ERP & Accounting Software Selection Advice
ERP (Enterprise Resource Planning) and accounting software selection projects must adhere to a systemic and disciplined process in order to achieve a predictable implementation success and begin a journey which leads to a planned destination. Software selection and implementation challenges are sure to appear, however, executive sponsors, project managers and project teams can mitigate these obstacles with the best practices, shared experiences and lessons learned by predecessors who have traveled this road many times previously. The sequential steps below outline a methodical approach to ERP software selection and accounting software selection projects used by many veteran consultants and industry professionals.
Phase I Project Planning
Don't circumvent your project by making the mistake of viewing ERP software demonstrations before the project team has gathered, documented, prioritized and weighted the company's business and related software functionality requirements. The most successful ERP and accounting software implementation projects invest significant up front time and effort to interview all stakeholder groups, document requirements, challenge existing business processes and consider process re-engineering before ever reviewing the first business software system. While this needs analysis project is a time consuming and somewhat laborious exercise, the process is clearly an up front investment which pays major dividends in terms of a more informed software selection decision and the acquisition of a software solution with greater fit which will lead to a faster implementation, greater user adoption and achievement of the company's most important objectives.
During the project planning phase, it is always advisable to avoid the temptation to repeat the existing processes in a new enterprise resource planning system. Most enterprises have a significant opportunity to improve, refine, restructure or streamline their business processes in order to achieve improved consistency, repeatability and efficiency. The software selection phase is the time to review the status quo and consider the reengineering of workflow processes that can be further complimented with a new business system for a synergistic result.
Once you have confirmed your business requirements, challenged the norm and documented the most necessary software feature sets, you are ready to survey the ERP and accounting software market for credible solutions. Although there are over 1,050 commercial ERP software systems (see ERPsoftware360 for a complete database of ERP and accounting software systems) in the global market place, no one business software system accommodates most organizations well so the commercial systems are segmented by their fit and strengths among several key elements illustrated below:
- Customer size.The most commonly referenced customer size segments include the SMB (small and midsize business), mid-market and enterprise market. Like all credible business software applications, ERP and accounting systems are normally designed for specific target markets, and usually struggle when placed outside those intended customer markets. However, many software manufacturers do not acknowledge or publicly state their best fit target market as they do not want to limit their selling and revenue opportunities. While this common sales practice is short sighted, ERP software buyers need only identify the manufacturers average user count to determine the company size where each business application best fits. Do not make the mistake of trying to install an SMB software solution in a large company or a enterprise software solution in a small company.
- Delivery method. ERP software systems are either remotely delivered as a subscription-based service, most often called software as a service or on-demand ERP, or as an up front purchase to be implemented on site (typically called on premise ERP). SaaS ERP solutions have been somewhat slower to evolve when compared to customer relationship management (CRM) hosted systems, however, hosted ERP systems are now entering the mainstream and are the single highest growth component within the ERP software industry.
- Software price. ERP application costs vary significantly by manufacturer. The Top Tier manufacturers (including SAP, Oracle and Infor) are the most expensive in terms of software procurement, maintenance and professional services. However, these vendors are also the most likely to provide significant discounts timed with their quarter-end and year-end business performance.
- Vendor reputation. While this is a subjective criteria, most experienced consultants, industry practitioners and repeat ERP software buyers have discovered a very high correlation between successful software engagements and reputable software manufacturers. It's no secret that some software manufacturers offer outstanding post-sale support and some (well known) manufacturers have a reputation known as a 'drive by sales organisation.' Becoming tied in a business relationship with the later can lead to an unbearable source of frustration. The Internet and social media web sites have teamed to deliver a new communication channel that broadcasts the experiences, views and opinions of thousands of business software users and industry practitioners. These Web 2.0 (or Enterprise 2.0) social media sites bring tremendous first hand experience, communication and insight with other users, software evaluators and software buyers. Web 2.0 sites often express views in blogs, user forums, product review sites and wikis and are generally far more personal, insightful and valuable than any marketing brochure or arranged manufacturer customer reference. Simply perform a yahoo, MSN or google search of "<software vendor name> reviews", "<vendor name> user reviews" or something similar to find information you won't find anywhere else.
Resist the temptation to evaluate every ERP manufacturer that has a nice website. The more focused approach of down-selecting a smaller but qualified list will achieve a more efficient and successful selection project. A typical vendor down-select list contains three to six software manufacturers. Once the list is assembled, a Request For Information (RFI) can be forwarded to each manufacturer. RFIs should include thorough descriptions of the most salient information systems requirements, a budget, an acquisition time frame or schedule and any specific requests unique to the company. Permitting the manufacturers to send questions and even make recommendations may result a more meaningful RFI response. Be sure that all questions posed and answered are circulated to all participating vendors in order to sustain a level playing field. Depending upon the size of your software acquisition, you may want to arrange a vendor briefing meeting to initiate the engagement and determine vendor interest.
Phase II Software Evaluation
The software evaluation phase normally kicks off with a Request For Proposal (RFP). It's critical that the RFP include all (prioritized and weighted) identified requirements in clear and specific language. The most common RFP mistake is too consider all requested software functional requirements equal in importance. Most experienced consultants recommend that each requirement be placed into one of three or four classes. The first segmentation class is 'Prerequisites'. These application requests are the minimum contractual requirements that the manufacturer must provide to accommodate the most important business objectives. Without meeting the requested prerequisites, there is no sense in consuming additional time by the vendor or the company. A second segmentation class is the 'High Priority' type. These requests are heavily weighted software requirements that will most influence the chosen application. A third segment identifies 'Nice To Have' functionality and includes requests for software feature sets which bring value, however, a lesser value than the more pressing software requirements. An alternative classification is to create a weighted scoring range from 1 to 5 after the Prerequisites class in order to score each software requirement along a fixed scale that can later be summed.
