Juliette Welch: Good afternoon everyone. Thank you for joining us for today's call: Why Companies Pick the Wrong ERP Software? Shawn Windle will be our speaker for today.
Shawn is the Founder and Managing Principal of ERP Advisors Group based in Denver, Colorado. ERP Advisors Group is one of the country's top independent enterprise software advisory firm. ERP Advisors Group advises mid to large sized businesses on selecting and implementing business applications from enterprise resource planning, customer relationship management, human capital management, business intelligence, and other enterprise applications which equate to millions of dollars in software deals each year across many industries.
On today's call, Shawn will discuss the key tips to help ensure you don't select the wrong ERP software for your needs.
Shawn, I'll pass it on to you if you're ready.
Shawn Windle: Okay, yeah. Thanks Juliette, I appreciate it. Thanks everybody for joining today.
This is definitely a good topic, something that we try every day to not let happen with our clients.
So, that's super applicable to what we do, and I thought we would do something a little bit different on this call.
Sometimes as consultants, I think we say the same things over and over, maybe a little bit differently. I really took the time to look at four very specific examples that we were involved with clients that did pick the wrong software and I really took the time to get to the real “why” that happened.
And so I want to share the real lies with you today.
But first what I want to do is just quickly, as always, it's always good to define the words. What is ERP? We'll do that quickly. What does it mean to pick in the ERP? And then thirdly, I'll talk about typical reasons you hear for picking the wrong ERP, and then I'm going to tell you the real reasons why people pick the wrong ERP based on actual examples.
Okay, so what is ERP? Enterprise resource planning. I've said this before on other calls. Gartner Group in the 80s came up with this term which was basically software that automates the entire business from the beginning of the process from receiving inventory or receiving a new project or sales all the way through to the accounting side.
When we talk about ERP, we think about it as a philosophical approach to enterprise software across the whole business.
So, we look at things like, what is the best way to automate order to cash, lead to close, procure to pay, even manage the books processes and all the rest of this sub processes that are involved with a manufacturer, a life sciences firm, a professional service firm, real estate companies.
And so we look at all of the business processes and try to determine what is the best way to automate those processes with software.
So, when we say ERP we’re looking across the whole company and even into the value chain of vendors and even customers. So, we look across the whole thing.
So, when we say, what is an ERP software package? Yeah, it's a package you go and buy — now it might be multiple apps is what I'm trying to say as you look across the business, but typically there's one main one.
Okay, so that's what ERP is. So, what does it mean to pick an ERP?
Basically it's, I want to buy that. And you are contractually obligated to pay for it. And you also receive the software — now receive the software should be in quotes, because that really means you can use the softwarem; you have a license to use the software or you have an agreement that you are subscribing to the software.
So basically, when you think about picking software, it really is going through the contracting process and saying, that's the one I want and here's the agreement that I'm going to abide by and here's my cash to do it whether you pay upfront or overtime.
So, good. With those definitions and the context out of the way, here's the typical reasons you hear for picking the wrong ERP software.
So, the team fell for a slick sales pitch is the first one. So, the salespeople said they could do it and then we bought the software and then we implemented it and it couldn't.
We hear that sometimes.
Yeah, okay, I mean I can see it and we've seen some examples of that, but it kind of pushes the responsibility onto the salesperson and not on the buyer, so I don't like that one.
That's kind of an excuse, frankly, so you hear that and certainly can think of instances of it. But again, if you start decomposing the real lie, that doesn't quite make sense because people that are choosing software, they're responsible for sometimes hundreds of thousands if not millions of dollars in purchase decisions.
So, to blame it on the savvy salesperson or the switch salesperson? No, that's not a real reason.
So, another reason that you hear on why we picked the wrong software is we didn't get buy in from the stakeholders.
So, we just went out and picked what we thought was best. And then we implemented it and then the stakeholders, which could be end users or they could be super high-level executives in other divisions just didn't support it.
I've seen instances of that for sure, but that's also shifting the blame frankly from we didn't get the buy in from the stakeholders in advance, so you can't really say, oh we implemented the software and the stakeholders didn't buy into it.
Well, that became your responsibility. This is kind of like the tough love call. I have two teenagers, so we're having a lot of these tough love discussions right now. So, we're sharing that apparently with you guys
But that's another typical reason you hear which still doesn't equate, there's something else going on.
The third thing that that you may hear, too, is that, oh, we picked the wrong software because we didn't truly understand the requirements. Maybe the vendor didn't really understand our requirements and so we went live and the software didn't support us.
Again, I've seen it. Again, there's companies that have gone through this, and even companies, even local to Denver that have gone bankrupt because they've said they implemented the software and it didn't support their needs.
Okay, but it's sort of like you bought the software and then it doesn't do what you wanted it to do. Kind of like shame on you for implementing it — I hate to say that, but it's really true. So, that reason doesn't even make sense.
And then the other thing that that we hear — the fourth typical reason we hear for picking the wrong ERP software is we went with the cheapest option.
So, a company may say or some executives may say, oh, you know what? We just — budget is tight. Let's just go with the cheapest software, the one that's the lowest cost.
