What does it mean exactly to be objective and vendor-neutral and why does it matter?
We don’t have all the answers, but we have fun sharing and discussing as ERP organizational change practitioners, researchers, and colleagues. And, we have fun asking lots of questions. Why do “objective” and “vendor-neutral” software comparison companies spend millions of dollars, accumulate countless employee research hours, and expend incredible effort developing a “knowledgeable”, “non-biased”, “objective”, and “vendor-neutral” software product to assist organizations in ERP system and partner selection? There appears to be a significant demand for this type of product and service, but why?
Why are there many professional service firms that choose to remain ERP vendor-neutral? Why do ERP researchers, websites, magazines, and trade publications state that they are objective or vendor-neutral? What is an objective ERP selection process exactly?
What are the pitfalls, barriers, and challenges of an objective, non-biased, vendor-neutral ERP selection? Or, aren’t there any? During extensive formal and informal research, we’ve interviewed many Private Equity executives on the value of objective and vendor-neutral ERP selection. We will share more of their quotes and post ERP organizational change reflections on this topic in future posts. But, can an “objective” and “vendor-neutral” selection be an “illusion”, “buzzword”, or “checkbox item”? If so, how?
Why does it matter? How do we know it matters? Does a knowledgeable, non-biased, objective, and vendor-neutral approach to ERP partner and ERP system selection really matter? Isn’t it just good enough to be “in the ballpark”? Really, all discrete manufacturing ERP platforms do all the same functional “things” anyways….and, they have to be competitive in pricing because it is market-driven? Right? Some great questions.
All ERP Vendors and Solutions Are Not Created Equal
While there are many good ERP solutions and vendors, they are not created equal. Additionally, some are better suited than others in unique organizational contexts. There are many ERP solutions in the market today. For instance, just for discrete manufacturing alone, there are nearly 100 vendors to choose from. And, the selection process can at times be overwhelming to organizations. But the fact remains, proper and diligent system selection is crucial. While we work with many great ERP products, vendors, subject matter experts (SMEs), or third-party resellers daily, they can be unique in many ways including deployed technology, organizational context, methodology, functionality, pricing, support model, and on-and-on.
The results of an ERP selection process can have direct implications upon and within the business.
“All ERP Systems Do the Same Thing. Just Get in the Park and Pick One.”
Well, actually, this is a dangerous and risky idea. And, factually, just not an accurate statement. In fact, ample objective and vendor-neutral research suggest that ERP systems selection, implementation methodology, and partner selection are critical for a successful ERP organizational change project. For instance, there’s been some sound research in this area across many different industries since the beginning of the study of ERP organizational change and critical success factors back to the mid to late 1990s. Although there are several critical success factors, an organization does need to start with the right foundation (i.e. ERP system). Umble, Haft, and Ubmle offer just one example of work that advocated the importance of software capabilities. They found that if the software capabilities and needs are mismatched with a company’s business processes, this can lead the ERP implementation to failure. This critical point is suggested by other work including,
- Lee, Chen, and Kang (2019) stated that one major reason for the failure of ERP assimilation is that the selected solution is not a good fit for a firm.
- Both practice and research demonstrate that organizations can perform inadequate ERP selection learning and evaluation in terms of time and money (Neves, Fenn, & Sulcas, 2004).
- And Ghosh (2012), “A Comprehensive Study on ERP Failures Stressing on Reluctance to Change as a Cause of Failure”, explains it well:
“Choosing the correct package is essential. Buyers have to make sure that the package chosen satisfies their requirements. Reasons for improper package selection include lack of knowledge as well as lack of clarity about functional requirements. Sometimes packages are wrongly chosen because the characteristics of the package aren’t well understood. There have been instances where employees have chosen certain packages due to successful implementation in past jobs. Buyers have to make sure that the vendor has the correct package; often purchasers are drawn in, using misleading tactics, only to discover that an existing package has to be modified extensively. If incorrect packages are purchased, they may not suit the needs of the organization well or process tasks slowly. Additional resources will have to be expended to remedy the situation.”