The second milestone in the software evaluation phase is a weighted software demonstration script. Many software selection project teams have been taken down a disingenuous path by not implementing this important step. Without a common demo script used for all software vendor presentations, project teams end up evaluating manufacturer applications based on their frills and not based upon the most important software requirements. Software demonstration scripts are essential in order to map the buyer's requirements to each software application as well as to the achieve a fair and relevant comparison among multiple vendor systems. The demonstration script ensures that each manufacturer comparably shows how their application addresses those most important software requirements. Without the demonstration script, the manufacturers will instead perform what experienced software practitioners like to call the 'dog and pony show' (or sometimes the Show Up and Throw Up presentation). These generic demos are full of bells and whistles that most demo attendees never knew existed. However, while they are interesting at the surface, they do little to demonstrate how the organization's most weighted requirements will be satisfied and are certain to bypass the software requirements which the manufacturers don't do well or don't do at all. At the end of the dog and pony evaluators are left with some impressive presentations and a complete absence in determining which of the requirements are not fully satisfied. This lack of consistency also prevents an apples-to-apples comparison among competing applications. Finally, make sure that software demo scripts include weighted scoring for each functional requirements and that all attendees viewing the demos score every individual requirement. Most demonstration attendees and project teams quickly learn (after its too late) that after the second or third software demonstration, if you don't have an weighted scoring sheet to rely upon, you forget which vendor did what and the final decision is hampered by subjective or short term memory limitations. Software demonstrations are a lot like drinking from a fire hose. You can become overloaded quickly. Unless you score each application right away you will likely be unable to accurately attribute software capabilities to each manufacturer solution after the fact.
Also, in addition to aiding project team members to accurately record their thoughts for each manufacturer system, the demo script's weighted scoring delivers two additional key benefits. First, it forces the manufacturers to actually follow the software script. Many veteran consultants have learned multiple times over that if manufacturers are not penalized for bypassing demonstration script agenda items, they will indeed skip or gloss over those items which they do not perform well or perform at all. By scoring each and every individual demonstration script agenda item, the manufacturers are rewarded to at least demonstrate partial compliance or a reasonable work-around rather than earn a zero score for the item. Second, the weighted scores deliver the most objective and meaningful comparison among the competing application systems. Also remember to include RFP scores with demonstration scores when making the finalist determination as the RFP's are much more comprehensive and include many more items than can be reviewed in a software demo. Together these two scoring documents form the most sound decision making bases for designating the highest fit manufacturer solution.
Phase III Software Selection
Once the ERP software review and competitive scoring is complete, a preferred application designation is made. Most software selection project teams will notify all participating manufacturers when the preferred vendor has been identified. When the preferred vendor is named, the manufacturer and implementation due diligence process begins. Vendor viability assessments can include financial statement reviews, credit rating review, review for contingencies (such as existing or threatened litigation) and an overall company assessment. Note that privately held software companies will probably not agree to provide financial statements which they often regard as private and confidential, however, they generally do provide other assurances of profitability or financial position if they are comfortable in those positions. The more time consuming task will involve a review of the vendors proposed implementation plan. It is extremely important that the buyer verify that the implementation project plan and cost estimate are complete and without omissions. As any software manufacturer is only as good as the consultants assigned to your implementation project, it is extraordinarily important to receive resumes and talk to the proposed consultants before committing to the application purchase.
The final software selection task is to complete the license contract and price negotiation. It may be helpful to recognize that software sales people are very experienced and well versed in software negotiation as they perform these duties repeatedly. Software sales persons are also highly compensated on the results they achieve for their employer. Conversely, most corporate software buyers may participate in one or two enterprise software negotiations during their professional careers. This disparity puts the buyer at a disadvantage. However, armed with publicly available information, successful negotiation can be achieved in a manner that minimizes time, achieves a fair price and ties manufacturer payment to customer implementation milestones and overall project success.
Using well structured, comprehensive and weighted Request For Proposal (RFP) documents is one of the single greatest safeguards you can take advantage of to reliably align your company's software requirements to the ERP software systems as well as clearly understand the differences between the competing systems.
A well crafted RFP document will deliver a meaningful apples-to-apples comparison among otherwise seemingly similar business software systems. Also, the manufacturers RFP responses should identify missing software capabilities prior to viewing demonstrations or making a purchase commitment so that alternatives such as reconfiguration, process work-arounds or software customization can be evaluated during the decision making process.
The below 5 Step CRM and ERP Software Selection Guide is a white paper which includes RFP suggestions and a document template to achieve the following benefits:
- A systemic method to identify and prioritize the most salient business needs and high impact objectives
- A structured document which logically ties business processes with core application software modules
- Recommendations on how to create an RFP document so that it can become part of your future vendor software license agreement
- Suggestions of what not to include in the RFP as these items provide little value or cloud higher impact requirements
- How to avoid buying software that you won't use (often called shelfware or bloatware)
Successful Software Negotiation
This negotiation white paper includes recommendations to achieve a fair application price while also contractually earning the manufacturer’s cooperation, participation and vested interest. With over 12,000 downloads, this instructional guide has been widely cited in several industry publications and industry web sites. This most current version has been upgraded to include negotiation of software as a service (SAAS) ERP and CRM software systems.