Finding an ERP software provider is a lot like buying a new car or a home—you end up having to weigh your wants versus your needs and then you try to reach a compromise of sorts. It can be challenging, if not downright maddening.
The reason selecting an ERP software provider can be such an ordeal is that oftentimes the selection process is flawed. Using the analogy above: You, the consumer, can easily be blinded by the shiny new sports car, or the new home with the in-ground pool and brand new kitchen. And in addition to all of the shiny attributes, you also must deal with salespeople who are doing and saying everything they can to earn your trust and then turn that trust into dollars in their pockets. Why shouldn’t you trust them, right? They are the experts and you’re the unknowing consumer. This metaphor is equally true with ERP evaluations.
Companies in need of ERP software for years have followed the same selection process. Andy Pratico, Synergy Resources’ Business Development Manager, knows this legacy selection process all too well. Having spent the past 30 years in the manufacturing industry, Pratico believes companies have become resigned to following the same old method without any regard for the time and money they might be wasting. That dated process goes a little something like this:
- Step 1: Budget Approval — Usually first step in the selection process, believe it or not, involves going straight to the ERP software provider and asking them how much it will cost to purchase and implement their software. A salesman will more than likely lowball you in an effort to preserve your interest, but 9 times out of 10, that lowballed price is not what you end up paying. Once you get the estimated cost, you’ll likely take that ‘less than required budget’ to your bosses to find out how you should proceed. If all goes well, you move on to the next phase in the selection process.
- Step 2: Define Requirements —This next step involves going around to all department heads and getting input on what each of them would expect out of an ERP software. This input then becomes your list of requirements that you intend to send to all ERP vendors as part of the Request For Qualifications (RFQ) process.
- Step 3: Send RFQ to Software Vendors — Next you’ll submit this detailed multi-page novel called the “system requirements list” to all ERP software vendors. The hope is that vendors fill out the list honestly, but more often than not the questionnaire is returned with carefully worded versions of: “yes we do that!” The next thing you know you’re stuck with a handful of responses that all say the same thing: YES!
- Step 4: Request Pricing — At this point in the process, the salesman you’re working with is likely trying to figure out exactly how much you’re willing and able to spend. This is where most ERP customers get duped. For instance, you tell them your budget is $100,000. Well you’re in luck, the salesman tells you that the software itself will cost $95,000 and the implementation will only cost $4,995—a grand total of $99,995. How great is it that the salesman was able to come within your budget. Don’t buy it—this is an optical illusion. Once you used up the $4,995 of training and you need more, who do you think you buy more training from?
- Step 5: Create a Short List — Your short list is based off everything you’ve learned up to this point in the selection process. It’s a small list filled with ERP software providers who have impressed you with their price options and response to your RFQ. These ERP vendors will now be invited in to give a sales demonstration.
- Step 6: Entertain Sales Demos — The ERP vendors lucky enough to survive to your short list are invited in for varying lengths of sales demonstrations. The selection team then shoulders the arduous task of reviewing these “sales demos” in an attempt to decipher the subtle differences. And naturally, “sales demos” are always designed to look good. If the “sales demo” did not look good, the software company would go out of business. Some ERP software companies even hire professional presenters who know how to navigate around the weaknesses of their system and precisely which keystrokes will present their software in the best light. Other ERP sales teams deploy three, four or even five people for your sales demo because A.) it gives off the hint they are committed to you, but might also imply B.) ERP is complicated and it takes that many people to adequately explain its attributes.
- Step 7: Ask for References — The last part of the process involves following up with references—references that you were given by the ERP vendor. They are references carefully selected by the ERP sales team and represent customers that swear the software turns water into wine. How much do you learn by speaking with them?
- Step 8: Make a Decision — After all this hard work it’s time to make the Company altering decision.
ERP software providers are familiar that you use this process. And as a result, vendors are aware of how you evaluate ERP, and also know how to counter each step. Their singular goal is present their product so that it appears the most attractive. But what they’re really doing is selling you—selling your company hard on something that may not fit or even need at this point.
Pratico believes there is a better, more efficient way to select an ERP vendor—a way that can save a manufacturing company valuable time and money, and can be 100% successful. Having worked with hundreds of manufacturers over his longstanding career, Pratico has seen his fair share of ERP implementation success stories, but sadly even more failures. As a result, Pratico has come up with a fresh approach to selecting ERP systems.
The following is an alternative selection process you should consider:
- Step 1: Justify your need for ERP in the first place. Ask yourself: Will a new system provide you with a measureable return on investment? Or would just streamlining your processes get the results you desire? Converting to a new system is difficult enough. Make sure that the effort is warranted—or else don’t do it. Remember if you do not streamline your processes in concert, a new ERP will only place pretty screens in front of your current problems.
- Step 2: Document critical requirements that are unique to your company. Critical Requirements are ‘Must-Have’ requirements only. Only after you have documented and focus on them, can you recognize the differences in ERPs. And remember: ‘Critical requirements only. We can all assume that most systems will have an Aged Trial Balance. And your list should not be longer than two pages.
- Step 3: Get an un-biased opinion by speaking with companies using these ERPs. However these are unlikely to be the three referrals the ERP vendor provided. The only way to benefit from un-biases opinions is by speaking to un-bias customers. How to you find them? Ask your Vendor for a company that is local, a similar size, in a similar industry (or similar “must-have” requirements) and has been using the ERP version you’re considering for more than 12 months (past the learning curve). Why not learn from someone else’s experiences?
- Step 4: Embrace the cost and process of implementation. Software price is a certainty. Implementation and training costs are directly related to how much you contribute to the project versus the vendor. All ERPs require the same steps to implement. You are the one who decides who does what and therefore how much it will cost. Forget about what you’ve been quoted—this is a fictitious number. Of the common 16 steps every ERP implementation requires to be successful, you decide who conducts each engagement. The more you participate, the less it will cost. And vice versa. The day you go live is the day you know how much your ERP costs to implement.
- Step 5: Get the prescriptive presentation you need! If you plan to review sales demos, demand that the vendors bring in the trainer you will work with post sale, to show the software. You will never see “pre-sales” presenters after you purchase. Trainers have to live with their promises after the sale, and should be quite forward about what the system can, or cannot do. Remember that trainers are a profit center for the ERP vendor. So be prepared to shell out for a trainer’s demo but it is worth it. Trainers are not offered to companies unless you ask.
The Truth About ERP Software
There are over 1,000 manufacturing systems in North America and 73.8% of them are dissatisfied with their current ERP systems. This is the hard-to-swallow truth about ERP software. The reason, according to Pratico, is that ERP is sold as if it’s simple—but in reality it’s anything but.
“ERP is not something simple, it’s incredibly complex,” says Pratico. “When companies evaluate ERP systems, they rely on their past experiences of purchase or evaluate other large purchases. You cannot evaluate ERP the same way you evaluate Equipment, Houses or Cars. The only way to be sure about any ERP software is to buy it, use it for a year and then you’ll know if you like it or not.”
By following this simple 5-step process, emphasis on your Critical, Must-Have requirements, Pratico guarantees you will not only get the right fit system for your company, but you will be successful. Why would you not try it?
To help companies increase their probability of success, Pratico presents common-sense web workshops on how to select systems. To learn even more about the ERP selection process sign up for an upcoming webinar or contact us and one of Synergy’s Business Advisors will be with you in no time.