Abstract

The process of selecting a new accounting or ERP system can become very time consuming and frustrating. Rather than presenting a multi-page document that discusses each task you need to accomplish, let’s concentrate on a single issue: evaluating the system itself.

At this point in your accounting and ERP software evaluation project you should have completed at a minimum the following significant tasks.

• You have solicited and received the buy-in from each significant stakeholder: executive, CFO, CIO or IT manager, line of business managers, sales and marketing managers and staff and finally the people in the trenches (those people who will actually be using the system on a daily basis).
• You have met with each of these stakeholders and determined what from their perspective they like and dislike about your current system.
• You have met with various executives and managers and determined what the company needs to do well to achieve excellence.
• You have also met with executives and managers to determine the direction the company will be taking in the future (current direction as well as expansion into new industries and geographic territories).
• You have figuratively speaking taken the company apart and put it back together to enable it to become more competitive (some may call that process improvement) and have launched improvement projects to transform the business.
• You have met with stakeholders and determined what features, functions and reports the new system should support to achieve the company’s strategic and operational objectives, some of which may be future events that “might” happen.
• You have researched various product options and discussed your requirements with vendors and/or software resellers.
• You have conducted a very high level needs analysis to identify and eliminate those products that clearly cannot meet your most important operational and business intelligence requirements.

Now we have reached the point in time where this article becomes relevant. The only products being considered are those that appear to meet your most important requirements. Although you have not yet actually “seen” the product in the level of detail you will need, the vendor or reseller has confirmed the fact that their products can meet these requirements. This hands-on evaluation will either confirm or deny the relevancy of those products under consideration and you will decide which products move forward.

Step by Step Analysis

A proper hands-on product evaluation (a.k.a.demo) cannot be completed in a single day. This also applies to an evaluation of a mid-market accounting system. Keep in mind the fact that there are several significant stakeholder groups and each need to view the system. Actually some people might need to view the system twice. The first viewing would concentrate more on ease of use while the second viewing would analyze detailed functional processes. Some people will need to actually “touch” the system as they will be asked to enter transactions and this will require some time to complete. Given all of this you will need to decide who should attend a demo, when and the format of the meeting (viewing from above or actually operating the system).

Functional Requirements

An accounting and ERP software evaluation project must start with a very detailed analysis of features and functions. RFIs (Request for Information) are important decision tools. If a product does not support a significant number of key requirements, it should be eliminated from further consideration regardless of how good it is in other respects. It doesn’t even matter if a product is generally accepted in the industry. If it doesn’t do what you as a unique firm need it to do, then it probably isn’t right for you.

The RFI analysis can be scheduled as a two-step process. Take the RFI you created (If you didn’t create an RFI, then stop and do so!) as you evaluated your current system and created a vision of your future. Identify all of the requirements that are very important to critical. Use this same check list to vet each product under consideration. Look first at the critical requirements that cannot be met. Then look at the requirements you identified as being important, but not necessarily critical.

If a product does not meet a sufficient number of your critical requirements, particularly when compared against other products under consideration, maybe it should be eliminated. Of the products remaining, identify the important requirements that cannot be met. Then determine if these requirements can be met via an existing third party enhancement that has been thoroughly tested. If no third party enhancement is available, can the product be customized? Finally, compare the list of shortcomings for each product. If one product is clearly weaker than other products, decide whether it should be eliminated or not.

At this stage in the accounting and ERP software evaluation process you are looking for products which you and a majority of your users like (first impression discussed below) and one that can do what you need it to do. Whether you eliminate a product now or later is really not that important other than the fact that evaluating any product is very time-consuming. If the products you decide to carry forward are supported by the people who will be asked to use them, then it’s OK to eliminate one or more products as you move forward.

First Impression

While it’s all too easy to immediately launch a detailed hands-on analysis of a candidate product, you really need to approach this in the proper order. The first step should be a high level view that gives people an overall sense of a product. Since resellers and vendors are all too eager to give you a “dog and pony show” to promote what they think are a product’s strengths, give them this opportunity. Let them show their product and all of its glory (with some controls of course to keep them on track). Your objective here is a little different. You want to give your users an opportunity to form an initial impression of a product.

