5 Tips - Choosing ERP supplier Whitepaperfplreflib.findlay.co.uk/images/wm/k3/ERP-supplier.pdf · advice on choosing the right ERP system. However, much of this just focuses on the

Executive Summary

A trawl of the Internet reveals numerous white papers and other literature giving varying degrees of helpful advice on choosing the right ERP system. However, much of this just focuses on the detail of the software or the implementation process. When it comes to exploiting the wealth of benefits an ERP system can provide, your choice of ERP supplier is as important as the technology. So, the purpose of this white paper is to provide some otherwise difficult to find, practical advice on the ERP selection process itself - how to choose not only the right system for your business, but the right vendor too. There are five common sense steps to follow:

1. Clearly define your business objectives

2. Ask how the solution specifically tackles your problems

3. Develop clear criteria for evaluation

4. Get to know your supplier

5. Speak to other customers

Keep these in mind and you will greatly improve your chances of unearthing an ERP solution that both supports your business strategy and helps you achieve your goals; now and for many years to come.

Page 01 | April 2014© 2014 K3 Syspro. All Rights Reserved. All trademarks are recognised

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Introduction

The benefits of a good ERP system probably need little explanation. From improved productivity and greater data reliability to enhanced customer and supplier interaction, and better informed decision-making; some organisations report as much as 300 per cent material improvements in efficiency whilst reducing costs by up to 65 per cent. Clearly this depends in no small part on choosing the right ERP solution and supplier for your business in the first place. It is a decision to be given very careful consideration.

You should select your ERP supplier on the basis it will become your long term business partner; one you will have to work with not just on the implementation of the system, but for the next 10 years or more.

A successful partnership will not just help internal adoption of your shiny new ERP system, but will also greatly increase the benefits your business gets from it.

Yet, this is something companies apparently continue to get wrong. According to Panorama Consulting, in its 2013 ERP report, nearly one in three respondents were ‘moderately dissatisfied’ or ‘not satisfied’ with their overall experience of their ERP vendor.

Make sure you don’t meet the same fate - follow these five steps and find the right ERP partner for your business.

“According to Panorama Consulting, in its 2013 ERP report, nearly one in three respondents were ‘moderately dissatisfied’ or ‘not satisfied’ with their overall

experience of their ERP vendor.”

5 Tips for Choosing the Best ERP Supplier For Your Business

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Gartner states: ‘the most significant business benefits are derived when an ERP implementation is used to support strategic business transformation.’ This means ensuring your ERP goals and objectives align with the overall business strategy. And to do this you naturally need to first understand exactly what it is: Identify what good looks like, what your business is trying to achieve, where you hope to be in five years time: Are you looking to improve service or avoid late delivery penalties without overstocking, for example?

One of the biggest reasons ERP implementations fail to deliver on promise is because the technology isn’t aligned with the way the company does business. Companies generally set themselves up for project failure when they search for an ERP system with a narrow focus on solving acutely painful ailments. Ultimately, they omit consideration of less obvious needs - ones that might not be causing evident pain but are nonetheless more critical to operations. Often organisations think a particular issue is causing a problem within the business when in actual fact it is something completely different. That’s why you need to give the vendor a view of the wider picture and your overall business objectives.

In addition to ensuring the right criteria are used to evaluate ERP systems and vendors, this process of defining your business objectives will also help achieve the level of executive sponsorship for the project and commitment required to make it a success.

1. Clearly define your business objectives

Before you can find an ERP system that will help to run your business better, you need to know not only what you are hoping to achieve from the implementation, but what you are trying to achieve as a business overall. Justifying your search for a new ERP system as simply a replacement of your disparate legacy systems with more modern technology, quite frankly, won’t cut the mustard. Why are you really buying a new system; what are the benefits you expect to get? You’re about to go through massive upheaval and put your business at risk for several months, so you better be clear about what you are trying to do.

It is important to identify and communicate to potential suppliers, the specific benefits you are looking to derive from the software, such as improved communication with customers (or other systems), or better user interface to allow specific actions to happen faster, the ability to drill down in to the detail of orders with ease, or the removal of duplication of effort so more time can be spent on things that help better run the business. But you must quantify these things too - exactly how much duplication of effort exists for example. And don’t just think about the specific IT requirements, remember the role of an ERP system is to help you achieve your business goals, to ease and improve your processes (in measurable ways), and ultimately enable the management team to make better informed decisions.