And so, they negotiate in between two vendors and they get the lowest one and they go with that option. Then they go through the implementation and they go live and the it blows up. Oh well, the reason why is because we went with the cheapest option — that's still not the real reason.
So those four reasons of picking the wrong software, fell for the slick sales pitch, didn't get buy in from the stakeholders, didn't truly understand the requirements, and went with the cheapest option. I don't buy those reasons to be totally honest with you.
What we see in all of those examples is the client — so, the person who's responsible for the decision always needs to be ultimately one person who makes the recommendation and says this is the app we're going to go with. Now there can be a team of people that are working with that individual and that person needs to listen to what the team says and they need to observe and understand what's happening.
But let's just say that person happens to be you. You really want to make sure that you fully have responsibility and take responsibility for the decision of picking software.
The four reasons I just listed frankly are not — they’re are indicators of a person not taking responsibility. That's the biggest thing. So, watch out for that.
But what I also did in preparation for this call was I thought about four clients and some of the things I just mentioned were kind of discussed as to why they had selected the wrong software.
But when I really dug into it — we call it pulling the string — like, what's the real “why” behind this?
There were four things that came up that if you're the person that's going to be choosing software, you have got to watch out for these things because these are the real reasons why people choose the wrong software.
So, the first one is — and we have two clients that have engaged us to pick implementation partners, but when we've looked at their software, we've questioned if it's the right software.
So, the first one is take an upgrade of their existing ERP, which was wrong in the first place.
So, in particular, we're working with a client right now that was on an app that probably was okay for them to get on originally when they were a quarter of the size that they are now.
Even then had we been involved, we probably wouldn't have gone in the direction that they're on. But fine, now they're on it and the vendor has said look, you're on an old version, you have technical performance issues with your app, we understand that. We'll give you the upgrade of the software for free and then all you have to do is pay for the implementation costs.
So, they basically chose a new application because it was free. That's a hell of a deal. Honestly, because this stuff's expensive.
But when we look at the longevity of that product, and we look at the software vendors in the market — which it's a declining product. It's kind of reached its maturity, and it's going into that decline, honestly, in terms of product lifecycle, we've had a hard time finding really good vendors to support the client.
Now we've gone back to the client, and the client said look if you think this is the wrong product, tell me. And I basically said well, not only will we tell you, but if you continue on the project and we know it's the wrong software, we're going to stop our engagement because we can't help you if we know you're on the wrong software.
So, we've determined that the app is okay, that it will work for them to get them through a transition period that they're trying to get through. And then we know in about two years they're going to have to get on to some nothing else.
So, the key thing there, the first reason — the real reason why people picked the wrong ERP — is because they just take the upgrade of their existing ERP, which was wrong in the first place.
Now the second thing that comes into play here, let me just tell you what it is.
So, there's a guy or a gal — whoever is in charge — who loves the app and convinces everyone else it's the best when it really isn't.
So, you'll see this where people become — they're very enthusiastic about the application, and they usually were involved in the implementation in years prior. And they really — you just get the sense that you're like, man, that gal, she really thinks her job’s totally dependent on this software app, and sometimes that's true, but oftentimes it's not true.
But you'll see these people that are trying to really sell everybody that a particular application is right when in actuality it's not the right application.
So, at the end of the day though, you kind of have this zealot, who's saying, pick any application in the market, this is the right thing, and this is — it worked before and we're going to do the upgrade and it's going to work in the future. And I can make it work and I can lead the project.
And maybe the senior executive team, the leadership is like, okay, fine. This guy’s done a good job before this guy did a great job in the past. They're going to be able to make it go right.
But then as you get through the project the person isn't the person knowledge of that the application is right — that's not enough. Like the application actually does have to meet exactly what the company needs, not just this person.
We love it very honestly, when there is an individual at a business of one of our clients that says, I'm fully backing this software like we actually look for that. It's actually one of our requirements honestly, when we go into an implementation is that there's a person that says I'm going to make this go right for the project.
But when that person is overzealous if you will, where it's almost like a religious discussion like, oh we have to do this. That's when it definitely is going to go bad. I don't care what the app is, they're just not willing to see outside the box that they're in. And it could lead to a major failure.
The client I'm thinking of in particular — actually they're not a client, they're a parent of one of our clients right now — they had made an acquisition of a company that was running a specific application and the people there at that location were so remanent about how wonderful this product was that corporate heard that they said, oh well, why don't we just pluck some of the key guys from the local subsidiary location and bring you up to headquarters and you can roll that application out across headquarters.
Like great, yeah, this is great. The person wanted the opportunity was a cool. And so, then they started implementing it, and it's not going so well. And that's because this person wasn't really willing to look and say, oh corporate has completely different requirements than the local shop does and so maybe that wasn't the right app.
So, just look out for people that are like super enthusiastic about the product within your company.
You kind of have to have a little skeptical eye to say, why is this person pushing this app so much?
Now the third real lie on why people pick the wrong app is because they pick it because everyone else — in quotes — in their industry uses it.
