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Seven Questions to Start Vetting ERP Vendors

Navigating a daunting ERP maze requires sound guidance. One misstep can undermine objectives and even go backwards. A familiar cautionary tale illustrates consequences. Owing to the ineffective deployment of an ERP solution, Hershey reportedly lost $100 million leading up to its pivotal Halloween candy sales season in 1999. Short of calamities like this, thousands of companies that deploy ERP never enjoy its full benefits because they embark with insufficient guidance.

Choosing the right vendor means choosing a partner who helps prepare the groundwork, supports training, eases transitions, handles bumps along the way and stays around until a transition is complete. There is no foolproof checklist for finding such a partner, but seven questions can start a process with the right footing.

  1. Does the ERP vendor understand your market sector and your customer?

  2. A track record reveals part of the story but not all of it. One or two ERP assignments for rivals might say a lot or very little. Assignments along the supply chain reveals more. They expose ERP vendors to less finished components of solutions that may drive your business to the moon or to chapter 11. Vendors may be more willing than rivals to share candid assessments of vendors’ performance. Look for a vendor with 20 assignments under its belt, not a half dozen or fewer. Treat a potential ERP partner like any job candidate, where “here’s what I’ve done for companies in your industry” trumps “here’s what I would do.” Invite vendors to tell you about your customer, and lean toward those who know the challenges you face.

  3. Is the vendor equipped to train your staff in best practices including group and individual support when training ends?

  4. The best ERP system in the hands of unprepared employees usually dooms an initiative to sub par results. Training is imperative and anyone who has spent a half-day learning to operate a new telephone should appreciate the scope of training that ERP entails. It will take at least a full day and often more, depending on roles.

    The vendor should be able to support formal training that goes beyond basics. Cede no ground where ERP quality is at stake and require attendance at training sessions. Do not settle for an ERP vendor with a great sales pitch but who can’t conduct training during installation. When the new system gets switched on, the whole team must be ready or problems may start to cascade from day one.

  5. Has the vendor described pitfalls and consequences to expect in time and cost?

  6. In the course of multiple ERP assignments for comparable companies with similar missions, a vendor should have seen everything that can go wrong. Benefits seduce; pitfalls are sobering. Demand a candid assessment of factors that can add costs or extend time frames so that you never hear five words a company should never hear from its ERP vendor: “we didn’t see that coming.” Vendors that are partner material give frank accounts of the downside because they’re attuned to goals and ERP system will advance.

  7. Will the vendor set firm deadlines, goals and benchmarks and agree to penalties if not met?

  8. Imprecise due dates invite delays and cost overruns — the kiss of death for an ERP implementation. Choose a vendor who will commit to getting the job done by specific dates and has met deadlines before. Remember, extracting firm deadlines from vendors also imposes self-discipline. A company that misses internal ERP implementation deadlines cannot hold vendors’ feet to the fire. Don’t settle too fast for installation deadlines. Tie deadlines to ERP goals. And when it comes to measuring success, new systems should meet an array of data points. Insist that process benchmarks shed light on the drivers of cycle times, cost per unit, error causes and further ERP innovation.

  9. Do the vendor and solution provide ability to integrate with other 3rd party systems and vendors?

  10. Business imposes more complexity now more than ever at every level, even on small companies that must accommodate larger vendors and customers. One vendor may not supply all the answers, which is why many companies report growing demand for third-party ERP support. Constellation Research, a leading source of independent analysis in the finance and accounting technology space, found that 57 percent of executives who responded to a survey in 2011 indicated interest in hiring third-party ERP support. More telling still, 42 percent said they were pursuing third-party support, more than twice the result in 2009. If a third party vendor cannot play nicely with counterparts, big trouble often lurks.

  11. Can my vendor furnish support in every domestic or global region as we expand?

  12. Look ahead five or even ten years and hire a vendor who can accommodate that company. Let optimism guide the decision. A vendor down the road with more than enough capacity won’t hurt; a vendor who can’t handle growing markets, geographic regions or mounting complexity — that is crippling. Suitable vendors, like systems, bend, stretch and grow along side. That doesn’t rule out a hiring a small company for ERP implementation, so long as it houses expertise and resources geared to challenges on the horizon.

  13. When will I know that I know enough to select a vendor?

  14. The short answer: once costs and benefits in sales pitches and presentations are easy to anticipate and key questions flow easily. Fluency in the merits of local, open source or cloud-based ERP implementation -- not the underlying technology -- signals time to decide. Decisions that precede a firm grasp of costs, benefits, goals and time frames, including lots of nuances, hike the risks. There’s no fixed moment for a green light; think instead of a green zone. With input from all internal stakeholders, review reasons for embarking on a mission to install state of the art ERP. Remember that excessive delays impose costs that may be hard to recoup.

Now that you have a solid foundation for making your technology decisions, feel free to explore our Enterprise Resource Planning product listing, where you will find filtering capabilities and product reviews from financial professionals.