4 key considerations when purchasing an ERP System

Neal Goffman
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Many of us grew up with a Swiss Army Knife. It’s such a handy piece of mechanical technology that it has become a symbol worldwide for utility, versatility, and adaptability – a sort of all-in-one for life in the woods. It helps you cut, carve, saw, snip, stab, screw, file, chisel, whittle, uncork, measure, ply, thread, and hook your way past basic challenges. That’s a lot of function and value. Indeed, it’s just about everything you need to keep the camp firelights burning. That said, there is one thing that the Swiss Army Knife can’t do, and that is to make you a wiser woodsman. Much of the same logic can be applied to ERP, or the information technology that organizations rely on to execute transactions, automate back-office functions, and basically keep the lights on. Like the Swiss Army Knife, ERP is essential to basic functioning and often remarkably useful beyond that. But it is not really designed to lend insight or make you a wiser decision maker. The only problem with this is that ERP vendors continue to sell buyers on the contrary.[rd_line line_pos="center" margin_top="10"][rd_line line_pos="center" margin_top="10"]So, because of this and other commonly promoted misperceptions, I’ve decided to list four key considerations that any potential ERP buyer should make.

1.       Explore the Term Forecasting

The best known ERP vendors advertise demand forecasting and other analytics tools as key features of their software. But scratch beneath the surface and you’ll see nothing close to market-competitive capability when it comes to forecasting and analytics. This is the point is key.

Advanced analytics are what drive forecast accuracy, which is the single greatest contributor to operating efficiency, savings, and customer satisfaction – across all industries. So it’s important to define what forecasting means. Are we talking about real, statistical forecast engines with advanced automation features and intuitive UIs? Or something much less? Point is, determine whether a potential vendor is confusing the term forecasting with BI, basic weighted projections or some other capability that is commonly marketed as forecasting.

2.       Know Price from Value

ERP vendors sometimes discount the forecasting and analytics modules in their systems to coax a purchase. This is a clear sign that said modules are low-value giveaways created to flesh out the perceived offering. In a white paper, Microsoft describes it’s very own Demand forecasting for AX as “Not best-of-bread forecasting software.”

The point here is that big powerful companies, OEM vendors included, do not discount products that they consider to have strategic or competitive value. Nobody does. That’s why free or cheap is usually reserved for window dressing. Sure you’ll spend less, but for less functionality, quality and accuracy than advertised. And if shoddy planning tools bring down performance, you’re actually paying to lose money or worse, your job.

3.       Don’t Buy the All-in-One Myth

For years, top ERP vendors have sold the proposition of a single, unified platform for all-in-one enterprise management. This is notion is hogwash that neither the OEMs nor their integration partners hold true. Sunrise Technologies, for example, boasts that Microsoft’s new Supply Chain 365 can “Easily integrate with the forecasting tool of your choice,” Why would anyone need to do that?

It’s common sense that no single vendor has the capacity to develop a competitive offering for every possible enterprise management need. In any case, the large vendors with wide offerings are tough to deal with. They often operate as hodgepodges of loosely connected, in many cases recently acquired, organisations and platforms. Customer service can be uncertain, usually because it expensive or difficult to pin down the right expert hidden among multiple layers of support.

Another deterrent is the total cost of ownership. Usually, the “modular” solutions from All-in-One vendors are more expensive to implement and support. This is due to high services rates and lengthy processes for custom fitting to unique business requirements.  Can you imagine what the support would be like of a highly customised module, one for which the All-in-One vendor may not even have the right developers (due to acquisitions or layoffs)? Best of breed solutions typically have much of the functionality out of the box or are quickly and cost-effectively configured to support your business requirements.

Also, consider the quality of the parts. The Swiss Army Knife is a great multipurpose tool. But when you break it down, it’s never going to have the greatest individual scissor, screwdriver, or saw. The same goes for ERP. All-in-one is a mixed bag of excellent core transactional capabilities and mediocre to weak business modules.

4.       Consider Best-of-Breed Enterprise Planning

Don’t let them scare you!  All-in-One vendors will try to instil fear and by unjustly playing the “integration” card.  Do not listen to this. They are trying to deflect attention from the fact that their “solution” is inferior.  Instead, focus on the requirements, the business value, and the quality of analytics behind the window dressing.

For Integrated Business Planning (IBP) and Forecasting, best of breed should feature:

  • Advanced analytic forecasting, simulation, and optimisation
  • Automated forecast updating in real-time and across distributed environments
  • Web-based user access for real-time and remote data access, management, and reporting
  • Seamless switch today, week, month, quarter, year, or any forecast horizon
  • Intuitive graphical interface
  • Intuitive, business-process-based workflow design
  • Dynamic Synchronisation with ERP or core data system
  • Complete set-up in days, not weeks or months

Good Luck.

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