So, we worked with a company recently in the steel industry and as an industry in general, steel is a little less likely to adopt new technologies, and so a lot of the apps that are in the marketplace are based on more of a client-server framework — more like 1980s/1990s infrastructure.
And there's some customization that these vendors have built out for this particular industry. And, well, everybody else uses it. So, how can you go wrong?
Well, interestingly, in this example when we actually were engaged to do the selection here, thank goodness, we took the requirements that the client had and really isolated their industry-specific requirements down to just a few things.
And basically, purchasing was very straightforward, their revenue cycle was pretty straightforward, reporting was very straightforward, the way that they measured and cut steel was very unique so, we identified that as an industry-specific requirement, a couple other things like that.
And so, when we went to the market and started talking to the industry-specific solutions that companies like our client had used, within about three conversations with the top vendors we’re like, there's no way we could do business with these guys. Their development teams are tiny. So, now you're worried about long term viability. And you buy the software application and the company goes out of business in several years.
We've had that happen before so we know it happens.
Their road map was very light. They weren't putting a lot of R&D or money into the product because they were trying to just keep the lights on. And even when we talked to some of the customers in the industry, they had problems with the app, just basic things like reporting remote accessibility and some other things that have been handled by all of the modern day applications.
And so we basically eliminated all of the industry-specific solutions and then focused on some ERP applications that were more horizontal, meaning they work across verticals or industries. And we picked one that was very horizontal but very focused on distribution and manufacturing — very like core functionality to what this client needed.
And then we were able to find just a little bolton that was an industry-specific part to handle some of the specific things that they needed.
So, our client is like one of the first companies in their industry to use this app.
But they know that everyone else is actually making a mistake, so it's a funny thing when you think about taking a leadership position that sometimes you have to be willing to do things different than your colleagues because you just know they're wrong.
And fortunately we had a lot of research and very objective data to take our client through that process so that they saw it for themselves and realized picking an app because everyone else in their industry used it was the wrong thing for them to do.
Now the last thing I'll talk to — another real why people pick the wrong ERP — it's kind of funny, right? There's one company in particular that I think sees this more than others: the person in charge of the selection has a bias against a vendor.
So, we had worked with a software company recently and advised them a little bit on this selection and basically told them some things to do in this selection — really just more of a friends and family type project where they said they could do it themselves and got it down to two vendors.
And they said, well, what do you think about the two? And basically we said we don't know. We didn't do the diligence, but in the market — in the industry — you have the right to finalists so you just have to make the decision on which one you think is the best fit and not just feature function wise, but also the economics of the deal makes sense, longevity, implementation partner, all that kind of stuff.
So, they then made a decision to choose the software.
Well, now a year later — a year and a half later — they have formally engaged us to go through an entire software selection because they realized they made the wrong decision.
And when I went back and really dug under the covers as to the why, they did go with an app that was less expensive and they said all the board pushed us towards the less expensive route.
And I thought, you know, it was only $15,000 less a year. Now if as a person — if I could save $15,000 personally, a year that's a lot of money, right? But for a business that's doing tens of millions of dollars in sales, $15,000 is not a lot.
So, that wasn't the real reason why. And I kept digging and it turned out that the CFO years before had implemented a certain application and it went bad and the vendor treated him badly, he thought.
And so now that was that same vendor that was trying to sell him software today and he was — he had basically made a decision earlier in the process. He's like, I'm not doing business with those guys again, they screwed me last night or whatever it was.
And unfortunately, that app was the right one that he should have gone with, so he went with the other one and as it turned out — then like I said, they had to come back to us later and we were able to help them through that process.
But they're going to basically end up with the app that he felt caused him problems in the past. But because we did a diligent process, we saw how we could manage that and not be a victim to it again.
So those are the four real lies and going then — really dissecting some recent client experiences on why people picked the wrong app. And those again are taken up, greater their existing ERP, which was wrong in the first place. There's a person who loves the app and convinces everyone else it's the best for them when it really isn't. They pick an application because everyone else in their industry uses it. And then the person in charge of the selection just has a bias.
So, watch out for those four factors and again don't fall for the slick sales pitches and make sure you get buy in from the stakeholders.
And for heaven’s sake, please understand your requirements before you buy anything. Especially what could be hundreds of thousands or millions of dollars of ERP.
And don't just go with the cheapest option because it's like furniture, you get what you buy, although I do love IKEA.
So those are some reasons why again, kind of straight from the heart to you all on why companies pick the wrong ERP software and hopefully after hearing this webcast and being part of this conference call, you will not do that.
As always, give us a call if we can help you out.
Juliette, back to you.
Juliette: Yeah, thanks Shawn. That's a lot of great information. Thank you everyone again for joining us for today's call. As Shawn said, please let us know if you have any questions. We're happy to help.
Our next call is November 13th: Dos and Don’ts for Your ERP Selection. In this next edition of The ERP Advisor, we will discuss tips that will help increase success with your ERP software selection.
Please go to our website erpadvisorsgroup.com for more details and to register. Thank you again.