As we have highlighted in our extensive ERP research, 93% of projects take longer than expected and 65% cost more than planned. Our research, combined with our experience as expert witnesses in ERP lawsuits, shows that a key root cause for such project overruns is mismanagement of ERP software vendors.
Four Tips to Manage ERP Software Vendors More Effectively
- Negotiate aggressively. The first key is to negotiate software licenses and professional services aggressively. such negotiations should focus not just on short-term costs, but also longer-term costs such as future licenses, additional modules, and long-term maintenance. This will help contain overall project costs.
- Clearly define scope. Make sure you clearly understand what the vendor is and is not responsible for during implementation. For example, who is responsible for data migration, documenting business processes and workflows, and creating training materials? These need to be clearly defined as part of the ERP selection process.
- Set realistic expectations. Vendors are notorious for underestimating implementation duration and cost and often do not account for key project activities such as organizational design, communications, process simulation, etc. Organizations and their implementing vendors should agree on a realistic rather than overly optimistic implementation plan prior to signing contracts.
- Maintain leverage. When a vendor has you backed into a corner, they are going to be less likely to cooperate in helping you contain costs. Keep in mind that third parties often provide cost effective maintenance and professional service alternatives, so don’t be afraid to use this as leverage or as a viable option to contain costs. It is also helpful to set high expectations for implementation support and hold the vendor accountable when their actions contribute to project delays.
By keeping the above tips in mind during your ERP software selection, you will be better equipped to manage implementation cost and duration.