There is one best ERP solution for each and every unique organization. And, the organization needs to take the time and effort to find that “one best fit” without making assumptions. Some ERP solutions cater to specific industries while some cater across industries. Some come with industry-specific configurations and have hundreds of preconfigured business processes. Some cater to specific niches with little configuration. Some have been around since the beginning of the ERP era and some that we don’t know about yet but will bring to the market new and exciting products with creativity and innovation. ERP solutions utilize different models and often cater to different business needs. Some have all the bells and whistles and try to be everything to everyone. Others are very industry-specific and cater to a niche market. There is free and open-source ERP and there are propriety ERP vendors. And there are ERP vendors that focus on add-ons only. ERP solutions and partners often employ technology differently and have different approaches to organizational readiness, functionality, business modeling, implementation methodology, and training.
Look for the True Differentiators
The ERP solution itself as well as ERP partners have different competitive differentiators that drive how they advertise and approach the market. ERP solutions and vendors all have unique tangible and intangible benefits, advantages, disadvantages, and costs. Some of them have truly unique differentiators, some don’t, and some say they do. What matters, is not just the ERP vendor Ads, commercials, or sales pitches, but what really makes for an organization’s success is being mindful of how critical the triad (people, process, and technology) and hence the true differentiators that ERP solutions and vendors bring or don’t bring to the table.
The Selection Factors
There are many selection factors to consider that contribute to success. A portfolio needs an applicable, methodical, and disciplined approach and scorecard prior to making an ERP decision that considers many selection factors. Friends and colleagues at Technology Evaluation Centers (TEC), an impartial software analysis firm, state that:
“Any company considering an ERP implementation needs to understand what ERP systems are on the market, which business processes can be handled or improved by an ERP system, and how to approach ERP selection.”
It starts with an ERP implementation plan that is aligned with business strategy and goals. But then ERP requirements gathering, long and shortlisting vendors, demonstration management, RFP/RFI/RFQs, contract review, and price negotiation are critical aspects of ERP vendor and partner selection. Clearly, business models and matches of needed business requirements are essential. But there exist many other influences that should be factored into a decision. These would include, for example, some influences as described by Neves, Fenn, and Sulcas (2004) in their article “Selection of enterprise resource planning (ERP) systems.”
- Number of local installations
- Market share
- BI Tools
- Previous install demonstrations
- Total cost of ownership
- Project implementation history (speed and ease of implementation)
- Project Methodology
- Independent consultant availability and expertise (look at subject matter experience and expertise)
- Fit to business strategy as a tool of competitive advantage
- Technical aspects such as security, redundancy, and adaptability
- Ability to customize
- Upgrade and maintenance plan and schedule
- R&D spend
- Much more.., including appropriate business model and functionality, references, and honesty.
- And of course, partner fit (culture, alignment to mission, ownership, commitment, etc) are crucial.
These are just a few of the factors that should be considered as all products and vendors are different.
“The cost, complexity, and potential complications of implementing an ERP imply that serious consideration must be given to the selection process as well as between competing products.” Neves, Fenn, and Sulcas (2004). Furthermore, Tsai, Lee, Shen, and Lin (2012) suggest that, among others, compatibility between the system and the business process and the provision of best practices, international market position, training support by the supplier and supplier technical support and experience, and consultant’s ERP implementation experience in similar industry are important selection considerations.
Industry fit and industry support are critical as noted by Chung, Skibniewski, and Kwak (2009), “Recently, a significant number of major construction companies embarked on the implementation of integrated information technology solutions such as enterprise resource planning (ERP) systems to better integrate various business functions. However, these integrated systems in the construction sector present a set of unique challenges, different from those in the manufacturing or other service sectors. There have been many cases of failure in implementing ERP systems in the past, so it is critical to identify and understand the factors that largely determine the success or failure of ERP implementation in the construction industry.”
