection – Cornell Pump
Negotiating ERP costs is complicated and the ERP software vendors take advantage of the buyer’s lack of experience. EAI-SoftSelect’s experience and influence helped us level the playing field. We clearly saved money and lowered our long term risk.