“One of the biggest reasons ERP implementations fail to deliver on promise is because the technology isn’t aligned with the way the company does business.”



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This approach changes the emphasis of your engagement with the supplier and forces them to conduct a detailed ‘discovery’; talking to the people that are going to use the system - to make sure it provides a solution to their problems. Gaps will start to appear. The only way for a supplier to demonstrate how the system will help your purchasing manager, is to ask your purchasing manager to show the vendor what he does now and for the vendor to come back and demonstrate to them how their system will handle it; it may be different to what happens currently but the supplier should be able to show the benefits that will come from that.

There are three levels to consider:

1. Executive: Is the solution mapped to the critical success factors of your business strategy? Does it provide one version of the truth, and does it feed this information to the senior team in a timely manner to allow more effective decision-making?

2. Management: Is the system easy-to-use, so information can be collected and reported quickly and easily, while avoiding duplication and errors?

3. End user: Does the system have all the functionality required to allow staff to do their jobs more effectively (functionality, which might not be available on your current system by the way), i.e. does information feed back in to the system for tracking once a work order passes to the shop floor rather than simply disappearing?

2. Ask how the solution specifically tackles your problems

Of course you wouldn’t buy an ERP system without first having a software demonstration? Unfathomably some companies do, and of those that do have a demo, too many rely on a standard scripted presentation; this gives the supplier free rein to determine what they do and don’t show. Inevitably, they will demonstrate the fancy bells and whistles - all sorts of things you’ll probably never get around to using - but miss out what is really useful to you.

Always insist on a solution-based demonstration using your own data, so you can see exactly how the software relates to your business processes, and how it will specifically handle real-life problems. Unless you test it beforehand, how do you know the solution has all the functionality you need and provides a 100% process fit? The big question to ask is: Have you understood your own processes? If not, there’s every chance your supplier won’t either.

Ask prospective vendors specific questions but ensure you focus on the real issues. For example, ask how the system will help your purchasing department make purchasing decisions, rather than asking how it will handle a five-digit code or raise a purchase order - your purchasing manager may be used to a specific screen that displays their top ten suppliers, who they can buy from at different rates, at different times. Your new system may not have this as standard, and unless you cover it off in the demonstration, you are about to dramatically change the life of your purchasing manager, for the worse.. So ask, what happens when your buyer sits down at 9.00am in the morning and places orders; how will it help them; will it make their life easier; will it be faster and more accurate? Show me.

Bear in mind that some pre-sales consultants are trained to ‘demo to win’ and are incentivised to close the deal. Their job is to create the impression they have understood your business even if they haven’t. By providing examples of specific scenarios, or tasks users will carry out with the software, you not only give the demonstrator little opportunity to skirt around issues with the software they want to avoid, but can also help you determine who really has the greatest understanding of your business and which software is the best fit.

“Always insist on a solution-based demonstration using your own data, so you can see exactly how the software relates to your business processes, and how it will specifically handle real-life problems.”



k3syspro.com

Any demonstration should not only show how the solution would tackle specific problems, but a wider understanding of your overall objectives. Take the example of a racing car exhaust pipe manufacturer: rather than simply requesting a demonstration of how the system handles despatch, it should explain the business situation to the vendor, i.e. that it has to deliver exhaust pipe orders by the given deadline or face a fine of £15,000 for every minute they are late. That way, the ERP provider can show what steps and protocols can be implemented in the software to stop this ever happening.

To further reduce the opportunity for gaps to be missed and prevent the supplier from limiting your view of any potential gaps in functionality, ask to use the system yourself in the demonstration.


Critically, as with the demonstration, the proposal your supplier subsequently produces for you should not be routine; instead it should detail the deliverables and specific solutions to problems and difficulties you want to overcome - and how the system will help you meet your business objectives. Be vigilant in checking the proposal is indeed a real proposal, with recommendations and solutions, not simply a price list; make sure you understand exactly what you will get in the package.