First impressions can become in many cases a self-fulfilling prophesy. If a system seems to be complex and the data input process more time consuming than with their present system, these first impressions may become difficult to overcome. Imposing a complex system on people who have not had an opportunity to view it first and approve it may prove to be a significant issue.

While first impressions are extremely important, you need to submit to your users products that meet your functional and transactional requirements. It makes no sense to ask people to spend a significant amount of time evaluating a system if it doesn’t meet certain minimum standards. That’s why you need to complete the detailed functional analysis first.

Touch the Product

High level views of a product are important, but some people really need to “touch” the system. This is particularly true for people who are going to be responsible for transactional input. Modern accounting and ERP systems have become powerful tools that give firms more control over their daily operations and certainly more business intelligence. Unfortunately the achievement of this power may impose more burdens on people than you might realize particularly if you don’t really need everything that a product provides. That’s why it’s critically important that people assess how a product is going to fit within the business processes of your unique firm.

This hands-on analysis should concentrate on two key areas. How long is it going to take to complete a transaction such as an AP invoice? Second, to what degree do the business processes as required by the accounting or ERP system possibly conflict with the preferred business processes of your firm?

Business intelligence applications can give people very useful information, but the extraction of that information usually requires the addition of data fields that were not present in your “old” system. That’s OK as long as you understand that it’s going to take more time to complete the transactions that contain the added fields. The more information you need, the longer it takes to input source transactions. You need to strike a balance somewhere.

To some extent the same argument holds true for business processes. Workflow can become a very powerful tool that helps people do what they need to do, but at the same time it can impose activities on people that do not need that level of control. The larger the system the more it has the potential to impose processes that are not needed or wanted. As your accounting and ERP software evaluation process moves forward, you need to understand what the system will impose on you and whether this imposition is appropriate for your firm.

Third Party Enhancements

No accounting or ERP system can provide everything every firm needs out-of-the-box. With limited resources vendors have to decide what functionality they are going to create and what functionality they are going to encourage third parties to create. Since it is very likely that your evaluation will reveal functionality gaps, it is vitally important that you determine if there are third party enhancements that address these gaps. Of course this also means that you will need to evaluate these applications just as you are going to review the core accounting functions.

Customization

If the products you are evaluating do not meet all of your functional requirements and you cannot find acceptable third party enhancements, some degree of customization will be required. My first suggestion would be to see if it’s possible to eliminate the need to customize a product in the first place. If there are other products that do not require the same degree of customization, maybe you should eliminate from further consideration a product that requires substantial customization. I realize that this candidate for elimination might be a crowd favorite, but substantial customization should be avoided if possible.

If no product supports what you need, maybe you should change your business processes. I realize that you might think you need certain functions, but it makes no sense to customize a system if you can change the way you do business. Maybe the fact that no product supports what you think you require is a sign that you need to change?

Business Reporting and Intelligence

This is probably one of the less complex issues you will need to address in any accounting and ERP software evaluation. At the same time it is one of the most important considerations. Today’s products all support some form of Business Intelligence (BI). Even mid-market and small business products support fairly sophisticated reporting systems. My challenge to you is this. What do you really require in terms of BI? Given the fact that you can extract just about anything you need, the evaluation really should focus more on what you think you require rather than a product’s ability to slice and dice data. Since it’s extremely easy to create reports and graphs, it’s also extremely easy to produce too much of what you really don’t need.

I have addressed this issue in several past articles and would therefore refer you to these articles if you are interested, but would also summarize my thoughts as follows.

• Ask yourself why you need the information you think you need. Challenge people to justify their need for specific BI information just as you challenged yourself to justify a new accounting or ERP system.
• If you are going to improve business performance, you must start by identifying the key drivers that influence your bottom line. I am not convinced that people spend enough time identifying what they really need to do well. Key drivers are like common denominators. There are no underlying factors that influence their behavior. Identify these key drivers and control them and those business processes that are affected by these key drivers will improve as the key drivers improve.
• Truly effective business metrics give you a basis for comparison that either tells you where you are going and whether you are above or below expectations. As I have said many times in the past, bar charts and pie charts are pretty creatures, but they tell you nothing as does every other “status report”. Status reports are static by their very nature and therefore will never support the decision making process. You need to create a system that tracks key business drivers and helps you understand where you have been, where you are, and where you appear to be going. In addition you need to determine where you would like to be. That’s your target and that’s what you compare against your actual performance.
• Consider creating an interactive Exception Management reporting system. If you identify key drivers and you present that information in terms (mostly line charts with some form of regression analysis and forecasting) that will allow you to see where you need to concentrate your efforts, you have two of the key ingredients for an effective Exception Management system. Use the system to analyze this data and build in alerts that help you become more proactive than reactive. Then take the last critical step. Build a task management system that allows you to track your efforts to control and improve key drivers. A task manager is not unlike a contact manager in that it allows you to record notes and schedule reviews. It also needs to support collaboration so that multiple people can be working on the same issue and sharing their thoughts and analysis.

