“If you don’t know where you’re going, any path will do”

Start with business strategy.

I was recently having a conversation with a business consultant friend of mine, who was describing a discussion he’d had with a friend of his. The friend was working on an ERP software evaluation for a large company, and was inquiring as to the company’s strategic direction for the next several years. This consultant was informed that he was to only focus on the requirements of the current business and not to be concerned with the company’s strategic direction. However, this consultant knew that with the implementation for this very large organization likely to take some 24 months, the business for which they would be implementing software would be two years outdated if future business direction wasn’t taken into consideration. He decided to move on as he didn’t want his fingerprints on this scenario.

I also find the words of hockey great, Wayne Gretzky, to fit this situation well. Gretzky said, “I skate to where the puck is going to be, not where it’s been.” From a business perspective relative to evaluating and implementing new ERP software, start with business strategy first. That way, one can enable the business that will be, not an outdated business model that will no longer be competitive in the future business setting. There should be an on-going process of continuous improvement, continuously seeking to enable new business models that sustain competitive advantage for the long haul.

10 Common Pitfalls to Avoid in ERP Software Evaluation

Through my experiences of working with over 1,000 end companies in manufacturing and distribution and over 200+ consulting organizations over the past 3 ½ years, here is a list of what I’ve come to see as “10 Common Pitfalls to Avoid in ERP Software Evaluation.” I felt that if I came up with some snappy way to describe them, it would be both more entertaining (at least in my mind) and have more impact than by just writing a bunch of narrative.

I’ll list them now, and will take each one of these to describe what is meant by the situation and what is recommended to overcome each of these scenarios. So here are “10 Common Pitfalls to Avoid in ERP Software Evaluation”…

1. “If you don’t know where you’re going, any path will do”
2. “It’s just an IT project”
3. “I don’t know what I want, but I’ll know it when I see it”
4. “Analysis Paralysis”
5. “I want a new system that looks and acts exactly like the one we have”… AKA “‘Here’s how we do it in the old system’ syndrome”
6. “The Beauty Contest”
7. “If only I had known then what I know now, before we said, ‘I do’”
8. “The World Tour”
9. “Let’s just let ‘good ole Joe’ run the project”
10. “Once selection is done, my job is over”

What Customers Want from ERP Software and What ERP Vendors Want

Next, we’ll examine what most customers want from new ERP software and what most ERP vendors want. While there are many layers to the topic of what customers want from new ERP software, the core answer of what businesses want from new ERP software is Business Results – business owners want to reduce costs, increase revenue, improve operational efficiencies, and make it easier for their customers to do business with them.

Beyond Business Results, companies also want the following from new ERP software:

• Efficient software evaluation leading to a successful result – companies want to make excellent decisions in the most efficient manner possible (unfortunately, when businesses aren’t aware of how this process should work, it becomes very inefficient).
• Efficient, successful implementation – companies want their new software to deliver the functionality they expect, and for the implementation process to be delivered on-time, on-budget, and on-scope.
• Good long-term customer/vendor relationship (“win-win”) – companies want to be able to work with their software vendor, have continuity of relationships with personnel at that business, and be able to understand how best to utilize their software and to resolve issues as they arise.
• Ability to grow with the solution – companies want a solution that will last them for an extended period of time, in many cases this is 10-15 years or more. To be able to do this, the software must be flexible, robust, and have sufficient functionality to be able to be leveraged as the customer’s business continues to grow and evolve.

So, what do ERP vendors want? Probably not surprising, they likewise first and foremost want Business Results.

Additionally, ERP vendors also want the same things the customers want:

• Efficient software evaluation leading to a successful result – while ERP vendors would love to bat 1.000 by winning every deal they touch, they know that’s not practical. They want to compete in deals in an efficient manner where they can win and it is worthwhile to win.
• Efficient, successful implementation – vendors want their customers to receive the business benefits they desire from their software, and want the implementations to be delivered on-time, on-budget, and on-scope.
• Good long-term customer/vendor relationship (“win-win”) – vendors want to work with customers who are easy and fair to work with, have continuity of relationships of personnel, and are able to understand and internalize how best to use the software they’ve acquired.
• Ability to grow with the solution – vendors want customers to continue to leverage more and more of their software’s capabilities over time. This helps vendors to continue to grow their solutions for existing and new customers as well.

While said somewhat under the covers above, I’ll also explicitly state the following which ERP vendors also want:

• Efficient sales cycles (winnable deals, no “tire kickers”) – again, vendors want to focus their time on evaluations where decisions will be made and customers will move forward. There is no time to be spent with "perennial prospects" that go through the same evaluation once a year and never decide to move forward to do anything.
• Happy, referencable customers – there is nothing better from a vendor’s perspective than having happy customers who are willing and able to act as references on their behalf.

