Why Did You Buy That? Really!
“I didn’t think it would be this complicated.”
The head of a booming company in the throes of a growth spurt called me up on a weekday morning. He was embarrassed. Though he had years of experience purchasing complex machinery for the manufacture of his company’s bestselling products, he’d only bought computer software for his business once - when he'd first set up shop. The world had changed a great deal since then. And now he was discovering he was in over his head with the contract he was trying to negotiate for a new Enterprise Resource Planning (ERP) system.
This is so typical.
One of the most common calls we get are from businesses who have started the process of purchasing and implementing a new Enterprise Resource Planning system - and find themselves in trouble.
These companies were forward-thinking enough to realize that ERP software would help them improve their operations and allow for growth, but they were not forward-thinking enough to realize that, while experts in their own field, they were newbies in the world of ERP.
ERP projects can have many unnecessary purchases. We can help you streamline, optimize, and get the project successfully implemented.
Here are Six Tips to Reduce the Cost of your ERP.
Know what you need – Before you even start looking at the available software, think hard about what you want and need. A furniture company doesn’t need software that tells them the expiration date of food products although that feature would be a must-have for a food company. It’s common for businesses to end up purchasing more options than they need. This can add up to big bucks wasted.
Don’t talk to every Tom, Dick, and Harry – Only a select number of ERP suppliers are going to be able to satisfy your requirements. It is tempting to gather as many proposals as possible simply to have more bids from which to choose, but don’t waste your time on suppliers who don’t have the features you require. It’s equally important to make sure those providers you’re considering are willing to be flexible during implementation. Similar to a construction project, you will discover things as you go along and want to make changes. You’ll want to pick an ERP supplier who can go with the flow and not hose you with unreasonable fees for each and every change.
Say what you mean – Document your needs in the form of a written Request for Proposal so that ERP suppliers can respond clearly. You’d be surprised by how many of these ‘contracts’ rely on requests submitted over a phone call. Obviously, the possibility of misunderstandings grows exponentially when demands and their associated costs are not documented in writing. You don’t want to end up paying for something you didn’t actually want. Nor do you want to miss acquiring a feature or function you badly need.
Know your Showstoppers – 80% of your needs will be solved by most of the commercially available ERP software. This would include accounting software, invoices, sales orders, and so forth. The problem lies in the remaining 20%. These are the “showstopper” requirements unique to your business. Perhaps you have a special algorithm for calculating commissions for your salespeople. Or maybe you need to be able to trace food lots for potential recalls. Hunting for the right ERP provider who can satisfy these specific needs can be time-consuming, but if you don’t get your showstopper, you will be hobbled in using your new and expensive software.
Negotiate . . . Negotiate . . . Negotiate – Everyone is open to negotiation. Some months of the year are better than others, such as the end of a quarter when the sales force wants to close a deal. But there are other factors that come into play, as well. On a recent deal, RJMC took an original $1 million bid for an ERP system and - without changing the parameters of the deal - obtained a discount of over 30%. You don’t want to miss out on the opportunity to shave money off this big-ticket deal.
Engage an Expert to Represent Your Best Interests – This is the most cost-effective decision you will make. ERP suppliers know how to “sell you.” You don’t want to walk into a transaction without similar expertise on your side of the table. Seek out an expert who can lead you through this critical decision process to make sure that you get the full systems you need, and for a reasonable price. Most importantly, the project leader you select will also get the systems implemented and your team working together.
If you employ these Six Tips to Reduce the Cost of your ERP, you will limit your project risk and increase the probability of selecting the right solution at the right price!
Rubenstein / Justman Management Consultants has the experience to assist companies to make the tough, complex decisions that can result in successful projects while controlling project cost. Call us to help lead your ERP project!