ERP Selection – The Myths that Land you in Trouble

What are the common myths of Enterprise Resource Planning (ERP)?  Believing in them blindly may land you in trouble, including bankruptcy.

Many companies may not know that selecting the wrong Enterprise Resource Planning (ERP) solution can be a costly and sometimes, fatal mistake.  If you search on Google with the phrase “ERP causes bankruptcies“, you can find many articles and case studies of corporate failures caused by mistakes made in selecting ERP.

This article illustrates the common myths in Enterprise Resource Planning.  Believing in these myths will lead to wrong assessments during your ERP (Enterprise Resource Planning) selection process.  And worse still, may land you in trouble.

What are Myths?

Before we proceed further, let’s understand what are myths and why at times, these misunderstandings may result in situations that can be fatal.

By definition, a myth is a widely held but false belief or idea.

Let me highlight some examples that we may encounter in our daily lives or work:

Public Listed Companies have cash, can be trusted, and are good paymasters

Those who have dealt with various companies for a long time will realize that publicly listed companies are not much better than any other companies in terms of making payments and trustworthiness.  Although I am not implying that publicly listed companies are less reliable than other companies, there is no lack of cases of publicly listed companies getting into financial or operations challenges including bankruptcies.

So, when we deal with publicly listed companies, we should apply the same vigilance as with any other companies. 

IT people are very accepting of changes and new technologies

IT people may be at the forefront of the ever-innovating IT industry.  But that does not necessarily make them less resistant to changes.  This behavior is more apparent among senior IT persons who spent years mastering a certain skill or experience on particular technologies.  To abandon the acquired skill and knowledge to take on something new, especially when the person is senior and more advanced in age, will be as painful as anyone else.

So, IT people are still human.  Human generally has resistance to changes and prefer to stay in their comfort zones.

Police are the protectors of citizens

Although we would like to believe that police are responsible and dedicated to protecting their citizens, in many countries, approaching the police is the least preferred option to seek help when citizens are faced with crime issues.  Sometimes, it may even land the citizens in more trouble and make the situation worse.

Some of my examples above illustrate that we must be aware of some of the common myths so that we can make better judgments in our daily life and work.

Myths of Enterprise Resource Planning

Now, let’s go through some of the common myths of Enterprise Resource Planning (ERP) that I have observed over my years of working with ERP (Enterprise Resource Planning) projects.

Myth – A Larger Support Team indicates Better support services

It seems common sense that a larger support team from ERP service providers should provide better quality and responsive support.  But the truth can be far more complicated.

The Truth

The truth is that a larger ERP support team does not necessarily indicate better support services.  Often, it may even hint at a potential hidden lack of quality of services.

1. In general, ERP service providers will employ the smallest support team that is necessary.  In fact, there is little incentive to provide speedy support to support issues raised by their customers.  You can just imagine that if you are a client who raises an issue with your ERP service provider and most of the time the support consultants provide you with solutions almost immediately.  How will you feel about their services?  Good?  Unfortunately, most customers I worked with reacted differently.  Although they were happy to receive prompt replies when they occurred, many will eventually feel that they are overcharged for the support services due to the perception that it appeared to be easy to support their issue because the support consultants can easily provide quick resolutions.  So, at times even if the support consultants can provide resolutions immediately, it may not be to the advantage of the ERP service provider to always provide immediate quality resolutions.  So, there is little incentive for ERP service providers to employ a large support team to provide quick resolutions.  People habitually tend to value the perceived activities more than the outcomes.
2. The support team is often the training ground for new consultants.  Having more inexperienced consultants does not necessarily translate to better support services.
3. The number of support consultants corresponds to the amount of support work that the support team needs to carry out.  And against common sense, a larger support team often indicates problematic implementation and support capability.
   • The more customizations (Programming) were created in the ERP project implementation, there will be more bugs, and, more support will be needed.
   • The inability of the implementation team to resolve bugs and stabilize the implementation early will lead to more support requirements after the project is lived.
   • The inability of the support team to resolve technical issues from their root cause will lead to recurring support issues. Hence adding to the recurring support workload and a larger support team.

My Recommendations

It is more important to understand how the Enterprise Resource Planning (ERP) service providers handle their support backlog and manage their support process.  This will need some know-how and experience to obtain true and accurate information during your selection of your ERP service provider.

Myth – I can base my evaluation on ERP Analysts’ Ranking

Just do some Google search and you will find many Enterprise Resource Planning (ERP) analysts with reviews of the ERP Software (Often it will be those well-known few ERPs).  There are ranking and comparing showing some ERPs are better than others in certain ranking criteria.

The Truth

The truth is that nobody can understand the functionalities of the majority of ERPs sufficiently and in an up-to-date manner to rank them.  I have worked with 8 Enterprise Resource Planning (ERP) software since 1996, and I know that I do not know enough information to rank all the eight ERPs that I worked with over my career.  It is especially challenging as each ERP solution evolves over the years.

