Choosing your ERP: a headache? Not so sure if you take into account today's fundamentals!
What's at stake?
For many SMEs, choosing an ERP (Enterprise Resource Planning) system is a very stressful decision. The stakes are always high, both in the short and long term. The wrong choice can even get a company into serious trouble. There is a plethora and diversity of ERP solutions on offer today.
Should you opt for a generalist or specialist ERP? Locally installed or in the Cloud? Should you choose a 'big', long-established vendor or a new, more agile entrant? Should you go direct to the solution provider or go through an integrator? Should you choose a complete monolithic ERP or a more modular solution? What is the right budget?
These are all legitimate questions to ask. In an attempt to 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 scalable solution that is sustainable over time is often more expensive than a more fixed solution.
Choosing a solution based on an absolute budget is often a mistake, because it's a short-termist view. You need to think in terms of ROI , in terms of productivity gains, and in terms of the solution's ability to support the company as it moves into other business areas and grows. This can be summed up under the term "AGILITY", which has become an essential fundamental in the face of increasingly rapid changes to the business model.
It's also worth remembering that making the wrong choice by choosing the lowest bidder (25% of cases) results in a triple penalty:
Buying the 1st solution, buying the 2nd solution, tripling 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 business and technology model (software rental), two separate budgets need to be taken into account: the budget for setting up the solution and the annual budget for using the software and upgrading it. Very often, the client will take a very close look at the recurring rent and choose the lowest bidder. In the conservative French culture, IT is still seen as a depreciable investment (capex) and not as an expense (opex)... This may have been understandable 10 years ago, but not any more with the constant and very rapid development of new technologies. The recurring budget is and must be used to cover these ongoing developments.
SaaS or on-premise solution: still a dilemma for some?
In 2020, over 80% of new ERP projects will be open to the SaaS model, whereas 10 years ago, this model was requested in less than 20% of cases!
Today, with markets changing ever more rapidly as a result of globalisation, the advent of new business models and, more recently, the rise of SaaS, it's clear that the SaaS model is the way forward.thirds and, more recently, the rise of teleworking 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 ageing badly because updates are too rare. It's not uncommon to see on-premise solutions that have been running for 10 or even 15 years without an update. The consequences are clear: the company's 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, searching for information, tedious consolidation of figures, etc.).
Overall, this updating problem is much better dealt with in a SaaS model, for the following reasons:
- The core of the software is centralised on a server,
- Updates on users' workstations are processed automatically by browser editors (Chrome, IE, etc.) in the case of a solution developed natively using web technologies.
SaaS is good, but multi-tenant is even better!
Favour multi-tenant solutions/applications whenever possible!
An application is said to be multi-tenant when all the clients of the solution are using the same version : the latest update... For example, the applications you use on your smartphone are true multi-tenant applications: they are updated regularly and the functionalities are constantly evolving for all users at the same time. The user community is involved in these developments.
Multi-tenant ERP solutions are still rare on the market, because they require publishers who adopt this model as part of their research and development strategy to adopt an extremely rigorous discipline in dealing with the specific requests made by customer companies. Because each company is unique, it is not unusual 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 in the core software and this is less costly in the long term.universal' mode in the core software, and the specific features in question then become specific parameters for this customer, thereby feeding into the new standard which is being extended. This last case is that of 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 for their customers themselves (or by a very limited number of integration partners).
As a general rule, pure integrators do not have access to the publisher's source code.
These multi-tenant solutions have real strategic advantages for those who use them:
- The publisher's R&D systematically and regularly benefits all customers
- Developments requested by an existing customer or by a brand new customer benefit the entire customer community: it's a mutualist model.
- All developments (new functions) are capitalised on for the benefit of all customers. In this case, we can talk about programmed sustainability!
- Updates are frequent (at least 6 times a year) and compatible across all customers.
- Updates are free (included in the subscription).
- The solution is resilient in the face of continuous change, so there's no longer any need to overhaul the ERP (every 7-10 years) and tie up a lot of internal resources to manage these transitions/migrations.
Do I still need to be close to my supplier?
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, because all the infrastructure is outsourced.
On the other hand, as soon as there is no longer this geographical proximity, the very good availability of support or the Hot-Line must be validated before choosing a supplier. You can easily check this by calling the solution's customers.
Should I go for specific development or standard?
This is a fairly clear-cut issue, if you agree with the arguments above and in particular the virtues of the multi-tenant model. Of course, you should go for the most standard solution possible. There are many reasons for this:
- Minimised implementation costs
- Fewer start-up bugs
- Time savings on implementation
- Stability of the standard solution
- Easier to update
To sum up and conclude
The budget for a company's information system should no longer be seen as a one-off investment, but as a recurring charge to finance ongoing technological developments and to put an end to the traumatic and time-consuming cycles of overhauling the IT system (5-7 years). In descending order of resilience and durability of solutions in the face of very rapid technological change, 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. The expert contributors are authors independent of the appvizer editorial team. Their comments and positions are their own.
Article translated from French