Purchasing ERP software can be a complicated endeavor. In addition to functional fit, organizations considering a new ERP system need to think about things like technical fit, vendor viability, the business case analysis, organizational readiness, implementation planning, and a host of other variable that constitute an effective ERP selection process.
Navigating these variables can be confusing for organizations and project teams without extensive experience. In particular, deciphering the sales code of an ERP vendor or systems integrator can be challenging for those that don’t do so for a living. Not that all people in sales are bad or want to be misleading, but their primary objective is to close a sale rather than represent an implementing organization’s best interests.
Here are a few tips to help crack the sales code of ERP vendors:
Distinguish between FUD (fear, uncertainty, and doubt) and reality. One of the most common sales tactics in any industry is to create fear, uncertainty and doubt in the minds of potential buyers. Corporate executives and other buyers of ERP systems face similar tactics, whether being told that only the vendor’s direct professional services group is capable of handling the implementation or that the maintenance contract will be void if a non-certified software consultant installs and configures the software. The key is to understand which messages are real versus pure and simple FUD, a skill that comes with extensive objective knowledge of and experience in the industry.
Understand ERP software pricing complexities. Unfortunately, there is no universal standard for how ERP software should be priced. As a result, comparing proposals and contracts of competing vendors can be extremely difficult. For example, some vendors price their software with named users, while others price via concurrent users, so faulty assumptions in comparisons of the two can lead to inaccurate side-by-side evaluations. Other examples include SaaS vendors that charge for transaction volume or supply chain management software modules priced based on growth in a company’s cost of goods sold. Again, there is no substitute for extensive independent industry experience dealing with complexities such as these.
Beware of the “best practices” trap. Many ERP vendors tout their pre-configured industry solutions, suggesting that their software is designed and built for your industry. While this may be true of niche providers, larger ERP systems such as SAP, Oracle and Microsoft Dynamics simply cannot be everything to everyone. As a result, they counter these perceived disadvantages by driving home industry “best practices” sales messaging, which has varying degrees of relevance. In most industries in which we work – especially the more complex ones such as food and beverage or aerospace and defense – these best practices are largely irrelevant, necessitating extensive reconfiguration to meet the unique needs and complexities of the individual organizations implementing them.
Realize that quarter-end discounts are overrated. ERP vendors love to give quarter-end and year-end discounts to create a time-sensitive sense of urgency with potential buyers. However, it is extremely rare to see a sales rep fail to honor this discounted pricing after the fact if the period end has come and gone. Of course they won’t admit that at the time of the initial discount, but the reality is that most are not likely to refuse a sale or increase pricing simply because the deal did not close by a certain date.
Remember to set realistic expectations. When we are hired to for an ERP project recovery or to act as expert witnesses in ERP failures, we often trace many of the problems during implementation back to unrealistic expectations early in the software selection and purchasing cycle. Whether it’s setting a shoestring budget, not allocating enough people to a project, or expecting business benefits that never materialize, these misaligned expectations can be quite problematic and even disastrous for many organizations. It is important to take vendor estimates with a grain of salt and do your own independent due diligence to determine what exactly your expectations should be. And also be wary of making decisions based on anecdotal stories of what could be. Instead, base your expectations and decisions on large samples of independent and unbiased data similar to companies such as yours. Panorama’s 2012 ERP Report and other proprietary benchmark data used by our consulting teams is a good starting point.
Short of being trained as an ERP vendor sales professional, there is no way to fully understand all of the sales tactics used by software companies. However, the above tips should provide some basic guidance on how to sort through the complex variety of messaging you are likely to receive while evaluating and selection a potential ERP system.
Learn more about choosing the right ERP system for your organization by watching our on-demand webinar, Tips for Selecting the Right ERP Software for Your Organization and downloading relevant chapters from my book, An Expert’s Guide to ERP Success.