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This article features an interview of J. Carlton
Collins and was originally written by James Bryce Smith
james.bryce.smith@navision.com.
It was published on the Navision web site here:
http://www.navision.com/us/view.asp?documentID=829. It has
been adapted from its original version and re-published here.
ERP Selection Tips from the Expert
J.
Carlton Collins, CPA independent technology consultant, draws on
his involvement in over 200 software selection projects to help
you make the right choice.
Buying business software can be like going into battle. If you
don't choose wisely, your company could suffer from software that
doesn't do what you need, difficult system administration or data
loss - and guess who will have to clean up the mess? Equip
yourself with the right product and the right reseller and you
will win the battle.
Of course, when entering hazardous
territory, it is always best to have a knowledgeable guide. Today,
your guide is Carlton Collins, Editor of Accounting Software
Advisor, an accounting software web site. He has seen over 200
clients through the ERP selection process to safety. He reveals
when and where to start looking, the best shortcuts, how to tackle
internal politics, and who to approach for insider tips. Let's get
started.
Warning Signs
First of all, what on earth could
prompt anyone to engage in an operation fraught with such danger?
Collins explains: "For the most part, it's either because
companies have outgrown their current system, or because it is
unstable, which means bugs."
Unfortunately, some ERP systems
have become breeding grounds for bugs. If vendors have not been
able to eliminate the bugs in their software, the best way for you
to solve the problem is to find a new system.
Then there is outgrowth. Collins
identifies two areas in which a company can outgrow its system:
performance capability and functionality.
Functional shortcomings mean that a
growing company will have too many manual processes. "Say a
company has opened up a new warehouse and expanded into new
product lines. Now they need dual warehouse capabilities and 'time
& billing' because they're providing service management. But the
problem is, their product doesn't support these needs."
Poor performance is also common.
"You go to print the sales journal at the end of the day and it
takes 45 minutes. Or the sales reps want to input their orders and
find it takes five to 10 minutes just to get to the necessary
screens. Basically, the whole system is so slow that no one can
really use it adequately."
In many cases, performance problems
can be overcome, at least in the short term. By updating old
hardware, like servers, network interface cards and cables, some
of the agony can be removed. But often this just means delaying
the inevitable.
Defining the Project
Once a company has established that
it needs a new system, it needs to define the scope of the
project. This will usually be clear from the way in which the
current system is holding the company back or causing unnecessary
expense. But there may also be an opportunity to improve the way
the business operates.
"For larger companies, putting in a
new accounting system represents an opportunity to do a lot more
than add a few features. The newer information systems with supply
chain functionality let companies automate their information
flows, thereby saving the salaries of the people employed to
manually input information into different systems."
Although return on investment (ROI)
studies can be useful in certain contexts, Collins believes that
they offer minimal benefit in software purchasing.
"A new accounting system is not an
investment like a new division or a new product line. It is a
necessity," he says. "It's like trying to find the ROI on a pair
of shoes. You need shoes, and you want them to be good ones, and
of course you don't want to overspend or underspend."
"Likewise, most companies need an
accounting system and they need a good one. Therefore the decision
to purchase a new accounting system is based more on whether the
old system functions adequately. If it doesn't, a new one is
needed - and no ROI study will change that fact."
Defusing Internal
Politics
In Collins' experience, it is
important for the project team to direct their energy towards
surmounting the political obstacles that can blight software
implementations. And the bigger the company, the more political
the choice of system becomes.
Collins cites the case of a large
Japanese electronics manufacturer that ran into trouble with a US
division that was not part of the decision to implement SAP. The
political damage between the division and headquarters was
enormous.
"I've also seen a project team take
six months to evaluate the market, make a sound recommendation to
the board, and the board chooses another product because someone's
brother-in-law sells it."
The key, therefore, is to involve
all the people who can cause the project to fail. Exactly who this
should be varies from one company to the next. But anyone in a
position to sabotage the results if they don't have input should
be included - at least to some extent.
"Put together an organizational
chart of the company, and find someone in each functional area or
division to get some feedback from. Don't give them hours of work,
just get their feedback so they feel they made a contribution. In
most cases, they make a positive contribution."
A good idea is to poll these people
on what their departmental problems are, which products they think
the company should be looking at and, later on, what they think of
the short-listed products. Some people will indicate that they do
not need to be involved in the selection, but others will want to
be consulted.
