Evaluating the vendor: What to look for when making an ERP purchase
February 26, 2010 by Daniele Fresca
For manufacturers looking to add, upgrade or replace ERP software, one of the most apparent concerns is what the system can do. Can the system handle the company’s scheduling needs? Does it offer production monitoring and quality control? Can it streamline communication?
While these are important, what an ERP system can and cannot do is only one consideration. In fact, functionality should be consideration against the backdrop of the entire package: its technology and its vendor. Only by doing so can manufacturers ensure they make a right and lasting choice.
While platform (e.g., .NET, SQL, hosted, etc.) is important, an ERP system should not be selected based on platform alone. Doing so may distract from the real value an ERP system can provide. Choosing based on a pre-conceived idea that only one platform will fit the selection criteria may eliminate viable options before they are considered. Instead, look for high-caliber functionality then consider whether the functionality compensates for the platform difference.
As technology evolves, so too should a good ERP system. If a vendor is not on the leading edge of technology, chances are that vendor is not a viable option for the long haul. Check to see how they are keeping up with technology. Are they focused on research and development for future applications, or are they focused on past technology that will soon be out dated?
• Number of vendors.
It is important to understand how many total vendors will contribute to a package. Some are built upon technology developed by and acquired from multiple sources, but packaged as a single system. Sometimes the number of vendors can be as many as the number of system components. Sustaining multiple vendors can be cumbersome and should be a factor in determining the long-term affects on an information systems department.
• Product demo.
Product demonstrations are often a good way to see an ERP solution first hand, and knowing what to look for will provide the clearest picture. Consider whether questions are answered clearly and concisely. Be persistent when gathering desired information. As well, the most valuable tool is personal experience, so test-drive the system, too.
• Customer referrals.
While existing customer referrals are beneficial, remember three things: customers are on the referral list for a reason; vendors don’t typically give out the names of problem customers; and vendors will most likely provide only the number of references requested (if two are requested, only two will be provided). Then check the vendor and customers’ websites for case studies, quotes, customers in the news, etc. Ask for referrals from companies that used the same system, are similar in size or are in the same product industry as your own. The vendor may not have an exact match, but a software vendor that can offer a variety of customer referrals is more likely to have many happier customers than one who cannot.
• Implementation time.
When provided with an estimate for the number of days to complete an implementation, ask how the vendor arrived at the number. They may have a proven plan that does not match what their competition is offering. Times will vary from package to package, but don’t take for granted the number of days noted by the salesperson. Get feedback, so when contacting a reference customer, ask whether the vendor met their implementation schedule. If they did not, how much longer did it take, and why?
• Customer retention.
It is one thing to have a short list of current, happy customers — but it is something else entirely to maintain the customer relationship for years to come. Ask the vendor what their customer retention rate is. Do a majority continue on with them for years — even decades? With the buyouts and recession of past years, no ERP vendor can claim 100-percent retention, but anything less than 80 percent should raise a flag to ask a question.
• Think realistically.
While it is always good to think about where you want to be in five or more years, also think about where you are now. Buy a package that focuses on your current market position but can carry you to your next goal and beyond. An over-the-counter ERP system bought at the local office supply store will not see a company through to its multimillion-dollar goal. On the other hand, the software solutions used by the Nikes of the world may be too big. An ideal package is one that can be purchased with only the components that are needed but expand with a business as it grows.
• Consultant catch.
The utilization of consultants in the ERP selection process can be useful and informative. However, beware of the consultant who has affiliations with a specific ERP system. Hiring a consultant should be paying for an unbiased opinion of which software truly is the best match for your company and not a test for them to see how they can sell you their ERP system.
Daniele Fresca is the director of marketing for IQMS.