Just because all of the system functionality has been demonstrated doesn’t automatically mean it will all be included in the package they recommend for you. Unless the supplier has something to hide this will be transparent in the proposal: look for a section specifically stating what is not included - think about hardware, operating systems, data migration, servers, fire walls etc. Never accept the first proposal; go through it with a fine-tooth comb and make sure everything is covered off one way or the other.

“Any demonstration should not only show how the solution would tackle specific problems, but a wider understanding of your overall objectives.”


k3syspro.com

So, rank these considerations in terms of importance, and involve the key users of the system in this process to ensure supplier evaluation fits with the varying expectations at the different levels of the organisation.

Don’t issue an ITT with a hundred and one questions: how many characters can I have in a description; what’s the maximum part number length? Ask big questions that allow you to really differentiate between systems and suppliers.

By defining your requirements to a sufficient degree of detail before going to market, you enable suppliers to demonstrate how their product will fill any gaps, tackle specific scenarios and meet your criteria. You can not only save yourself and your vendor a lot of time and effort, but also find a much better solution and partner for your organisation, one that will make a difference to your daily working life as well as your business performance.

3. Develop clear criteria for evaluation

ERP software can vary tremendously, and so too can sales pitches. It is difficult to evaluate each of them like-for-like without first setting out your evaluation criteria. This can be anything from functionality, to price, platform, or experience.

Functionality: Your specific industry, processes and business objectives will dictate the details of the functionality required and govern which features are most important.

Price: If price is a key criterion, be aware capital cost is only one part of the total cost of ownership (TCO). Bear in mind most of the profit for suppliers is not in the initial capital cost, but in the annual licence and support fees over the next five to 10 years. In theory, this is good news because it is in the supplier’s interest to ensure they look after their customers over the long term. However, it isn’t always the case, so check their reputation. Beware too that a low upfront cost may also mean higher annuals. Make sure you check exactly what you are getting for your annual fees.

Platform: Cost also raises the debate of cloud or on-premise. One of the key benefits often touted by cloud ERP providers is its price tag, i.e. it’s cheaper, but often this isn’t the case. Indeed, according to Panorama Consulting’s 2013 ERP report, 3 out of 5 respondents who had deployed cloud technology indicated a cost saving of only 0 to 20 per cent. With a cloud or SaaS model, you may well be able to get up and running for little capital outlay, but you could end up paying for the software two or three times over during the course of a ten year relationship with the supplier. In any case your vendor will almost certainly be able to arrange finance terms for you, so you can keep the initial capital outlay down, irrespective of whether you choose cloud or on-premise.

Experience: Every industry is different, and some have more specialised ERP requirements than others. For complex businesses in particular, experience in the same sector may be the deciding factor.

“By defining your requirements to a sufficient degree of detail before going to market, you enable suppliers to demonstrate how their product will fill any gaps, tackle specific scenarios and meet your criteria”



k3syspro.com

Whilst it can be more convenient to have a supplier come to you to demonstrate their product, you can often learn a lot more about the supplier by visiting their premises - and when you are about to invest tens of thousands of pounds or more in a new system, the travel fare is certainly a worthwhile spend. Not only will this give you an insight in to the staff that will be supporting your new system, you will also get to see the willingness of the supplier to reinvest in their company, and what their priorities are. The focus of the questions becomes quite different:

• Do the staff (not just the salespeople) seem happy?

• Has the company invested in up-to-date technology and proper demo suites?

• Do people know who I am, or am I just another name on the prospect list?

There is value in speaking to independent third parties too, such as consultancy firms, although it’s important to be sure the advice you are given is truly independent, as some consultants have a list of preferred suppliers, which aren’t necessarily the best fit for your business.

4. Get to know your supplier

When you purchase a new ERP system, you aren’t just investing in the technology, you’re investing in a long-term relationship too. That’s why choosing the right supplier is at least as important as choosing the right software.

Naturally, you’ll want to do due diligence on the real financial status of the company to ensure it is financially stable and well-managed. Good ERP providers will happily share all relevant information with you, and in the age of the Internet, it’s relatively straightforward to verify, especially if they are a plc.

