What is ERP
An Enterprise Resource Planning (ERP) system provides integrated management of core business processes and operations. The typical ERP system should operate in real time and include: a common database, integration between modules, and a consistent look and feel across modules. Each ERP consists of a wide variety of modules to accommodate each business’s differing needs. Though I have experience with ERP systems in the manufacturing sector, I will concentrate my article within higher education, since I have over 25 years’ experience in that field. Most of the points will apply to any ERP, in any business.
The ERP system has become one of the largest IT investments a company must make. The implementation of an ERP system is not an easy task. An even harder task is the selection of the right ERP for the organization. Many institutions go through an agonizing process during the selection of a new ERP system, abandoning their existing ERP with the hope of a better and more productive system. The fact is, there are only a handful of ERP vendors for higher education. So, how do most institutions choose a new ERP system? Well, the majority employs the DACRDPSIT method: Discussion, Approval, Committee, RFP, Demonstration, Pricing, Selection, Implementation, Training.
Discussion – At most institutions, the decision to change ERP systems typically begins with one or more employees or departments expressing their dissatisfaction with the current ERP system. This dissatisfaction may stem from a lack of knowledge of the current system, caused by inadequate of training. A far more concerning argument against the current ERP is the ability to specify how it does not meet the organization’s needs. Most likely, the individuals who expressed their unhappiness are either members of the management team or have well-placed political connections within the institution. Alternatively, they may be new employees, who came from outside organizations, bringing knowledge and experience with different ERP’s.
Approval – After the rumblings about the ERP have been acknowledged as valid, a discussion will take place at the administrative level, where the project will either get the green light or be killed. Most likely, the higher-ups will focus on a general discussion about the cost of changing ERPs. Just let me say, the initial cost estimate is always inaccurate. If the top-level administration approves the search for a new ERP, they will likely form a search committee.
Committee – The committee should consist of all stakeholders in the institution. In my experience, there will be one or more power decision-makers on the committee. Those decision-makers may be politically connected. In general, the committee may meet few times and may seek help from the IT department for a vendor list and to initiate the RFP process.
RFP – The Request for Proposal is a document to list all requirements for the new ERP. This document is usually very long and lists every function and process needed for the institution. In my experience, the RFP is good for a new ERP vendor, but not for a well-established vendor. In the case of well-established vendors, unless the institution has special requirements for the ERP, it is likely the ERP will suit. When there are special requirements, many vendors may claim they have the feature, function or process, but later reveal there is not a straight solution, but rather a workaround to the required item.
Demonstration – After narrowing down the ERP vendor list to 3-5 potential candidates, a schedule will be established to bring the vendors in for a demonstration of their software. Unless the current ERP vendor for the institution has a new ERP system, they likely will not be listed as a possible vendor. This stage is the selling point for the ERP system. Some vendors may impress the selection committee and employees, even if their product is not that great. Conversely, I have seen horrible presentations for great ERP systems.
Pricing/Selection – Some institutions may ask for prices before selection, and some may select first then ask for prices. Either way, when negotiating pricing, both the vendor and the institution must consider several factors, including resources needed for conversion of the old system, the implementation timetable, and training. I have seen the cost of implementation exceed the cost of the ERP system itself. The selection of the vendor will be based mainly on the quality of their presentation, their impression on the client, and their ability to answer the clients’ questions. I have seen many institutions select the vendor based on how many other institutions using the same ERP, which is a grave mistake.
So, how to select the right ERP?
Well, here are some of the Do’s and Don’ts
Don’t select a vendor based mainly on how many institutions use their product. Bigger is not always better. Some vendors have merged with other companies, which makes their client base appear bigger, even though their clients are using different ERPs or even using non-ERP products.
Do inquire the underlying technology behind the ERP’s database. Is the vendor using a true normalized relational database? Or are they using a flat database or non-normalized database running a nightly conversion job to convert a subset of the database into a normalized database? The reason you need a normalized database is to allow you to run future reports easily and more accurately, instead of spending hundreds of hours chasing fields and data.
Do explore the underlying technology behind the ERP’s front end. Is the vendor using a true OOPL (Object Oriented Programming Language)? OOPL brings data and its associated behavior together in a single location, which makes customization and code enhancement much easier and reduces future bugs. Another benefit of OOPL: hiring programmers who are up-to-date with the latest technology is much easier than finding programmers with antiquated skills.
Don’t be deceived by cloud-based ERP. A cloud-based ERP does not equate to a web-based ERP. Some vendors may put their software on the cloud and charge a subscription to give the impression their product is either SaaS or Web-based. A true web-based ERP is one that you could access using a regular web browser, without a third-party product.
Do visit or talk to other institutions that use the ERP you are interested in. Don’t depend on the demonstration or the vendor’s claims. With this type of investment, it is worth it to visit comparable businesses/campuses and talk to a wide variety of users in multiple departments to learn more about the ERPs you are considering.
Do investigate the cost of the ERP. Look into the initial purchase of the system, the implementation, training, and ongoing maintenance. Pay close attention to the annual maintenance and the future cost escalation. Some vendors may initially give you a low annual maintenance fee and then, after few years, the cost will skyrocket.
Do read the contract very carefully. Make sure there are no hidden clauses preventing you from dropping modules and modifying the annual maintenance.
Do ask the right questions during the demonstration phase. Be very specific and do not accept a twisted answer or an answer that starts with “yes we could this with minor customization…etc”.
Do look into how well the ERP system will meet your needs out-of-the-box, without customization. If the ERP will not cover at minimum 90% of your needs, then you are looking at a high cost for customization.