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SIFTing Through Your Technology Choices

09.05.2018

There are many factors that must be taken into consideration when buying new ERP software. It is important to have a checklist or framework in place to be confident that you are making the best decision for your business.

We recommend using the SIFT framework for purchasing ERP software. This methodology helps to organize all factors so that all options can be compared. We consider these four factors to be critical in identifying the best solution:

  • Suitability - Is the vendor providing an appropriate solution based upon your needs and company culture?
  • Investment - Have the current and future costs for purchasing and implementing the solution been accurately determined?
  • Functional Fit - Does the solution satisfy the critical business process requirements of your company?
  • Technology - How mature is the technology? How does it fit with your company’s existing information technology and management capabilities?

Suitability

Suitability addresses key issues that will help to determine if you are buying the product from the “right” vendor. You can assess the software vendors’ suitability by learning how many customers they have, how long they have had those customers and by the size and sophistication of their customers. Their involvement in your industry can be assessed by what trade associations they work with, which trade shows they attend and where they advertise. Some vendors have developed industry councils for organizing and prioritizing development ideas.

The ERP software vendors’ ability to help you successfully implement the solution is critical. Not only will the software vendor become your partner, but their involvement will be key to the successful implementation of the software, training of current and future users and the ongoing development of new features. Their ability to maintain and enhance the functionality of their software, as well as keep up with changes in technology, will determine the useful life of the software. Software should have a 10-12-year life before you need to consider replacement. You will want your software vendor to be a profitable and dynamic company during this period. It is also important to understand who with the vendor has the industry expertise you’re looking for and how you can tap into it. Look at executive, sales, development, implementation and support personnel. The more areas you can find expertise, the more likely you are to have a successful implementation.

Investment

Investment refers to the total cost of ownership for the software. It’s easy to focus on negotiating upfront license fees and consulting services, but don’t overlook ongoing costs such as training and future purchases of licenses, as well as the internal cost of staff for the project. Maintenance, the fee paid for software updates, and help desk support are charged annually. The complexity and cost of software has made Software-as-a-Service attractive to some companies since the software is paid for on a subscription basis.

For traditional On-Premise software, Total Cost of Ownership (TCO) should include:

  • Hardware (servers and workstations)
  • System Software (operating system, databases, utilities)
  • Application Software (user licenses, module licenses, third party software)
  • Custom modifications
  • Maintenance (software updates, support calls)
  • Implementation Services (installation, application consulting, data conversion reporting)
  • Training
  • Travel
  • Go-Live Support
  • Internal IT staff costs

For Software-as-a-Service (SaaS), TCO should include:

  • Subscription fees, including yearly increases and any upgrade fees, if applicable
  • Implementation Services (installation, application consulting, data conversion reporting)
  • Extra resource surcharges for storage and bandwidth, private vs public cloud
  • Maintenance (software updates, support calls)
  • Internal IT staffing
  • Internet Bandwidth

Functional Fit

Functional Fit refers to how well the software meets the functional requirements of your business. There are thousands of features built into today’s ERP systems. It’s impossible to evaluate every feature, and it’s not necessary. We find using the commercial features lists available for sale to be a waste of money. These lists of features have several problems. It’s nearly impossible for clients to accurately rank the importance of all the features when some may seem identical. When scoring fit, there is usually very little differentiation between vendors. Software vendors hate these because they are limited to answering only yes or no with no other context, so answering a few obscure feature questions might result in them being eliminated from consideration. 

We strongly suggest identifying the critical business process functionality that makes your company unique or that provides a competitive advantage. Functionality in Order Entry, Customer Service/Order Processing, Purchasing/Replenishment, Warehouse Management and Business Intelligence are of critical importance. Each vertical market requires specific functionality. Focus your attention in these key areas when evaluating how well the software works.

Technology

Technology addresses the actual software and hardware architecture that is used to build and host the application software. This “technology stack” includes the database, programming language and tools, user interface, operating system and hardware. Typical examples include Microsoft, IBM or Oracle. Businesses should ensure that the software vendor is using one of these mainstream technology stacks to minimize the risk of obsolescence. “Non-standard” tools require extra due diligence to understand if there is greater risk.

Selecting ERP software is a complex task. There are many factors to consider when determining which software package will be the best one for your organization. Using this SIFT framework will ensure that you have assessed all the most important factors, and it will help you be more confident in your software purchase decision.

To schedule a meeting to review your current ERP software solution for your business, please contact Henry Struckel, Manager, Advisory Services at hstruckel@bswllc.com or 314.824.5285.

Team

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