But it is vital you get to know your supplier to a greater extent than their financial credibility. Company ethos is going to play a fundamental role in the success of the partnership. And that doesn’t mean choose your ERP supplier based on the lunch they provide - although that can be a good indication. Make sure you ask:

• Who are they?

• What’s their turnover?

• How many customers have they got?

• How many systems did they install in the last 12 months? (Are you the only one? Bear in mind some companies are living off a large installed base and not investing properly in the continued development of the system)

• How many customers left them in the past year?

• Have they got specific experience in your sector?

“Whilst it can be more convenient to have a supplier come to you to demonstrate their product, you can often learn a lot more about the supplier by visiting their premises.”



k3syspro.com

As a rule of thumb, you should visit two customers and call five more, and to get the most out of it, you need to think of some good questions in advance; not just about the implementation, but the whole process, including what they think of their system now.

Don’t just ask if they are happy with their system though, as invariably the answer will be yes; discuss features, functionality and challenges. Focus on the elements of a vendor’s total solution that can’t reliably be verified by vendor presentations and demonstrations - that way you can do due diligence on less tangible, but equally important elements of the solution.

ERP implementations never happen without a glitch of some sort; beware anyone that tells you different. With complex installations in particular, inevitably mistakes will be made, but it’s how the supplier handles its mistakes that will set them apart from the competition. You are looking to find out what went wrong and what the supplier did about it.

5. Speak to other customers

The most effective way of establishing whether a vendor is the most appropriate partner for you is through the depth and breadth of their experience. This can have a major influence on how well they understand your business processes and what you are trying to achieve, as well as providing the functionality you require. Nobody can provide a greater insight in to an ERP provider and its solutions than its existing customers.

There’s an old fable about a Goatherd: One winter’s day he found some wild goats mingled with his flock. He fed these strangers abundantly in the hope of enticing them to stay, whilst giving his goats just enough to keep them alive. Once the snow thawed the wild goats scampered away. As the Goatherd scolded them, one turned and explained: ‘If you’d treated your own goats better we might have stayed; but we know if another herd of strangers arrives, you will neglect us for their sakes.’

All too often in the midst of a pitch, salespeople over-promise and then under-deliver. The soundest way to judge how you will be treated as a customer is to find out how the supplier treats its existing customers. Customer references form a fundamental part of the buying cycle. It takes some of the risk out of the investment once you know similar companies to yours are being run on the same system.

That doesn’t just mean reading a few case studies - although of course, that is recommended - it means phoning customers and visiting their premises too. The reference to plural is intentional here. Most vendors have preferred reference accounts, which are relied on for positive reviews - it’s not unheard of for discounts to be provided in return for good references. So make sure you look in to multiple customers. Your supplier should be able to give you a few names to choose from. If they can’t, there’s a problem. Walk away - unless you want to be a guinea pig.

“As a rule of thumb, you should visit two customers and call five more, and to get the most out of it, you need to think of some good questions in advance.”



k3syspro.com

Good questions to ask:

• What lessons did you learn in the implementation?

• If you had that time over, what would you do differently?

• Was implementation completed on time and to budget?

• Did you have enough training?

• What was the consultant like?

• Where else did you look at and why didn’t you choose them?

• Why did you choose this system?

• Do you think you made the right decision?

• Does the software do what it’s supposed to do? Is it reliable?

• Have you had to use any workarounds?

• What is the vendor’s support team like?

These aren’t necessarily questions your supplier would want you to ask, but they will certainly give you an insight in to whether or not they are the right partner for you. Plus, you can pick up some handy tips along the way.

Conclusion

Choosing an ERP vendor doesn’t have to be a daunting task but it is one worth investing time and effort in. Picking the right vendor, system and service provider are non-negotiable project success factors. By following these five steps, you stand a very good chance of discovering a supplier that will both deliver everything you require right now and support you in the long term. Not only that, you’ll also have a system that tackles the specific challenges of your business. Improved efficiency, and productivity are a given, but you should find yourself with an ERP system that helps bring you sustained growth and profitability.



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5 Tips - Choosing ERP supplier Whitepaperfplreflib.findlay.co.uk/images/wm/k3/ERP-supplier.pdf · advice on choosing the right ERP system. However, much of this just focuses on the