The Problem With ERP Software Selection Advisement Companies

Executive Summary

• ERP software selection advisors tend to have a blinding focus on selecting from several ERP alternatives.
• This typically blinds them to the implications and often lack of fit of ERP systems.

Introduction

The large IT consulting firms dominate ERP software selection advisement. However, much smaller firms have come to provide software selection services. How good are these companies at giving good ERP advice?

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The Issue with ERP Software Selection Advisors

I will address the two major categories of ERP software selection advisors.

Category #1: The Major IT Consulting Firms

The first type of ERP software selection advisors are the major IT consulting firms.

This is normally not a mentioned item. However, there is a greater probability that the company will select a financially biased ERP system selection advisor than not do so. The straightforward reason for this is that most ERP system selection advisors have a financial bias.

The content produced by nearly every entity that offers ERP system selection services that we have read will normally parrot the claims made by ERP vendors. This shows a lack of independence from the industry.

Therefore, most companies are interested in selecting an ERP system begin their search with an untrustworthy ERP system selection advisor. These advisors tend to recommend their clients to the most expensive solutions.

It is impossible for any of these companies (Accenture, Deloitte, Infosys, etc..) to claim independence, as each of them has public partnership agreements and practices with specific software vendors. So instead of discussing the “independence angle” these companies tend to try to get their clients to ignore the importance of the issue. And they are very successful at doing this as ERP software selection vendors perform the bulk of software selection advisement in the major developed countries.

As they don’t focus on the issue, one might say or propose they are not “lying” however, they do everything they can to keep the clients for realizing their clear conflicts of interest. So to me, this does fall into the category of lying.

The vast majority of IT decisions are supported by the most biased financial advice imaginable. The advice of large IT consulting firms, without exclusion, is to direct software purchases to those areas that maximize the consulting revenues of the IT consulting firm providing the advice. How IT consulting firms rig RFPs. The RFP outcome will invariably result in a recommendation that makes more money for the IT consulting firm. This is because selling out the interests of clients is the business model of these firms, as is covered in the article How Consulting and Advisory Firms Sell Out the Interests of Their Clients.

Category #2: Smaller Specialized ERP Advisory Companies

A second a much smaller category of firms that provide advice on software selection are specialized selection firms.

Having analyzed the most prominent of these companies, I continually observed published material that was just a copy of the material on the websites of the ERP vendors. These companies had no interest in contradicting any of the claims made by ERP vendors, even when these claims (such as the claim around best practices) have already been disproven.

One company that really stood out for having ERP vendor assumptions without any questioning was Panorama Consulting. Panorama Consulting has the top spot in Google when I typed in “ERP software selection.” However, every article that I analyzed from Panorama Consulting was not only poorly written and loaded with false information about ERP systems, among other topics, but the material was not only just similar but a direct duplicate of what ERP vendors and consulting firms want customers to think about ERP systems.

If Panorama Consulting is independent of ERP vendors and consulting firms, why would this be the case?

The problems with these types of firms are they are very much in the mindset of recommending a specific software class, in this case, ERP systems. They do not break down the requirements to determine first if an ERP system is necessary, they don’t explain the fundamental limitations of ERP systems, or what parts of the ERP system must be adjusted or customized. And there are several questions about Panorama Consulting’s independence. They claim to be independent, but there is a variety of evidence that they are not actually independent. By not being independent, one can get referrals from ERP vendors. A truly independent software selection firm will never get a referral. It is easy to make the claim of independence. However, it is much more difficult to walk the line of independence, because being independent means losing out on revenues. Under a corporate model, a company is obligated to say they are independent (to maximize trust for the client), but be financially conflicted, in order to maximize profits. And under the prevailing logic of the only interests being shareholders, there is nothing considered inconsistent about this by the business community. This is the same way that Coke or BP pretend to be concerned with the environment. It is profit-maximizing to produce greenwashed PR about the environment, while at the same time using funds to fight against environmental regulation.

Panorama Consulting on 3rd Party Support

Another example of Panorama Consulting being less independent than advertised can be found in the following article quotations on 3rd party support for ERP.

At first, those leaders who make the brave, cost-cutting decision to switch to a third-party provider are treated like heroes, writes Kevin Cahill, a consultant at Panorama Consulting Group.