"Involvement could just be a simple
e-mail, or responding to a few questions on the phone. You don't
need to fly people in from all over the world. Just don't insult
anyone by leaving them out."
Identifying the
Candidates
Apart from the suggestions made by
each department, how should the project team draw up a list of
potential products?
Using an independent consultant can
cut out a lot of the groundwork. The drawback is that many
consultants only recommend the one or two products they know. So
the selection of a certain consultant can automatically narrow the
field.
If you can't find a suitable
consultant locally, or cost or fear of bias stop you from using
one, you will have to do the groundwork yourself.
Of course, the Internet makes it
easier to find information. And then there are independent
seminars, vendor-sponsored seminars and trade shows. Newspaper and
magazine articles can also be valuable. Find out what the
competition uses and seek the advice of industry and professional
associations.
Elimination Process
"When it comes to evaluation," says
Collins, "many people just look at features. But that's a mistake
- there's more to it." He lists eight other characteristics to
consider:
- Vendor strength. The company
behind the product should have a strong financial position.
"What good is the best product in the whole world if the vendor
is going to be out of business next year?"
- Underlying technology. Some
popular products have been around for years and appear to be a
good choice. However, closer inspection reveals that they are
based on old and limited technology. "This shortcoming may
prevent the vendor from adding new functionality such as supply
chain integration, customization, Internet enabled reporting,
support for wireless devices or remote access."
- Large customer base. A small
customer base may not provide enough revenue to support the
longevity of the product or users to debug it. "You want to have
those 35,000 customers out there debugging the product before
you install it."
- Stable code. Short-listed
vendors should have a reputation for clean, stable code.
"Vendors need defined testing procedures and dedicated
personnel. Without them, they are virtually begging for
trouble."
- Well-developed reseller channel.
There should be plenty of knowledgeable resellers to support the
product.
- Good customization capabilities.
"Some products are easy to customize. And others require a major
project with plenty of experts to come in, unlock the source
code and make your changes."
- Broad range of modules. Favor
the products with a wide variety of modules to avoid having to
replace the system when the company grows.
- Ease of use. "Training is a
heavy implementation cost."
"Cross the products off your list
that don't pass these tests," says Collins, "and eliminate those
that are too expensive or that have key functionality missing.
Whittle the list down to around four options."
This is the stage at which
comparing functional details makes sense. Collins suggests using
software that can help with this process, like the Accounting
Library, which profiles the top 150 accounting products against
4,000 different features. Select the features you need, and it
tells you how your shortlist fares.
Once the low-scoring products have
been eliminated, you are ready to meet the resellers.
Identifying Good
Resellers
“Seek recommendations on who are
the most experienced and capable resellers for each product. Go
for the support driven companies rather than the sales driven
companies. Invite them in to find out if you like them and if they
have the ability to do the job.”
The job in hand,
‘the implementation engagement,’ would be better renamed ‘the
training engagement,’ reckons Collins.
“The reseller has
to train everyone on how to put the new system in, how to gather
data from the old system, how to navigate the new system, print
reports, read reports, how to process the daily and monthly
activities. If you look at the billings, almost 90% is on
training.”
Picking a
reseller with a good training methodology is therefore crucial.
“Complete the
training in a week and your people won’t retain the information.
But do it four hours at a time, twice a week, for three months and
the company will get the most out of their new system while still
getting the payroll done and moving inventory in and out.”
Assessing the VARs
Collins advises companies to hold
two rounds of meetings with prospective resellers. The first round
should last about 90 minutes and will provide an opportunity for
the two sides to get to know each other. If they do not get along,
then neither has wasted much time on a long product demonstration.
The session should also be used to outline the company's specific
needs, enabling the reseller to prepare a relevant presentation.
"If project management is
particularly important to you, then give the reseller some data
from your company and ask them to demo how their product handles a
particular scenario. It takes a bit more time and effort, but
you'll be able to pick the winner more confidently."
You should also request an
evaluation copy of the product so you can test it further, on your
own time.
Making the Decision
If you follow these guidelines, you will end up with an ERP system
that suits your needs, and you will gain a consultant you can work
with time and again to refine your system as your business and
requirements grow.
Bonus Tip: Hardware
"Do not limit yourself to buying software
that will run on your current hardware. Find the system that best
meets your needs and then buy the hardware you need to run it.
Hardware is the simplest and least expensive part of the
equation."
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