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5 Tips for Vetting ERP Vendors

5 Tips for Vetting ERP Vendors

It's a long partnership and a big investment, so it's important to ask the right questions.

ERP evaluations are often done as a result of a previously failed implementation project. In fact, nearly 50% of ERP projects are unsuccessful the first time around, according to analyst firm TEC. Whether it is budget overruns, longer-than-anticipated timelines, or change in the technology capabilities, it all comes down to the failure to meet a company’s objectives.

So how can you make sure your upcoming ERP project doesn’t become part of this statistic?

1. Start by Defining the Project ROI

Unsuccessful projects tend to start with a statement like “our ERP system is dated” or “our ERP system is not supporting our growth.” Before embarking on an evaluation, define the business return on investment for your ERP project. Share the project ROI goals with each ERP vendor you are considering and work with them to understand how their platform is going to help you achieve that expectation.

The project ROI will also be a critical internal selling point to company owners, stakeholders, and even end-users and will help set benchmarks that can measure the health of an implementation project down the road.

2. Get into the Functional Details

For large ERP projects, the vendor will most likely come onsite to demonstrate the capabilities of their software. Avoid high-level software demonstrations, like “how do you void a check with your system” as much as possible. Instead, have them prove that the software can handle the unique challenges of your specific business. Pick five of the most complex processes that are currently handled, document them, and deliver the scenario to an ERP vendor only a few days ahead of the demonstration. This will give them time to prepare but prevent them from making significant coding changes to mask a potential gap in the software. As the vendor goes through the demonstration, throw them a curve ball at the end of each scenario and ask them to configure the solution in front of you to understand the process. If they struggle, consider it a red flag that you will find additional software gaps during the implementation process. As the number of gaps increase, so does the likelihood that you will encounter cost overruns, workarounds and, ultimately, failed projects.

3. Understand How the Vendor Overcomes Implementation Hurdles

ERP projects are significant undertakings, and no matter which vendor you select, there are going to be hurdles that arise in the implementation process. Thus, it is critical to determine how the ERP company is going to react to challenges during the implementation process.

Some specific questions you may want to ask the vendor are:

  • We find a gap in how the software handles one of our business processes. What is the remedy to address this gap?
  • We discovered that we did not purchase a required module for our business up front. What is the additional cost to add that to the scope of the implementation?
  • We do not find the consultant you selected for our project to be a good fit. What is the process for replacing this resource during the implementation?
  • We discovered a few corner-case scenarios during the end-user training that we forgot to account for in the process design phase. We need to take an extra month to re-design these processes. What is the impact to our project cost?

Proceed with caution if the responses you receive include pricing change orders and/or process workarounds. These answers are often the ones that lead to implementation failures and projects failing to meet their objectives.

4. Talk to Two to Three References

An ERP sales representative’s favorite word is “YES!” Unfortunately, after you sign a license agreement, that answer may not always be reality, and it has the potential to significantly impact your business. To validate what you have heard from an ERP vendor’s sales team, ask them for 2-3 reference accounts that you can speak with about their experience.

To make the most of a reference call, stay away from specific “how do you…” type questions. There is no business exactly like yours, and this will not help you understand the typical pitfalls of an ERP implementation. Take advantage of this opportunity to get first-hand insight into what life would be like if you selected that vendor. Stick to questions such as:

  • What were the three biggest challenges you faced throughout the implementation? How were you and the vendor able to overcome these challenges?
  • How many functionality gaps were discovered during the project? What was the response like from the vendor when a gap was discovered?
  • What are the three biggest support issues you have had since your ERP go-live? How has the vendor responded?

5. Uncover What it Would be Like to Live with the Software Over a 10-Year Period

Your partnership with your ERP vendor does not end after the initial implementation has completed, as ERP platforms are typically used for about 10 years. Thus, it is important to understand what it is like to live with the software and work with the vendor after go-live. The most important questions to ask are:

Support

  • What is the expected response time to a system-related issue?
  • We are required to support a new process for a customer. How can you help us?
  • Is a specific resource assigned to us to make sure we continue to be happy with the ERP product?

Upgrades

  • How often would you expect us to implement a major upgrade?
  • How long do major upgrades take to test?
  • How are patch releases done?

Technology

  • How do you evolve to support changes in technology over time?

ERP is one of the most significant investments that businesses will make, and rightfully so. It is the backbone of a business – collecting and delivering critical data points to help businesses thrive in competitive markets. Make sure that you are taking steps to truly understand what life is like with both the software and the vendor—and also if that is in line with your company’s ROI.

Prior to establishing Deacom, Inc., Jay Deakins was the founder and CEO of an all-natural cleaning product manufacturing company, distributed through national supermarket chains and other retailers. Discouraged by the complexity of software options available at the time to run his business, he took it upon himself to program a solution. He set up an office in his basement and built the Deacom ERP platform--and the company--from the ground up.

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