The Top ERP Analysis Complications
Executive Summary
- ERP analysis mistakes are a common part of the selection process.
- This article explains the top mistakes we have seen.
Introduction
The ERP analysis is fraught with complications. In this article, we cover these complications and how we surmount them.
Our References
See our references for this article and related articles at this link.
Complication #1: Selecting a Conflicted ERP System Selection Advisor
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 that has financial relationships that it does not disclose.
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.
Unfortunately, most companies are interested in selecting an ERP system begin their search with an untrustworthy ERP evaluation advisor to perform the ERP analysis system. These advisors tend to recommend their clients to the most expensive solutions.
This is the same thing the major IT analysts do. In fact, Gartner has a factor they use in their Magic Quadrants that preferences the largest vendors over smaller vendors. It is not coincidental that these are the vendors that also pay them the most money.
Complication #2: Not Questioning if an ERP System is Necessary
Many companies are poor fits for ERP systems. However, it is nearly unheard of for an ERP evaluation advisor to perform an ERP analysis and to recommend anything but an ERP system once the ERP vendor selection project has begun.
This is a flawed approach. It is through analyzing the business requirements that one determines if an ERP system is the best possible option. For example, a bank would be a good example in some companies, such as a small percentage of an ERP system’s overall functionality. Purchasing an ERP system is a major waste of resources. An ERP system combines a financial module, production module, materials module, and sales and distribution module. Why would a bank, which only uses the financial module designed for a non-bank entity, purchase an ERP system?
Other companies have so many custom requirements that being pushed into the generic functionality offered by ERP systems is a step back. These are just a few reasons that, in many cases, the best system for a company looking to purchase an ERP system is not an ERP system.
Complication #3: Recommending Only Large Vendor ERP Systems
It is amazing to see the same list of large ERP vendors on the websites of so many consulting firms and software selection advisors. For just the most basic reason, there are some ERP systems that have specialized in functionality for different industries. Listing the same 10 ERP vendors over and over misses out on just his nuance.
Complication #4: Not Keeping the Question of Custom Development Outside the Control the ERP Vendor
The point of both ERP vendors and IT consulting firms is to get the customer to buy and then worry about dealing with the repercussions of these false claims later. Once the customer begins implementation, they are locked in to continue, so there is virtually no negative business from the perspective of either the ERP vendor or the IT consulting firm about misrepresenting the coverage.
One of the worst situations is where the ERP vendor ends up prescribing the development language and environment. This is how SAP does things, and they state they require customers to use their proprietary language called ABAP. This simply pulls the customer into more dependency with SAP.
Companies implementing ERP systems should insist that they control the development language and choose an open language to perform this development. However, in the case of SAP, they will have to fight against the influence of SAP consulting firms, who will also tell them they need to use the vendor’s proprietary development language, even though it is very bad for the customer to do so.
Complication #5: Selecting a “Spoken For” Software Selection Firm
One company listed the following description of its ERP analysis.
Selecting an Enterprise Resource Planning (ERP) software is one of the biggest decisions your organization will take on as it grows and changes. This is because a Microsoft Dynamics 365 based ERP system provides financial, human resources/payroll, project accounting, procurement, supply chain management, manufacturing, warehouse management, transportation management, service management and much more including business intelligence capabilities across your entire enterprise. Selecting a new Enterprise Resource Planning (ERP) system is a major decision for organizations due to all the hundreds if not thousands factors that must be considered. With more than 500+ years combined Microsoft ERP experience our Microsoft Dynamics 365 teams, will do their leg work to understand all your business needs to help select the right ERP and accounting software. They help you walk through the budgeting process, building a realistic timeline, and inform you about the different support and licensing options available for your users. – Avantiico
What is the logic being presented here? Software selection is “important” — and Avantiico can walk you through a software selection and “do the leg work,” but they are a Microsoft Dynamics implementer and focus on this software? All of this leg work counterproductive if it results in a predetermined choice being made.
Why would anyone choose to go through an ERP evaluation process where the selection entity is entirely aligned with one vendor and wants to implement business for this vendor? This is not evaluation and no analysis is necessary if the ERP vendor is already a predetermined outcome.
The large IT consulting firms do the same thing but simply do a better job hiding it.
Complication #6: Not Evaluating the Honesty of the Vendor
Some vendors, like Oracle, for example, have a terrible reputation for lying. Such a pattern of behavior is a risk to any company interested in buying an ERP system because it means that they will start their implementations with the overhead of a great deal of false information. As was eloquently expressed in the HBO series Chernobyl, every lie incurs a debt upon the truth.
This is the same thing on ERP projects. In fact, a great deal of wasted time on ERP projects is “unwinding” the false claims made during the sales stage. And remember that the customer has no friends on this topic. Whenever the ERP vendor is caught in a lie, the consulting firm covers the ERP vendor and says a misunderstanding or misalignment. No one has so many euphemisms for lying as consulting firms. And neither ERP vendors nor IT consulting firms want lying in the sales stage included in the analysis of why ERP projects fail.
At Brightwork Research & Analysis, we evaluate software vendors’ honesty by using a combination of the evaluation of accuracy for the information provided on their websites, the information provided in public, etc.. ERP vendors can often create lock-in and use the ERP system as a Trojan Horse to sell other applications and infrastructure items. It is highly problematic if a company purchases from an unethical and dishonest vendor.
We have advised companies where during the sales process, the companies stated that they knew the vendor was repeatedly lying to them. However, they stated there was nothing they could do about it and said: “they had to buy.” In fact, they had to buy even before we were able to complete and disseminate our analysis. This is why it is important to obtain involvement from a trusted source early, before the pressure to buy builds.
The Lack of Overall Focus on ERP Vendor Honesty
We have never found any other entity that comments on the IT space that has a similar focus. It is almost as if the issue is invisible to the industry, and in descriptions of vendors on websites like G2Crowd, the honesty of the ERP vendor is never discussed. However, it is of paramount importance to the purchase and the implementation and eventually the maintenance of the solution.
Conclusion
The ERP industry is designed to get customers “on the ramp” to implement ERP systems and extract the most out of them. The ERP vendors, consulting firms, and normally the ERP evaluation advisors repeat the claims of ERP systems during ERP analysis system, but without providing evidence that the claims are true. This extractive model is one reason that the ROI on ERP systems is typically so low. This does not have to be the case, and there are many ways of changing this.