You’ll note that to this point in time I’ve mentioned these things apply to most customers and most ERP software vendors. That is because there are still people, including those who set the cultural tones of their businesses, who believe that the only way for them to “win” is if the other party with whom they’re working is to “lose.” This “win-lose” mentality unfortunately still exists in the customer/ERP vendor intersection.

Speaking from an ERP software vendor’s perspective, when it is determined that a potential customer is focused on establishing a “win-lose” relationship, we walk away from those deals as rapidly as possible. Likewise, if potential customers determine that an ERP vendor is attempting to establish a “win-lose” relationship, those customers need to eliminate those vendors from further consideration as rapidly as possible.

The most prevalent situation where ERP vendors attempt to establish a “win-lose” relationship is where the functional and/or cultural fit between the vendor and potential customer are low, and the vendor is so hungry for new sales (i.e., Business Results are far more important than any of the other desires) that they continue to press on to close the sale. This will lead to an implementation where none of the other desired benefits from either party's perspective can be achieved.

Those who are unfamiliar with how to structure and perform an ERP Software Evaluation are more likely to be bitten by a vendor attempting a “win-lose” transaction. In these cases, those companies who are not experienced at performing these evaluations on their own are highly encouraged to find and engage experienced, independent assistance to help with the evaluation.

When Should I Replace My Existing ERP Software?

Let's examine when it's time to consider replacing existing ERP software. There can be a number of symptoms that will help point someone to realize it's time to evaluate and implement new ERP software. Some examples include:

• Current software can’t match existing business processes - this may have existed from day 1 of new software, and the gap may have continued to widen over time with the new solution.
• The business is changing and software can’t enable this change - as the business changes, new processes can get introduced which help enable that business to be competitive in new markets with new customers.
• Lots of off-line processing (i.e., spreadsheets, manual processes, re-keying of data multiple times) - if the existing system doesn't allow someone to get their job done, they tend to find ways around the system to do so. Unfortunately, these inefficiencies can eat substantial amounts of time and can create data inaccuracies as the "same" information is entered multiple times in disparate systems.
• Have lots of “data” but can’t get “information” out of the system - analyzing information is critical to continuous improvement and attracting / maintaining good customer relationships. One can get handcuffed by have a data rich, information poor environment.
• Can’t easily implement new functionality or technology (i.e., RF/barcode, EDI, warehouse management, CRM) - there may be improved efficiencies to gain and/or new customers to attract by making it easy for them to do business with you. Many times, technology is a key enabler to making it easy for your customers to interact and transact business with you.
• Existing software and/or underlying infrastructure is no longer supported by the associated vendors - as there have been massive amounts of acquisition in the ERP market, there are lots of ERP solutions which were thought of as "flagship" solutions that are no longer receiving an adequate level of investment to keep existing and attract new customers. One's vendor may have "dropped support" for its software without doing so in a formal way with its customers.
• Can’t keep up with business demands by writing custom software vs. using packaged software solutions - for those who continue to write their own custom software, there are so many "commodity" processes that one could enable via packaged software while still gaining the benefits of customized software in those "competitive advantage" processes. Unfortunately, most companies who have a "build" vs. "buy" approach to software do so across all business processes, and either pay a lot for "commodity" processes or can't get resources focused on the "competitive advantage" processes due to keeping day-to-day operations running.

As a means to help businesses evaluate whether or not it is time to replace their existing ERP software, Technology Group International has published a White Paper entitled, "How to Tell If You Have Outgrown Your Existing Business Software" which is available from TGI's Web site at http://www.tgiltd.com/How_to_Tell_If_You_Have_Outgrown_Your_Existing_Business_Software.pdf.

Litzenberg's ERP Corollary to Carl Jung's Statement

Through this point in time, I've had the opportunity to work with over 1,000 end companies and roughly 200+ independent consultants in ERP software evaluations since Q4/2003. During that time, I've seen some firms and individuals who were very good at performing their roles in their respective evaluation processes, while others were at best ill-prepared. In the end, when participants in the process are unable to successfully play their positions - whether intentional or unintentional - nobody wins.

In an effort to draw upon these experiences to help the various stakeholders of the process learn from these activities, I wanted to summarize those situations into a single statement. In doing so, I was drawn to a famous quote by noted Swiss Psychiatrist & founder of analytical psychology, Carl G. Jung, who said, “The world will ask you who you are, and if you do not know, the world will tell you.”

Here is what I'll call "Litzenberg’s ERP Software Corollary to Carl Jung’s Statement"…

“The world will ask you what you want in new ERP software, and if you do not know, you’ll likely be sold something you don’t really want, can’t really use, will spend a lot of time, effort, and money trying to get to do something it was never intended to do, and ultimately, won’t achieve the desired results.”

I look forward to examining various aspects of ERP software evaluations and humorous situations that occur along the way.