1. An ERP consultant takes years to learn one ERP software and yet he will often discover new features and new ways of configuration throughout the time that he works with the same ERP.  That has not included the quarterly or yearly software upgrade with new features.  So, how can someone even able to rank a large number of ERPs at any one time?  I had even read articles from an ERP analyst who obviously mistaken the functionalities of two Microsoft ERP software.  I could notice the mistake because I happened to work with both ERPs at that time.  But many others may not realize that.
2. Often, analysts derive benefits directly or indirectly from ERP vendors.  So, it is difficult for them to be neutral even if they are capable of doing it.
3. The best ERP for your company depends on the nature of your business, the project scope, your industry, your project timeline, future plans, etc. So, it is dynamic and not static.  There is no one Best ERP Software but there are many suitable ERP solutions.  The challenge is to be able to find out the one that most meet your requirement.
4. Implementation, cost, and timeline are important factors to consider in ERP selection.  A powerful aircraft in the hands of incompetent pilots can be fatal.

My Recommendations

Those who are selecting ERP (Enterprise Resource Planning) need to understand the scope of the ERP project, the unique ERP requirement of their industry, and the likely group of ERPs that may be suitable. Evaluating the vendors’ implementation capability and your users’ readiness is critical, these are more important than the software functionalities alone.

Myth – Good ERP vendors received Awards

Some ERP vendors will showcase the awards that they received to convince you that they should be your chosen ERP vendor.

The Truth

You will know the truth only if you investigate further into the nature of these awards:

1. Many of the awards are either paid for (Directly or Indirectly) or Sales performance-related e.g. Partner of the Year Award.  These do not indicate any benefits to the customers.  In fact, these awards indicate how good they are in marketing and selling and I will mitigate these when evaluating against other vendors.
2. For service providers, ERP Software Principals will not get involved in the implementation services due to legal liability.  So, awards given by the ERP software principal do not usually indicate good service quality and project implementation.  Yet, the implementation capability is an important evaluation factor in selecting your ERP solution and implementation vendor.
3. Some awards are just irrelevant to your ERP selection (e.g. Prestige Brand award, etc.)

My Recommendations

To understand the implementation services of the ERP vendor, companies have to understand the reference projects of their potential vendor and the capability of the consultants who will be assigned to their project.

To understand the fit of the ERP software to your needs, a structured evaluation process will be needed.  And it is not just features and functions, but how the shortlisted ERP software executes your business processes and adds value to your business.

Myth – ERP is an IT Project and Best Handled by IT persons

When I introduced myself as the Enterprise Resource Planning (ERP) consultant, the usual replies would be, “Oh, you are doing IT?”.  It is common for ERP projects to be treated as IT (Information Technologies) projects that should involve or even be led by IT persons.

The Truth

The truth is that Enterprise Resouce Planning (ERP) projects should not be treated as routine IT projects.  Treating ERP projects as IT projects is a common factor that leads to project failure.

1. There are very few IT projects that need to involve a large number of non-IT stakeholders similar to ERP projects – Finance, Logistics, Services, Retail, Production, Project Management, Sales, Purchasing, etc.  So, the complexity of Enterprise Resource Planning (ERP) projects is much more than common IT projects
2. The critical knowledge needed in ERP Projects is accounting, and understanding of business processes combined with some basic IT knowledge.  So, IT knowledge is only one part of the knowledge requirement in evaluating and implementing ERP
3. IT department is not a natural leader of the non-IT stakeholders.  Often, they do not have sufficient accounting or business process knowledge to lead the project.  I observed from my past experience when dealing with IT person-led ERP evaluations that they tend to place a non-proportionate higher weightage on the technologies and IT requirements
4. ERP projects have a higher risk of failure than other IT projects.  How often does your Office 365 project fail as compared to ERP projects?  Just Google “ERP failure” and you will find many articles about ERP project failures.

My Recommendations

Treat Enterprise Resource Planning (ERP) projects as business process projects. The evaluation committee should consist of stakeholders from the key departments preferably led by a senior manager with an operations background.

If you engage a consultant to assist you in your ERP evaluation, someone who is mainly from an IT background without accounting knowledge is often not the best choice.

Consequences of Believing in ERP Myths

Good evaluation of Enterprise Resource Planning (ERP) depends on your judgments and is acquired through years of experience.  Believing in the myths that I mentioned above will lead you to make incorrect judgments.  It is important to know what questions to ask and how to ask them during your ERP evaluation.

If you just Google cases of ERP failure, there is no lack of examples of failed ERP projects that result in business challenges or even bankruptcy.  So, believing in the myths when evaluating your ERP can be fatal.

Conclusion

Common sense is not common, yet common sense can sometimes be misleading and wrong, especially in the field of Enterprise Resouces Planning (ERP) selection.

Making mistakes in Enterprise Resource Planning (ERP) is real and comes with serious consequences.

Arm yourself with sufficient knowledge except that it can only be acquired over a long period and wide exposure.  When time is not on your side, get credible external help to minimize your risk and achieve better ROI in your ERP selection.

You do not know what you don’t know.  1st ERP Consulting helps companies to select the most appropriate ERP solution that maximizes ROI, minimizes Total Costs of Ownership (TCO), and mitigates risks so that you are less likely to land in trouble.

Learn More about the author, Raymond Yap, and how we can help you.

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