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.
In ERP selection, the vendor you choose is just as important as the capability of the solution. 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 the right fit 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 for 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 up-front and get five years of maintenance for the four year price. Avoid vendors that do not clearly define 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 a help desk concept.
Software organizations are usually not good with offering support. The senior members, who have the greatest knowledge of the software, seldom spend any time on support. Instead, the support team is mainly comprised 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 answering 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 true 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 ultimately come from good management of the warehouse.
iv) Does the software include CRM functionality as a separate module?
Customer Relationship Management (CRM) is important to the overall success of the entire supply chain process. Knowing and understanding what your customer wants, buys, and in what quantities they buy is a clear benchmark for the future success of your organization.
While CRM encompasses many features and capabilities, a system with CRM functionality should, at the minimum, contain a complete contact management system, the ability to identify customer buying patterns, the ability to manage both customers and inventory in one of the facilities, and the ability to track penetration with your customers.
Look for a vendor that offers CRM as part of the ERP from its conceptual design phase.