ERP software survey 2014

Some results and lessons learned from our survey on enterprise resource planning systems.

Welcome to our annual vendor survey on enterprise resource planning software. Back in 1999, when we published the first survey in CAmagazine, ERP was another mysterious IT acronym. Now it seems that everyone knows about it — although you will still hear a lot of variation on what it really means. Fifteen years ago, we had only a few ERP systems in our survey. Today we have 93. According to a recent Forbes article, ERP software market grew 3.8% to US$25.4B in 2013 from US$24.4B in 2012. There is good reason to expect much bigger growth in 2014. Almost every ERP vendor and implementer I know is having a hard time keeping up with recent demand.

ERP 101

Enterprise resource planning (ERP) systems automate business processes across most, if not all, departments in a company. Using that definition, even a system like QuickBooks can be considered an ERP system for a small company. But while some ERP systems have been designed for multiple industries, others are meant for specific industries/verticals. Some of these vertical solutions are developed by one company — for example, Deltek (professional services) and Unit4 (public sector). Others are extensions to a popular ERP system such as Microsoft Dynamics NAV. The extensions are developed by third-party companies for a specific industry using the same database and tools as the base system.

Some ERP systems are installed on site and others are in public or private clouds. Public clouds allow multiple organizations to share the same instance of the software on one server. Public clouds require multitenant architecture and are often referred to as SaaS (Software as a Service). Private clouds provide one instance of the software and a single server to be used for the exclusive use of one organization. There are advantages and disadvantages to each type of cloud. For example, the public cloud will be less expensive and the private cloud will allow more customization.

The charts

Our attached vendor list contains hundreds of questions about target customers, cost and ERP features. Our results are available in pdf form by clicking on the survey chart below. You can also complete an online survey and then view the 10 best ERP systems for your needs based on percentage fit calculations available at http://www.180systems.com/tools/systems-analysis-tool/erp/. As with all our surveys, we were unable to validate the information supplied to us by the vendors. However, we don’t think there will be that many intentional mistakes, partly because the vendors will lose credibility if they are caught making false claims.

We have segregated the ERP systems into tiers based on customer revenue and employees and product cost. This is a convenient, albeit not perfect, means of differentiation. Be cautious if you’re trying to calculate the costs for a system, since these numbers are just averages.

Charts

Lessons learned

In previous years, we have mostly discussed ERP trends. This year, we are taking another tack — sharing what we have learned in the trenches about selecting and implementing ERP systems.

1. Critical requirements need to be precise. Critical requirements refer to unique/strategic needs that are not standard out-of-the-box features that would you find in many solutions. Even the smallest omission in defining these requirements can lead to huge costs once the implementation has begun and the vendor finally understands the requirement.

2. Scope must be well defined in the contract. We recommend that the requirements in the RFP (Request For Proposal) be referenced as part of scope in the contract.

3. Use your A team on the implementation. You will need to find ways to unload some of their day-to-day responsibilities.

4. Having the right implementer is just as important as finding the right software. It’s not enough for the implementation team members to know the system. They must also be experts in your industry and strong in project management.

5. Implementing a new system is by far the best way to improve business processes. Every problem should be considered an opportunity.

6. Project management is key. You can’t rely on the vendor to manage your internal team. You also need to ensure the vendor lives up to its obligations in term of cost, timing and scope.

7. Measurements of success should not be forgotten. When you start any project, you should know how to evaluate its success. While it’s important to stay on time and on budget, success has more to do with achieving strategic goal metrics (key performance indicators, or KPI) such as improving the time it takes to ship an order.

8. Avoid customizations if possible. These can lead to significant costs during the implementation and when the system is upgraded in future years.

9. Testing is key. Even though the system might be used by thousands of other companies, there are so many ways to set up a system that you might not get the expected/required results.

10. Don’t overlook change management. You would think employees would be onside for changes that will improve their skills and make them more marketable. But there might also be some resistance. Employees might be worried about losing their jobs after all the inefficiencies have been eliminated. They might be worried about the amount of work required to do the implementation when they are already maxed out. And, finally, some employees might fear losing power once processes are automated or important information is stored in the system.

Bottom line: be rigorous in selecting a new system. There are no shortcuts — even if the vendor claims it can provide "best practices" based on its extensive experience in your industry. Best practice can be great for standard procedures but can lead to disaster for unique or strategic requirements.

About the Author

Michael Burns


Michael Burns, MBA, CPA, CA, is president of 180 Systems (180systems.com), which provides independent consulting services, including business process review, system selection, business case development and project management.

comments powered by Disqus

Highlights

Update your knowledge and strengthen your network at this must-attend conference covering the most important issues and trends affecting audit committee members.

It’s probable that someone you know is deep in debt. If you are observant, you might see one of these seven signs.