After all, the big ERP vendors are like casino owners (which, you’ll note, the Corleone family knew was a smart business): The vendors make the chips and the rules of the game. And as much as the vendors talk about “taking care of the customer,” they know the odds are so heavily tilted in their favor that they’re always going to win.

Those execs who bet on third-party support, however, can end up “sleeping with the fishes” if the ERP system needs serious vendor support help—say, bug fixes, regulatory updates or other source-code related hiccups.

“The key to this question is risk,” Cahill writes. “Can you assume all the risks that are associated with having no maintenance and no parachute to fall back on should something happen? – CIO Magazine

What is this view being expressed in this quote?

Well, it is that 3rd party support providers impose high risk onto the customer. I have personally been lied to by 3rd party support providers (just as I have been lied to by ERP vendors), and I am not a major fan of many of the company options in the space; however, on average, the 3rd party support providers tend to provide better and more complete support than the ERP vendors and particularly the mega-vendors. For example, some of them support customizations, which the mega ERP vendors do not support. I can’t speak for every single support offered by ERP vendors, but they generally do not support a customer’s customizations.

This nuance is not explained by Panorama Consulting (PC) in the CIO article. PC also leaves out the major cost difference in using 3rd party support, leaves out that most ERP customers very rarely use the support they pay for and leaves out a host of other issues. Furthermore, what PC is saying is exactly what ERP vendors want customers to think. They want customers to eliminate the potential idea of even using 3rd party support because most of the profits for the vendor come from their support contract.

Duplications of Problems At Other ERP Advisors

And it was not just Panorama Consulting.

All of the top search results for that search string which included articles from ERP Focus, ERP Advisors Group, and Terrilium all contained information that never once questioned any of the claims of the ERP industry. They all presented the idea that all was needed was to select an ERP system and an implementation “partner” (a term they did not bother to challenge). However, there are many questions beyond this, and ERP system implementation not only does not solve the issues at companies, but it also brings a wide number of issues along with it. However, it appeared that each of these top-ranked Google result articles was trying to simplify ERP purchases to be some type of “slam dunk” and turnkey operation to the reader. However, this is a marketing rather than a functional or operational way of looking at ERP systems. ERP systems offer generic functionality, which requires modification (to parts of it, not all of it). And furthermore, not all companies need an ERP system. That was also left out of the explanations in each of the articles that I read from these companies.

Panorama Consulting’s Content

PC’s published content habitually demonstrates little concern for accuracy and a lack of scientific thought. A good example is the following quote. This time the topic is AI.

Many AI failures occur because it can be exceedingly difficult to integrate this type of sophisticated technology with existing systems. Not only does this require top-tier AI technology, but it also means that the current infrastructure must also be efficient and fully functioning.

While it’s easy to focus on the bells and whistles of AI solutions, it’s important to consider how AI will work with your existing tools – and not just from a technical perspective.

You should also consider . . . What new processes will we need to employ to make the best use of this new technology? Do we need to improve any current processes? How will AI affect and disrupt our current workflows?

This is generic business promotional writing with little in the way of content or insight.

One can replace the term AI with CRM, and not much about the article would change. PC points to culprits like Problems with System Integration, Unscalable Technical Performance, Lack of Project Management, but isn’t this true of any system? These are not the primary issues with AI projects. This article appears to be some type of template that the writer used and performed a find and replace with the term AI.

There are specific things known about AI projects that could be described and not generic, but PC does not touch on any of these issues. All of PC’s content that I have read is essentially like this.

Is CIO Magazine and Independent IT New Source?

What is stated nowhere on CIO Magazine’s website and what CIO Magazine does not want its readers to know is that it receives major portions of its revenue from industry advertisers and paid placement. Under its ownership by IDG, the CIO is not informing its readers as it presents information that its industry funders want readers to think is true. And if the 3rd party support providers could outbid the major ERP vendors, the information contained in this article would switch to how desirable is 3rd party support.

The quote from the article continues.

“If you cancel maintenance, do so knowing that you’ll be on your own. You now live on your own little ERP island and your ERP vendor will simply not respond to your requests for help,” he states. “Your ERP vendor will not be sympathetic in any way. You’ve effectively chosen to sever all ties with the ERP company and you need to realize your ERP vendor will view it as such.”

