Choosing your ERP: a headache? Not so sure, if you take into account today's fundamentals!
What's at stake?
For many SMEs, the choice of an ERP (Enterprise Resource Planning) system is a subject of great stress. The stakes are always high, both in the short and long term. The wrong choice can even get the company into serious trouble. Today's ERP solutions are plethoric in number and diversity.
Should you opt for a generalist or a specialized ERP? Locally installed or in the cloud? Should you choose a "big", long-established vendor, or a more agile newcomer? Should you go directly to the solution provider, or go through an integrator? Should I opt for a monolithic ERP solution or a more modular one? What's the right budget?
These are all legitimate questions. To help answer them, here are a few fundamentals to keep in mind throughout the selection phase.
What budget should be allocated to the project?
There are no rules on this subject, depending on whether the investment is for the short or long term. A solution that can evolve over time is often more expensive than one that is more fixed.
Choosing a solution based on an absolute budget is often a mistake, because it's a short-termist view. We need to think in terms of ROI linked to productivity gains on the one hand, and the solution's ability to support the company as it evolves towards other business lines and growth on the other. This can be summed up under the term "AGILITY", which has become an essential fundamental in the face of increasingly rapid changes in business models.
It's also worth remembering that making the wrong choice by choosing the lowest bidder (25% of cases) results in a triple penalty:
Buy the 1st solution, buy the 2nd solution, triple the time spent on the project (you spend twice as much time on the first solution to try and keep it and avoid a declaration of failure!)
With the advent of the Saas economic and technological model (software rental), two distinct budgets need to be taken into account: the budget linked to the configuration of the solution and the annual budget corresponding to the use of the software and its evolution (updates). Very often, the client will be very particular about the recurring rent, and will choose the lowest bidder. In the conservative French culture, IT is still perceived as a depreciable investment (capex) and not as an expense (opex)... This may have been understandable 10 years ago, but it is no longer the case today, with the constant and rapid evolution of new technologies. The recurring budget is and must be used to cover these ongoing developments.
SaaS or on-premise solutions: still a dilemma for some?
In 2020, more than 80% of new ERP projects are open to the Saas model, whereas 10 years ago, this model was requested in less than 20% of cases!
Today, given the increasingly rapid evolution of markets with globalization, the advent of new metiers and, more recently, the rise of telecommuting in the wake of the Covid-19 crisis, the on-premise model has taken a beating: Static, not very agile, with many specific features that are difficult to maintain over time, and aging badly because updates are too rare. It's not uncommon to find on-premise solutions that have been running for 10 or even 15 years and have never been updated. The consequences are clear: company productivity plummets and is no longer adapted to today's requirements. Employees spend a considerable amount of time on tasks that could easily be automated with the new solutions (multiple entries, information searches, tedious consolidation of figures, etc.).
On the whole, this updating problem is much better dealt with in a Saas model, for the following reasons:
- The core of the software is centralized on a server,
- Updates on user workstations are processed automatically by browser editors (Chrome, IE...) in the case of a solution developed natively in web technologies.
Saas is good, but multi-tenant is even better!
Choose multi-tenant solutions/applications whenever possible!
An application is said to be multi-tenant when all its clients use the same version : the latest update... For example, the applications you use on your smartphone are true multi-tenant applications: they are regularly updated, and their functionalities are constantly evolving for all users at the same time. The user community is also involved in these developments.
Multi-tenant ERP solutions are still rare on the market, as they require publishers who adopt this model as part of their R&D strategy to be extremely rigorous in their handling of specific requests from corporate customers. As each company is unique, it is not uncommon to have to deal with specific requests. There are two ways of dealing with them: either you develop these new functionalities outside the core software (and this is less costly in the short term), or these specificities are processed in "universal" mode within the core software and this is less costly in the long term.universal" mode within the software core, and the specific features in question then become customer-specific parameterizations, feeding into the new, broader standard. The latter is the multi-tenant philosophy: more costly in the short term, but much less so in the long term...
Intrinsically, these multi-tenant solutions can only be implemented by software publishers who integrate the solution on the customer's premises themselves (or by a very limited number of integrator partners).
As a general rule, pure integrators do not have access to the publisher's source code.
These multi-tenant solutions offer real strategic advantages for those who use them:
- The publisher's R&D systematically and regularly benefits all customers
- Developments requested by existing or new customers benefit the entire customer community: it's a mutualist model.
- All developments (new functionalities) are capitalized on for the benefit of all customers. In this case, we can speak of programmed sustainability!
- Updates are frequent (at least 6 times a year) and compatible across all customers.
- Updates are free of charge (included in the subscription).
- The solution is resilient in the face of change, and this on an ongoing basis, eliminating the need to launch an ERP overhaul (every 7-10 years) and tie up a lot of internal resources to manage these transitions/migrations.
Is proximity to my supplier still imperative?
To answer this question, we need to put the new Saas model into perspective.
What may have been relevant in the on-premise era is no longer really relevant in the Saas era, as all infrastructures are outsourced.
On the other hand, once this geographical proximity is no longer available, the very good availability of support or the Hot-Line must be validated before choosing a supplier. This can easily be verified by calling the solution's customers.
Should I opt for specific development or standard solutions?
This is a fairly clear-cut question, if you agree with the above arguments, and in particular with the virtues of the multi-tenant model. Of course, you should opt for the most standard solution possible. There are many reasons for this:
- Minimized implementation costs
- Fewer start-up bugs
- Time-saving implementation
- Stability of the standard solution
- Easier updating
In summary and conclusion
The budget for a company's information system should no longer be seen as a one-off investment, but rather as a recurring expense to finance ongoing technological developments, and to put an end to the traumatic and time-consuming cycles of system overhaul (5-7 years). In descending order of resilience and durability of solutions in the face of very rapid technological evolution, I have no hesitation in putting the multi-tenant Saas model at the top, the Saas model at the bottom, and the on-premise model at the bottom.
Sponsored article. Expert contributors are authors independent of the appvizer editorial team. Their comments and positions are their own.
Article translated from French