ERP Vendor

4 Questions to Ask Before Choosing an ERP Vendor

Picking an ERP solution is not something organizations do regularly. Therefore, the process can be difficult and time-consuming.

When looking for an ERP solution, most organizations tend to spend most of their time investigating how the software package will meet their business requirements. Very little time, if any, is spent on ascertaining the right vendor to work with.

ERP Vendor

In ERP selection, the capability of the solution is just as important as the vendor that will supply it. When selecting an ERP system, you are selecting both the software and the vendor. Therefore, it’s important that you have a true “partner relationship” with the vendor.

Below are key questions you should ask a potential ERP vendor to find out if they will be right for your organization.

i) What is the initial and subsequent cost of the software?

Long term maintenance revenue is a coveted thing in the ERP market. This is because if the ERP is a high quality product (i.e. has fewer systemic ‘bugs”), then the vendor will get more revenue from the maintenance contract than the installation contract. This is especially true in the first year after implementation of the software.

With most ERP suppliers, your organization will be in the software implementation phase in the first year of installation. Most suppliers charge maintenance fees ranging between 10% and 25% of the software license. If you pay a maintenance fee during the first year, you are likely to be paying between 10% and 25% more for the software for activities that are not being performed.

To get around this, you can negotiate a five-year fixed annual rate for maintenance. Alternatively, you can opt for payment for four years of maintenance upfront and get five years of maintenance for the four year price. Avoid vendors that do not define well their long term maintenance costs in their software licensing agreement.

ii) Who will offer support when we call?

Consider the type of support that the ERP vendor will offer when you have a problem. Most ERP suppliers use some form of help desk concept.

Software organizations are usually not good with offering support. The senior members, who have greatest knowledge of the software, seldom spend any time on support. Instead, the support team mainly comprises of junior members who have the least amount of knowledge about the software.

A good vendor should have:

a) Seasoned development personnel manning the support desk

b) Support person answer the initial phone call

If the vendor does not do this, you are likely to be up for a lengthy and frustrating support experience.

iii) Does the ERP come with WMS as part of it?

Most organizations do not differentiate between the concepts of inventory control and warehouse management when looking for an ERP solution. Some buyers assume that if the ERP system can make use of Bar Code and Radio Frequency (RF) equipment within their system, then they have an integrated Warehouse Management System (WMS).

When the buyers realize that integrating these technologies does not constitute a WMS, they end up spending more money to acquire and integrate a WMS into their chosen ERP system.

If the ERP you want to buy does not have a true WMS integrated as part of it and included in the price quoted, you will not be getting the full functionality you will need from the ERP. While the need for a WMS may not be obvious initially, a significant ROI from an ERP system will ultimate come from management of the warehouse.

iv) Does the software include CRM functionality as a separate module?

Customer Relationship Management (CRM) is important in the overall success of the entire supply chain process. Knowing and understanding what your customer wants, buys and in what quantities is a clear benchmark for the future success of your organization.

While CRM encompasses many features and capabilities, a system with CRM functionality should, on the basic, contain a complete contact management system, ability to identify customer buying patterns, ability to manage both customers and inventory in one of the facilities, and ability to track penetration with your customers.

Look for a vendor that offers CRM as part of the ERP from its conceptual design phase.