You know that your ERP is slow, expensive, and hampers innovation. You also know that implementing a new ERP can be a monumental undertaking. So how do you chart a path forward that overcomes your current constraints without getting caught in the same old selection criteria trap?
Fortunately, modern solutions are not bound by the kind of thinking that gave us the cumbersome, ‘do everything’ ERP monoliths that are so common today. Instead, business leaders should consider a refined set of criteria for selecting an enterprise software solution that dispenses with vendor-led views of how their business should operate and encourages innovation, customization, and operational transformation. You need to be able to reveal your strengths and differentiators to your customers in ways that are efficient, impactful, and flexible.
Using 1990’s Criteria Today
Software is evolving at a speed never seen before. Many vendors have multiple releases a year, some vendors release updates every few weeks, and I update apps on my iPhone every day! Due to complexity and cost, most businesses only update their current ERP software once every 5 to 10 years. In some areas of business, you could get by with this approach – using a version of Outlook from 10+ years ago, for instance – but it’s hard to imagine a modern scenario where using a dated enterprise system would be acceptable to any business. But organizations find themselves doing exactly that because decision criteria are not evolving at the same pace.
The source of the problem can be traced to the early days of ERP uptake when organizations relied on large consulting firms or software vendors to guide the structure of their business operations based on systems design. Under this scenario, it can be argued that some aspects of the selection criteria fit the needs of the vendor better than the actual business needs. Regrettably, the decision criteria developed by large, monolithic vendors in the 1990’s is still used today, and organizations are grappling with the ramifications of those decisions. They recognize how limitations of their enterprise systems constrain their ability to transform and compete in a dynamic, interconnected business environment.
This exposes a fundamental question for businesses considering new enterprise systems: why should the same old decision criteria from the 1990’s be used for assessing modern solutions? The answer is: they shouldn’t be. To get an idea of where the main problem lies, consider the old criteria typically provided by monolithic vendors:
Do you notice anything wrong with this approach?
The top two criteria on the traditional list are to understand your business needs and then to fit those needs into the vendor-defined ‘best-of-breed’ features. The second criterion is the crux of the problem. As Gartner notes, although ERP vendors offer numerous enterprise applications and claim that their integrated system is a superior solution, all modules in an ERP system are rarely best-of-breed[i]. By forcing business needs to conform to the shape of a vendor’s product features, the criteria end up defining success for the vendor, not the company. This usually results in organizations making compromises and leaving important capabilities behind, limiting their ability to adapt and change over time. A square peg fits into a round hole with a big enough hammer and enough force.
Because monolithic ERP vendors used it for so long, the term ‘best-of-breed’ is closely associated with inflexible, decades-old software that always leads to technical debt. The ‘best-of-breed’ approach was to develop the code as they thought it should be and leave it at that. Companies had few options for making the system match their specific requirements. If customization was required and agreed to, it could be done – for a price. The process to implement custom code was time-consuming, expensive, and a distraction for business leaders. As most ERP owners can attest, this is still true.
In my 25 plus years of experience designing supply chains and supporting ERP software implementations, I’ve seen business needs change in as little of 30 days of the initial go-live. What was expected, designed, and planned for during the months of work leading up to implementation, can change overnight once users get a real view of the business as experienced through the actual ERP.
Today, that approach seems almost laughable because it is so limited. Business leaders know they must constantly adapt to seize new opportunities, comply with regulations, and fend off threats. If core business systems aren’t able to keep up, they become liabilities.
In a deliberate departure from the old ways of developing ERP selection criteria, businesses should consider criteria based on the strengths of modern enterprise applications platforms that take a modular approach to ERP delivery and encourage customization. By starting from an updated set of top five criteria that focuses on surfacing what makes it unique, the company is better equipped to adapt to change and deliver products and services that mirror the shifting needs and behaviors of their customers.
With this focus, businesses can capitalize on the undeniable advantages of delivering value to their customers at every touch point.
1. Business Requirements. For an ERP project to be successful, organizations must clearly define, prioritize, and convey their business requirements. This has rightfully been, and should always remain, the number one focus of ERP selection criteria. It should also be mentioned that in a modern assessment, other types of software solutions would be factored in that are essential to meeting the business requirements and can be tightly integrated with the core enterprise system through customization.
To understand what is really at the core of the requirements being considered today, organizations should be able to articulate a thorough response to this question: What business operations define success by being unique, compelling, and defensible? All three characteristics are equally important to the definition because they form the goals for the other criteria.
2. Customizations. Customizations? Those aren’t best-of-breed! Correct, customizations may not be best-of-breed, but they represent the ‘special sauce’ that your customers have come to expect from your business. Customizations are critical to business success because they enable you to deliver products and services in your own unique way. They are how you differentiate yourself from your competition. Would you buy a Big Mac without the special sauce? Of course not. But if you did, then you would be getting the equivalent of a bland ‘best-of-breed’ ERP system that the monolithic vendor wants you to have. The special sauce is what makes a Big Mac, well, special. The same is true for your enterprise.
Selection criteria should identify solution providers that facilitate and support customization. But not just customizations that work right now and come with an expiration date. Customizations that are future-proof and can be purpose-built by you, the business user, without specialized talent, proprietary tools, or intervention from a required third party. Modern solutions enable businesses to easily customize enterprise applications that highlight their competitive advantages and sustain those customizations over time.
3. System Integration. System integration capabilities are essential to ERP implementation success over the long term. Enterprise systems must easily integrate with modern REST APIs (or similar protocols) that facilitate access to the abundance of products on the market that deliver specialized capabilities. The scalability and flexibility of REST APIs enable companies to tailor their systems to match the demands of their business and satisfy growing customer expectations. It is important to resist the selling tactic employed by monolithic vendors suggesting that a single product to meet all business requirements is still the norm to follow. It is not the norm: Modern enterprises demand more flexibility than a single solution can provide.
4. Technology. Chances are you are not using a Blackberry to read this blog. You are probably using the best technology available to read it from a mobile device while on a plane moving 600 miles per hour or from a desk with an internet connection of over 1 gigabyte per second. Similarly, companies should always choose the best technology available for the long-term health of their operations. As obvious as that sounds, basic questions are sometimes overlooked, such as:
5. Total Cost of Ownership. Get the first four criteria right and TCO falls in line: The right technology (criterion 4) enables sustainable customizations (criterion 2) and seamless system integrations (criterion 3) that support the key business requirements (criterion 1). ERP systems that allow customizations to be built and modified by citizen developers using an enterprise no-code platform can dramatically reduce long-term IT spend, improve responsiveness to a dynamic business environment, and create a future-proof system that can continually deliver on rising customer expectations.
No matter the exact list you work from, ERP system criteria should be centered on improving the ability of your business to operate efficiently and deliver products and services to your customers in the way only you can. Moving away from ERP selection criteria developed by monolithic vendors and toward criteria that allows you to surface your ‘special sauce’ is a big step in the right direction.
Nextworld is the enterprise-grade applications platform that supports business transformation and enables continuous innovation through no-code technology. With thousands of customizable apps that can be quickly and safely modified by your business experts, you can future-proof your operations and showcase what makes your business unique.
Senior Director, Solution Engineering
Kevin brings over twenty-five years of software industry experience to his role at Nextworld. He has firsthand knowledge of multiple ERP, labor management, material handling equipment, order management, slotting, transportation management, and warehouse management solutions. His areas of expertise include third-party logistics (3PL), consumer packaged goods (CPG), grocery, high-tech, medical, and retail verticals. Kevin previously held leadership roles at Manhattan Associates, NetSuite, and Oracle.