The infamous line by Michael Corleone to his brother Fredo might just apply: “Fredo, you’re my older brother, and I love you. But don’t ever take sides with anyone against the Family again. Ever.” – CIO Magazine

This is not true and is a scare tactic that is normally promulgated by software vendors to keep customers from not renewing their support contracts.

The reality is a customer can go back onto maintenance by simply signing a new maintenance contract. (is the vendor going to turn down the offer to buy a support contract? Anyone who thinks so, does not know how vendors operate). This threat implies that using 3rd party support is a type of betrayal of the ERP vendor. Again, who wants customers to think this — the ERP vendor.

Secondly, again the quote leaves out the highly important information that the customer support provided by many large ERP vendors is of inferior quality and deliberately limited in scope to maximize profits for the software vendor. In fact, nothing about the comprehensiveness of the coverage by the ERP vendor’s support or the quality of that support is broached in the article.

The end of the quote essentially compares a software vendor to the Mafia. This is, in many cases, certainly true, but, surprisingly, this got through the editors at CIO Magazine. Is not renewing one’s support contract like crossing swords with Michael Corleone?

One hopes not right?

Therefore, in these quotes, it does not look like Panorama Consulting is independent at all, but instead is a cat’s paw of the ERP vendors. If I had not known that the information provided by PC in this article was false due to my first-hand experience in the topic, I would have walked away from reading the article with a misunderstanding of the topic. PC clearly believes they can claim independence, but then provide interviews or publish material that is identical to that of software vendors, and that this fact will not be noticed by those that consume their content. And for many readers, they might be right.

What Life is Like Inside in the ERP Bubble

Panorama Consulting lives in the ERP bubble. This means doing things like going to ERP conferences and repeating the phrases of ERP vendors and ERP implementation firms. They are firm advocates of ERP, but without having the research background to know when ERP is applicable and without the lack of financial bias to not recommend ERP systems in all cases.

And like most firms in the space, they are driven by profit maximization, so they are not going to be concerned about not advocating for ERP systems (under the right circumstances) or offering a balanced evaluation of ERP systems, because that is not their business model.

Conclusion

When one checks the websites of major IT consulting firms, one again first entirely flattering, and false information about ERP systems. If a company that supposedly are experts in ERP systems, one should ask the question of why there would be obviously false information about ERP systems published on their websites. Furthermore, nothing is perfect, why is there is no critical coverage of ERP systems on IT consulting firms’ websites. Are they in the advisory business or the promotion of ERP sales and services business, because one logically be in both. Niche ERP software selection firms do not perform ERP implementation, but I have often found what amounts to ERP vendor assertions and assumptions on these websites.

Companies with financial conflicts and don’t have a strong foundation of analytical ability or research basis and that are locked into the ERP bubble and only finding an ERP system cannot help companies make good decisions when matching requirements to software. If we isolated the issue for faux independence for a moment, the other issues are that these types of advisors are not comprehensively analyzing the issues at hand. One thing some firms do (and in this case, I am not referring to PC as I am not sure what they do here) is to recommend using a major IT company. They call this “selecting an implementation partner.” But wait, is a firm you hire to do work a “partner?” No. By definition, they are a supplier. They are selling services to the customer. The term “partner” is a term created by the consulting firms to make it sound as if they are just friends or all working towards the same ends. However, a firm like PC and the others will use the terms that are promoted by the entities they are supposed to be evaluating. This is the same with the term “digital transformation.” This is another industry-created term that is a combination of virtual signaling, with innovation signaling and is as close as one can get to a term of propaganda. Advisory firms like PC don’t even think of challenging the terminology put forward by the industry participants, and that is a problem because these terms have little meaning and were only created to sell software and services.

Hiring a large IT consulting firm sounds like a standard thing to do. Doesn’t everyone do this? Well, again, it is not so simple. This is because the quality of consulting brought by the major IT consulting firms is quite poor, the information provided by IT consulting firms about everything from their implementation experience to their technical advice is often wrong or exaggerated and IT consulting companies have a history of extending the timelines of projects to get more money out of the account. The price is so high going this route that it normally eliminates the potential of obtaining an ROI on the software.

However, in this case, as well, most advisors simply go through the status quo process of recommending a major partner because “it is the thing to do.” As with the ERP decision, they are normally not thinking of different and better ways to improve the likelihood of implementation success and of ways to improve the value for their clients.

All of these things are problems in the IT software selection advisory area.