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What are the top questions an ERP buyer should ask a vendor prior to purchase?
Please list, in detail, the top questions that an ERP buyer should ask a vendor prior to purchase. High quality responses will be published in an upcoming report on ERP buying behavior, and will receive significant promotion across the Focus network.
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6 Answers
Given the high number of ERP projects that run in to trouble or do not delivery expected results, this is a key issue.
Let's break it down into several categories:
1. Product fit. There are many ERP products on the market, each designed for a particular segment. Therefore, buyers must ensure the product is aimed at organizations such as themselves. For example, if you are a small, regional discrete manufacturer, then don't buy a product intended for global oil and gas producers.
2. Process fit. After doing a rough cut analysis for product fit, look deeper at your own needs and match them against vendor possibilities. Continuing our example of the regional manufacturer, perhaps they plan to buy financials and CRM. Therefore, it is essential that the proposed vendor offer both modules. If not, then the process fit is not there.
3. Vendor confidence. After ascertaining product and process fit, consider other vendor attributes. Are they financially viable, which is important since ERP is a long-term commitment and ongoing support / maintenance are essential. Do they have the resources or partners necessary to implement successfully? Does their implementation methodology seem efficient and reasonable. There are many facets to considerations around vendor confidence.
4. Price and terms. Eventually, you need to actually buy. Consider whether the pricing is reasonable and the terms are acceptable. Don't forget to include ongoing support and maintenance in the price discussion. If support is 20 percent of the list price per year, after five years the cost of support will exceed the original license fee, so it's an important consideration.
Buying ERP is a complicated and strategic decision, but these issues will get you started. For more detail, definitely look at The 2011 Focus Experts' Guide to Enterprise Resource Planning, which goes into much more detail about all these issues. Here is the link:
http://www.focus.com/research/research-briefings/erp/2011-focus-experts-guide...
People often mistake an Enterprise Resource Planning solution for a piece of software. A true solution is only something that is in-use making your business more productive. With that in mind, I can frame my top 3 questions, in order.
1) Who are the vendor's top 3 installed references in our industry or a very similar industry? We do, of course, wish to talk with them.
2) What is the vendor's product development and support strategy? As our business changes, we must be supported and will be taking advantage of new developments (assuming there are some). The traditional software maintenance fees must cover off this support AND add long-term strategic value for our enterprise.
3) Is the basic architecture of the product (database, hardware platform(s), development lanugage(s), reporting methods, etc.) strong and in-use by a significantly-sized development community? As we move forward with this software, we wish to have numerous options for support and add-on developments should we need them.
All of the above questions should additionally be grounded in a strong analysis of a proven track record. Developing and supporting an ERP solution as a software company is not an easy task and players come and go - often with significant risk to or limitations on their customer base.
Of course our solution must be one we can afford, but price is intentionally not in the top 3.
I would add to the excellent recommendations:
What is my total cost of ownership in the next 5 & 10 years? Including license fees, implementation fees, training employee fees (including the employees time required since change management is a huge risk factor in any project), modification fees, support fees, upgrade implementation fees & inevitable work around employee costs for redundant/missing/inaccurate data.
By definition the #1 question needs to be "does the ERP solution have the capability and functionality to satisfy your requirements now and into the future?" The only way to find out is through detailed demonstrations. If the ERP solution does not pass this test, then there is no reason to continue the discussion.
Assuming the ERP solution does pass the first hurdle, the following are key questions that need to be answered:
1) How is the quality of the software; are there a lot of bugs or work-arounds?
2) How good is the quality of the Customer Support organization?
3) What is the time, pain, and cost of implementation including data migration, finalizing process work-flows, reports, and training?; essentially costs and time to "go-live".
4) What are the on-going costs of the solution, including IT resources to support the application
5) Can the ERP solution scale with your business?
6) Is the ERP vendor committed to your success?; Are they a vendor or a business partner?
The key to the six questions above is to realize that the only way to get the correct answer is by performing a real solid job of due diligence of the ERP company's customers. It is important to note, that demos will not yield one single answer to these questions. The single source of truth resides with the customers of the ERP company.
In addition, you need to look at more than 3 references. I even suggest take the three references offered by the ERP vendor and don't use them. Instead ask for the next 3. Most companies can find some references to satisfy a small set, but more importantly, what is the depth of the reference-able accounts.
If you want a more detailed answer along with recommended questions to ask during the reference check process, please see my whitepaper:
http://www.focus.com/briefs/finance/reference-checking-erp-selection/
Really strong contributions so far. I particularly agree with the earlier comments around the time-to-go-live, TCO, and customer references.
I would also add:
- ROI: What evidence does the ERP provider have around their solution's ability to generate ROI and how quickly can one expect that ROI to be generated.
- How customizable is the system? How easy is it to customize? Will you need to pay a 3rd party every time you need to change the system to better meet your unique business processes and how much will this cost?
- Market share growth: Are a greater proportion of buyer's purchasing the vendor's solution and if not, what else are they moving toward?
Rob
Selecting an ERP vendor is serious business, and not only because there tends to be decent price tags associated with such endeavors, but more so because the relationship and fit between vendor and client will be a predictor of long-term project success.
Buyers ultimately ask prospective vendors hundreds of questions prior to making the final decision. Questions about product features and capabilities, pricing, maintenance, and support are all imperative and unlikely to be overlooked. But here are a few important ones that can help determine if the vendor is a good fit in other areas.
1. Change Requests - Query the vendor on how they manage and charge for change requests. These can be a significant source of additional, variable costs to the client, so it's important to understand the vendor's process upfront. Ask what the vendor does during the requirements gathering phase to reduce the likelihood of large change requests.
2. Change Management - You will have assessed your organization's readiness for change and perhaps will have already put a change management strategy in place. Make sure any vendor on your short list is knowledgeable about such strategies and can support, reinforce, and augment the one you intend to execute.
3. Upgrades - Quiz vendors on the realities of upgrading software versions. While it's true that this won't affect you for some time, it's a bitter pill to swallow later if you find upgrading is a difficult or expensive undertaking. What percentage of the vendor's customers are on the latest version? What effort is typically involved in upgrading? What skills do customers need to perform an upgrade on their own, or should vendor assistance be expected?
Finding a good product fit is a necessary but insufficient condition for having a successful ERP experience. Use some of the above questions to really focus on the vendor relationship and ensure the vendor is on board with developing a true partnership with your business both now and in the future.
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