5 common mistakes SMEs make when selecting Cloud ERP solutions
A recent survey conducted by Redshift Research for a major ERP supplier reveals that ERP users aren’t happy with what they are getting. The Information Week article further noted that ERP users expect mobility in future ERP implementations. In Anderson Yates’ study of 20 ERP implementations that yielded disappointing results for SMEs, they discovered five common mistakes that these companies made during their ERP selection process.
1. Lack of detailed requirements that the ERP solution must deliver
Most SMEs fail to produce a detailed requirements document when selecting cloud based ERP. The lack of documentation of their required reports, KPIs and processes results in the company being subjected to each software supplier’s best practice process. Unfortunately, these may or may not meet the company’s optimised processes.
Since one of the major reasons for selecting cloud based ERP is to provide timely management reports and information to assist in decision making, SMEs are failing to produce clear management reports and KPIs requirements. It puzzles me that many SMEs treat management reports and KPIs as an after-thought. Too often we find that clients are struggling to produce their reports in the format required or they are surprised by the costs involved in producing them. The widespread use of Sage software has resulted in SMEs moving to an ERP solution assuming that creating reports is a simple process. Many are often surprised by the time it takes to specify and create an invoice layout to meet their clients’ requirements. One client had a fairly complex invoice layout that took 2 days on average to produce. They had 5 different layouts. That’s £10,000 just for invoices. Ouch!
2. Lack of clarity as to what the optimised business processes should be for the business
Although most SMEs understand the most optimised processes they need, they fail to make it clear to the ERP supplier that their solution must meet these processes. The lack of documentation on process and reporting requirements result in suppliers showing their software best practices and the standard reports in the system. Although the best practice in the software solution makes sense, it may not be practical to the user tasked with carrying out these processes.
We recommend that SMEs take the time to document their “As Is” processes and their optimised “To Be” processes with their users. This leverages users’ deep understanding of the best processes to adopt and also for their buy-in.
3. Selecting too many or too few ERP vendors on their list
Selecting less than 3 vendors for obtaining quotation and a demo is less common than selecting too many companies to consider. Most SMEs will select 6-8 suppliers to consider based on their research. The most I have seen involves 15 suppliers. Each is expected to provide a demo of their system in meeting the company’s outlined high level requirements and to provide a quotation.
In addition to the process being extremely time consuming, laborious and demoralising to the selection team involved, it also resulted in significant confusion. Yes you guessed it. When they finally selected the ERP solution considered to provide the best features and value, some features that they thought the software provided was in fact features in other software they have seen. It’s incredible how we sometimes remember the features we liked in software and thought that the selected software had those features.
4. Failing to confirm that the ERP solution proposed is able to deliver without further customisation
Companies sometimes fail to realise that ERP solution contracts are created by the software suppliers to reduce the supplier’s risk. My advice to clients is simply BUYERS BEWARE. Be aware that the construct of the agreement is often structured in such a way that it states that you the customer has fully satisfied yourself that the software solution and services provided by the supplier meet your requirements.
We sometimes get involved with ERP project rescue or recovery where the customer is dissatisfied with the software features and functionalities and is asking if they can ask for reimbursements from the supplier. Unfortunately, with the construct of the agreement being so, they are at the mercy of the supplier. Often, supplier will agree to create custom code to compensate for the lack of features and functionalities. In most cases, this involves additional costs.
The message here is simply to ensure that before entering into a contract with a supplier that you have fully satisfied yourself that the software you are buying can meet your requirements and can meet them within the timescale and costs quoted by the supplier. Ask to see an end to end demonstration of their proposed solution for your business, test it out internally and look under the bonnet to ensure you understand what the reporting or customisation tool is like. It is imperative that you include a detailed statement of requirements of outputs required from the new system and the “to be” processes it must meet as part of the contract. Their inclusion should enable suppliers to provide a fixed scope, fixed price contract – minimising the uncertainty and risk of your ERP project. Any suppliers with extensive experience will welcome this approach.
5. Making assumptions of the features and capabilities the selected ERP have
Underlying a number of mistakes made by SMEs during an ERP selection process is the assumption that based on the demo they are shown, the software is able to meet their business processes, reports and KPIs with little or no customisation or modification. Some also believe that the reporting and customisation tools are simple enough to use that they themselves will have the skills in-house to do this. However, these are often all based on ASSUMPTIONS. My colleagues used to point out that if we assume things, it would make an Ass of U and Me.
This article is created based on the forth coming e-book to be published by the author, Yuwan Effendi, on“Best Practices for the Selection and Implementation of Cloud based ERP Solutions” RRP £ 6.95. Anderson Yates has 25 copies to give away FREE. Simply send an e-mail to firstname.lastname@example.org with the subject title “FREE E-Book” and we will send you a copy.
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