By Jan Pabellon
An ERP (enterprise resource planning) implementation is never an easy task, as the experiences of one of the biggest Philippine sugar producers and a popular local sunblock maker, both of which spent countless resources on a failed on-premise deployment, before finally deciding to implement a much efficient cloud solution, has shown.
There are plenty of places an ERP project can go wrong: change management, lack of training, lack of clear business goals. But selecting the right ERP software shouldn’t be one of them. Not if the ERP selection team does its homework, works together with clearly defined goals, and gets detailed answers to these ten questions.
Does the vendor have customers like me? Is this software right for companies your size, in your industry, in your geographic location, with your type of business processes? Check the customers they list, ask for a reference, understand just how well things worked or didn’t, both during implementation and several years in.
How well does the platform integrate? The ERP system is the central nervous system for a company’s financials. It had better be able to talk with other systems — CRM systems, partner systems, supply chains, and warehouse and inventory — they need to connect. Some ERP systems offer a full suite, running ERP, CRM, and e-commerce. Beware, however, some of those applications are pieced together through acquisitions and offer no greater advantage than well-integrated best of breed solutions. Running a full suite off of a single data model can make a world of difference. If you do go with a best of breed approach or some combination of a suite integrated with others, be sure the ERP system has a robust set of APIs and connectors, built on a modern services oriented architecture.
What’s the vendor’s viability and roadmap? If you’re going to invest the time and resources in a new ERP system, you’d better know where the vendor you’re buying it from has been and where it’s going. The market for ERP software is relatively mature but newcomers continue to enter. Better be sure they’re viable. You’d also better be sure they’re not going to get acquired by a larger company with no intent to invest in the future of the software. Once you’re satisfied with their viability take a close look at where they’re going. Are they moving upmarket? Down market? Are the features and functionality they’re planning to invest in what you want? Have they kept their past promises of investment?
How customizable is the software? One common refrain in ERP implementation advice literature is to avoid customizations as much as possible. Indeed, breadth of functionality is an important factor in selecting ERP software. Yet, many businesses can’t help themselves or truly do have specific needs that no vendor is going to satisfy with their off-the-shelf software. That means it had better be easy to customize and configure or else you’ll be spending a lot of extra time and money. Speaking of extras…
Are there hidden costs? You pay more for ERP than just the license costs. It’s important to know where those extra expenses will come in ahead of time. It’s impossible to foresee everything, but as many businesses can attest, you’d better know what you’re in for. Consulting fees, integration costs, maintenance and shelfware can all add up. Discounts offered by eager salespeople upfront may wind up costing more than they save down the road. Go into your evaluations with a clear understanding of where those hidden costs have cropped up with other implementations.
What’s the partner ecosystem like? A comprehensive evaluation can account for a lot, but there’s no accounting for change. Shifts in business conditions, technology and the economy can place demands on your ERP system you never foresaw. Mobile and social networking trends are already transforming ERP. A vendor with a robust partner ecosystem can help you adapt. It goes beyond mere numbers as well. Do these partners have a track record of success; are they vetted and tested by the vendor and customers?
How frequently (and how easily) is the system upgraded? You want your ERP to keep pace with the rapidly evolving demands of modern business. That means regular updates, new features and a commitment to development. Yet, you don’t want massive, disruptive upgrades that grind your business to a halt, chew up resources and demand retraining users. Find a vendor with the right balance for your business.
What are the SLA commitments and transparency? ERP is vital to the business and downtime can cost a company a lot more than what you might get reimbursed in subscription charges for unused time. Does the vendor have a history of reliability? Do they document it? What does the service level agreement look like? Is it negotiable? Is there flexibility with the licenses if you need have seasonal periods of growth? What happens with your data if you move off of the software? Are there guarantees for data portability? These are some of the most important questions if you go with cloud ERP.
How good is the security? A long history of reliability and security has answered many of the concerns about keeping your financial data in the cloud. The vague, broad refrain, “I won’t store my financial data in the cloud” should give way to specific questions to your provider. More likely than not, they’re security precautions are going to be more robust than your own, but it’s an area you need to check. What audits have they passed? Do they own the data center or outsource? What about application level security? PCI compliance?
Has the system been localized and does it comply with local compliance rules? Businesses evaluating ERP systems need to ensure the software has been localized and is able to meet mandatory tax calculation, reporting and auditing rules. With software that has been properly localized, companies can lessen the time and effort needed for recording, reporting and compliance. In the Philippines for example, unless the company is exempt from tax, companies need to track and calculate the appropriate Value Added Tax and other types of indirect tax applicable in each and every transaction. Besides this, they also need to track the appropriate amount of direct income taxes that were withheld or need to be withheld from payments received or paid. If that were not enough, companies also need to calculate and summarize all of these applicable taxes and report that to the government via a variety of reports that need to be submitted on a periodic basis. Being able to use a system that supports and is able to automate all of these can go a long way in maximizing the benefits companies can get from an ERP system.
Don’t just ask the vendors you’ve shortlisted these questions, either. Be sure to check with customers, consultants and colleagues. The more you know, the better prepared you’ll be for implementation and you’ll be able to hit the ground running.
The author is the group product manager for Asia Pacific and Japan at NetSuite