“The choice of the package involves important decisions regarding budgets, timeframes, goals, and deliverables that will shape the entire project. Choosing the right ERP packaged software that best matches the organizational information needs and processes is critical to ensure minimal modification and successful implementation and use.” (Somers and Nelson, 2001)
Furthermore, Nah and Delgado (2016) state that “In order to have a comprehensive view of the enterprise’s requirements for an ERP system it is important for all functional areas to be involved in the selection of the package. It is also critical that test scenarios represent as many departments and cover current and future processes. The architecture that will run the ERP application also constitutes an important choice”.
Knowledgeable and Objective ERP Selection Matters
ERP selection is a significant strategic business decision. ERP selection includes selecting the right technology supporting the right processes with an ERP partner that is most aligned with the organizational mission, vision, values, and goals. Given the many selection influences that can ultimately directly impact ROI, EBITDA, and the effectiveness and efficiency of the ERP organizational change process, knowledgeable and objective ERP selection matters.
Oxford Languages states that to be “Knowledgeable” means to be “intelligent and well informed“. Dictionary.com states that being knowledgeable is “possessing or exhibiting knowledge, insight, or understanding; intelligent; well-informed; discerning; perceptive”. Wikipedia states the following about “Objectivity”, “In philosophy, objectivity is the concept of truth independent from individual subjectivity. A proposition is considered to have objective truth when its truth conditions are met without bias caused by a sentient subject. Scientific objectivity refers to the ability to judge without partiality or external influence.”
Therefore, who could argue that ERP selection needs to be well informed, truthful, and insightful process that informs a decision that is made without bias and without partiality? If ERP transactions essentially represent dollars (which for the most part, they do), this is a pretty important notion.
To be knowledgeable means that understanding that there are critical influences and that being “in the ballpark” just isn’t good enough. To be objective means that motivations driven by systems/vendor preference (or relationship) partiality, “misleading tactics” (Ghosh, 2012), by politics, or by sales (software or services) demands aren’t good enough. If organizations are not vendor-neutral and objective during an ERP organizational change selection then decisions are made that are not in the best interest of the organization, and that is a significant disservice to the organizational goals.
Want more on this topic?
More about Nestell & Associates https://nestellassociates.com/
Nestell & Associates News. Sign-up for Blog Posts and Podcast Episode Alerts! https://mailchi.mp/8c7a8b2a4f9f/nestell-associates-news
Interesting Article: Haddara, M. (2014). ERP selection: the SMART way. Procedia Technology, 16, 394-403. https://www.sciencedirect.com/science/article/pii/S2212017314003326
Chung, Skibniewski, & Kwak (2009). “Developing ERP Systems Success Model for the Construction Industry | Journal of Construction Engineering and Management | Vol 135, No 3.” from https://ascelibrary-org.libproxy2.usc.edu/doi/abs/10.1061/(ASCE)0733-9364(2009)135:3(207).
Ghosh, R. (2012). “A Comprehensive Study on ERP Failures Stressing on Reluctance to Change as a Cause of Failure – ProQuest.
Goldston, Justin “A Qualitative Study of Risk Mitigation in Enterprise Resource Planning Implementations”, Global Scientifc Journal: Volume 7, Issue 12, December 2019, ISSN 2320-9186
Neves, Fenn, and Sulcas (2004). “Selection of enterprise resource planning (ERP) systems.” South African journal of business management 35(1): 45-52.
Tsai, W. H., Lee, P. L., Shen, Y. S., & Lin, H. L. (2012). A comprehensive study of the relationship between enterprise resource planning selection criteria and enterprise resource planning system success. Information & management, 49(1), 36-46.
Umble, EHaft, and Umble (2003). “Enterprise resource planning: Implementation procedures and critical success factors.” European Journal of Operational Research 146(2): 241-257.
Somers, T. M. and K. Nelson (2001). The impact of critical success factors across the stages of enterprise resource planning implementations. Proceedings of the 34th Annual Hawaii International Conference on System Sciences, IEEE.