Any solution implementation is challenging, and one that affects the entire enterprise is especially daunting -- particularly when large parts of existing systems and methodologies are replaced. In the midmarket -- where budgets are tight -- deliveries must be on target and begin producing meaningful results as soon as possible.
Your window of education to enterprise resource planning products is going to be through various vendors, and it's important to choose both your ERP vendor and the product wisely. Let's examine ways to leverage relationships and properly select the appropriate vendor and related ERP system.
The ERP vendor: You are at a distinct advantage here. Vendors want and need your business. Work vendors against one another: Don't be shy about letting them know that you're exploring other options -- and be frank about who the other players are. You can do a cursory online examination of a dozen (or more) vendors and allied products, but eventually you'll want to arrive at three or so for in-house product demonstrations.
It's also important to keep in mind that an ERP system can mean something different for each organization -- and will be used differently in each. For your own benefit, help the ERP vendor "scale the sale" -- size it appropriately to fit your organization. In doing so, you get a robust, free education on what an ERP system can offer. Be as shameless about self-education as time permits, letting vendors teach you not just about their specific solution, but also about ERP in general. This will be especially valuable when it comes to getting buy-in from business stakeholders who may balk at ERP.
Budget: Midsized businesses and their allied operations vary greatly, but it's safe to say that meaningful ERP is going to start in the low six-figure range, minimally -- and that investment will likely get you ROI in a few specific areas. Keep in mind that implementation costs, any associated customizations and any real-world setbacks, will cause this figure to go up to the mid-six-figure range and possibly beyond. Assess the payout vs. the ROI.
A word of caution: A medium-sized business is often defined as having from 100 to 999 employees, which is quite broad. Therefore, there is no one-size-fits-all discussion for a budget.
Remember that it's OK to look: Vendors will engage in good faith (and, therefore, you should have legitimate interest, too). The process will help expose upper and lower ranges of investments and returns for your specific enterprise, budget, business-functional areas, stepped rollouts, etc.
Evaluating the ERP vendor and setting expectations
Force a competition by which ERP vendors compete for your business:
- Forward them your formal business needs and expectations.
- Be explicit about your expectations. You intend to deliver to business a system that embodies
- Cost savings.
- Scalability and adaption so that the solution easily:
- Incorporates a progressive inclusion of departments and processes on an easily managed basis -- particularly during initial implementation.
- Accommodates future expansion of present lines of business.
- Accounts for new lines of business.
- Allows for new resource setups.
- Adapts to evolving business loads, such as new regulation and oversight.
- Ease of maintenance.
- Measurements, analysis and reports.
- Solicit initial vendor input. This is not yet a formal "fit to requirements" document.
Initially, get some high-level overviews from representatives via email and see who has a handle on
your organization's interests. This is an initial quick pass -- that will eliminate unsuitable
vendors and products.
- Ask whether the vendors have delivered ERP for organizations similar to yours:
- Study integration considerations against your present suite of products, databases, general content, business methods, etc.
- Examine timeline expectations and potential burdens and interruptions to business. Factor this into vendor selection based on assessed ease, or difficulty of installation and adjustments.
- Look for a confident statement of steady, prudent, progress of installation and production deliveries vis-à-vis other vendors.
- Ask whether the vendors have delivered ERP for organizations similar to yours:
- Get references. For each vendor, talk to organizations that have gone through similar
- Assess their satisfaction with the ERP vendor.
- Were deliveries made on time?
- Was the system delivered on budget?
- Are there measurable, empirical benefits -- and has ERP, in effect, paid for itself and beyond? (It should.)
- Solicit challenges, both those that were known going in and, just as importantly, those that were not anticipated.
- Do they have any regrets?
- Choose three or four strong players and invite them in-house for product demonstrations:
- Understand that IT may wish to prequalify the vendors by examining product demos before inviting the business in.
- Have selected vendors demonstrate their products to key business department leaders and staff.
- Be certain that current IT staff members have the capacity to maintain specific ERP systems, or the ability to learn how to do so.
- Upon ultimate selection, be absolutely sure to have full agreement on the vendor and allied product by IT governance leaders and other business players.
- Solicit a formal business proposal.
Implementation timeline: In concert with key business stakeholders, the organization must develop a meaningful ERP implementation plan. There are a number of templates on the Web that will help you with key considerations. Your enterprise will have unique considerations as well.
Remember that an ERP system can cause massive disruption if not managed properly. Jobs will change, consolidate and even be eliminated. As the IT leader, you will need to determine if an ERP system can be implemented incrementally -- perhaps across two allied departments with mutually reinforcing content, process and service -- with a plan for full rollout to the whole enterprise.
This might seem counterintuitive: Isn't ERP meant to address the whole of the organization and its operations, bringing centralized management and consolidation of data and process? In its truest sense, yes, but ERP will likely be staggered in its ultimate delivery across the enterprise.
ERP as SaaS: Sunny future in the cloud?
Just to keep life interesting, and as if a major implementation weren't challenging enough, let's take a quick look at cloud computing's impact on ERP considerations:
Remember that an ERP system can cause massive disruption if not managed properly. Jobs will change, consolidate and even be eliminated.
- If you're already largely in the cloud, with key critical business components being delivered as Software as a Service (SaaS), cloud ERP is pretty much moot, as you would be centralizing and consolidating discrete systems and data already residing in the cloud. Hashing out vendor relationships and access may be an issue that will drive those with whom you do business, and, ultimately, where your critical business content and processes reside.
- If you are not presently in the cloud but are interested, it's a logical step to do in-house ERP, where process and data already reside. Once your organization is swinging with a centralized ERP system (and has that implementation/use challenge under its belt), then migrating ERP to the cloud becomes just another (comparatively) routine migration.
- A third distinction exists: A midsized business may not have in-house expertise for ERP system management, although that's a bit hard to imagine -- most general IT departments will have ready potential. However, you may engage in what some would consider a rather risky change: consolidation of process and centralization of data to a common system (ERP), and simultaneous (or even near-term subsequent) migration of process and content to the cloud. While this is not recommended, with talent and care it can be accomplished when demanded.
Bottom line: Set realistic timelines, budgets and expectations, and be up front with potential vendors. Working together closely can establish a strong relationship that will ultimately benefit both parties.
David Scott is a Fortune 100 IT professional. He is the author of the book I.T.WARS: Managing the Business-Technology Weave. Contact him at David-Scott@david-scott.net.
This was first published in December 2010