ERP Selection Land Mines
Top-ten things to avoid in selecting and negotiating access to new ERP
The following ten items are typical ERP selection project weaknesses that stand in the way of effectively selecting and arranging effective access to ERP. Many of these items will have further negative effects during and after the implementation. A few comments, in the list below, counter conventional thinking, so feel free to call us to discuss further. All of these points can be easily defended based on the experience of over 900 ERP selection projects. Download PDF version of top-ten land mines.
1. Operations does not own the ERP selection project
ERP projects are about improving efficiency of business processes and competitiveness. Therefore operationally focused executives and team members must own the project to more rapidly and fully reach top-level success. Such activities should never be considered IT projects.
2. Modern ERP is not understood
There are incredible productivity potential held in ERP solutions that have modern tools for configuring the application and developing custom workflows and metrics. If these capabilities are not understood and valued, they will not likely be properly visible in selection and/or implementation planning. The result will be ERP implemented well short of its potential. (Note that about 85% of ERP packages still offered today are not modernized relative to the leaders.)
3. ERP Long list is influenced by inaccurate and biased input
Simply stated—most advice and inputs, which drives ERP solution long lists, is not good. Professional advisor's opinions are often incomplete or biased. Web-based lists are almost always seriously inaccurate and some 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 project.
4. Inaccurate understanding of business processes ERP should support
The business processes that ERP should support (ERP process footprint) are largely dependent on the selecting company's size, industry, and process complexity. And to a lesser degree, the breadth of functional options from the long list ERP vendors. If the ERP process footprint is not effectively established, various levels of error are introduced into the selection process and can result in wrong modules or components being purchased, and even the wrong ERP being chosen.
5. Using the wrong functional criteria to reduce the ERP long list
The correct business process functional criteria should have the attributes of high-value and not be routine ERP functionality. Using long lists of general functional requirements is actually counterproductive (see our white paper on this topic).
6. ERP project team not well coordinated
ERP software projects are complex and in turn have many areas which can be negatively impacted. These projects need experienced internal leadership who understands enterprise software and has the capacity to lead all participants (including implementers).
7. Paying too much to access ERP
Routinely companies pay about double what they should for initial ERP licenses or ERP subscriptions. Paying too much for ongoing costs is also a problem, especially with ERP subscription costs. There are ways to have all competitive ERP vendors significantly meet the same buyer-centric target license cost and terms—regardless of what the sales people say is possible.
8. ERP contract terms are one sided and accepted by buyers
Contracts provided by sellers of complex ERP software and services literally leave the buyer with no legitimate control in the commercial relationship. It's that bad. Contracts should and can be fixed to properly support buyer’s legitimate interests.
9. Not leveraging ERP selection work to improve readiness to implement
Selection projects should include an investigation of current business process weaknesses and improvement ideas. This work should be further organized and developed—and it can form the critical background work that supports early implementation decisions. Do not depend on ERP implementers to do this work (see our white paper on implementation control).
10. Implementation methods and estimated costs overly influential in selection decision
Statements from candidate implementers on service cost and their ‘market leading’ methods are largely irrelevant in ERP selection decisions. This is because implementers can never have any serious idea of costs for a particular prospect's implementation and methods among top-line implementers of similar ERP solutions are overall equal. What is relevant is the talent of the specific people proposed for your project, hourly costs of all implementer personnel, and proper contractual relationship control. For well-established ERP packages (which the short list should be comprised of) there are multiple options to find talented people, arrange reasonable rates, and fix contracts.
What is a 'highly successful ERP project'?
We define it as a project in which a good and defensible selection was made and a buyer-centric purchase arrangement was achieved. Further, future-state business processes are well designed and ERP was efficiently implemented emphasizing:
- Enterprise-wide collaboration between business process areas
- Modern workflow and process exception mechanisms
- Collaboration with customers, suppliers, remote sales, etc.
- Best practices overall and standard practices in the ERP
- ERP process metrics that are in a useful format and real-time
After the ERP go-live, the more visible results are large cost savings in day-to-day operations and less stress on the company team. An even larger value is in an overall more competitive and agile company.
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Long term ERP license costs were initially very difficult to calculate. Working with SoftSelect we were able to insist on a predicable ERP license fee approach and achieve much lower initial and ongoing license fee costs.
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 SoftSelect, helped us negotiate for the products we need and set our expectations for the process of implementing these solutions.
Negotiating ERP costs is complicated and the ERP software vendors take advantage of the buyer’s lack of experience. SoftSelect’s experience and influence helped us level the playing field. We clearly saved money and lowered our long term risk.