Customer Relationship Management

Customer Relationship Management (CRM) systems can become powerful tools to generate new business and hold onto the business you already have. The real question is whether the products you are evaluating support CRM the way you would like to practice CRM. Some CRM systems are so powerful that they actually get in the way of efficient and effective sales and marketing activities for individual firms.

Evaluate the CRM system associated with the product you are evaluating. Does it support the way you would like to run your CRM activities? Does it offer the functionality you need as a unique firm? Does it offer so much functionality that it gets in the way? Are there other CRM products that more effectively support what you want to do? To what degree are these products integrated with the product being evaluated?

CRM doesn’t necessarily drive your business, but it is the gateway to new customers. People need to look on the CRM system as their business ally, not their business foe.

User References

While first impressions and hands-on testing of candidate accounting and ERP systems is critically important, these experiences are not the same as day-to-day “testing”. That’s not possible so you are going to have to rely on current users to paint a possibly different picture. Your task is not as easy as it might seems because the most readily available references are those provided by vendors and resellers and these firms are hand picked to represent the best of the best. If users are truthful, they will provide information regarding success as well as challenges they have faced.

By all means talk to vendor and reseller provided references. You might even consider site visits if the reference is fairly close. Don’t stop there though. Product specific user groups can be identified and contacted. Their experiences might be very educational. You might also try web sites such as Toolbox.com that allow participants to literally ask a question such as “Does anyone have any experience with Product X”?

Vendor and Reseller Evaluation

If a product has passed all of the tests you have subjected it to, your final analysis should concentrate on the vendor and reseller. Do the vendor and reseller both appear to be stable financially? What is its roadmap for product development? Is this a new product to the market, an older product that may be declining or a product that is growing in terms of popularity? Who is going to be responsible for support? How quickly will support people address your issues?

In the end the most important question needs to be asked. Is the potential relationship with the vendor and/or reseller one that is more like supplier/customer or true business partner? The services provided by your prime contact (vendor or reseller) can answer part of this question, but your gut feeling is more important. If you are going to establish a relationship with a reseller or vendor, it should feel more like partnership rather than a strict business relationship.

Buy-In

You needed a buy-in from all stakeholders before this accounting and ERP software evaluation project launched, and you will need this buy-in now before you move forward to a purchase decision. Hopefully the vast majority of your users have all concluded that a single product was superior to all others and are eagerly awaiting its implementation. That’s the ideal case. Reality says that people will have questions and issues that need to be addressed. By all means address every issue as it arises. The fact that someone might not have voiced a concern doesn’t mean they have no concerns. It might just mean that they were reluctant to do so.

As you move from step to step in this evaluation process, make sure people feel comfortable moving forward. If several people have the same concern, make sure these issues are addressed before you move forward. Don’t ignore people and don’t “wait until later” to address issues. You want people’s buy-in on a continuous basis, not a specified point in the process.

Conclusion

The accounting and ERP software evaluation process can become time-consuming and that’s OK as long as you are spending your time wisely. Of course “your time” means everyone involved in this evaluation project. Having identified through your research products of interest, you will need to follow this step-by-step process rigorously. The initial steps you take are more allied with eliminating products from further consideration, while the final steps are really geared to painting a picture in everyone’s mind of how a candidate system could be used on a daily basis. Start with several products. Limit the number of people participating initially as those people will be responsible for a single task: determining which products meet a minimum level of your functional requirements and which products do not. As you move forward, more people should become involved as they are going to be asked to use the system on a daily basis. In the end you want people to look forward to the system they have had a hand in evaluating.

Abstract

In spite of all the articles written and expertise available, it seems as though the failure rate of ERP selection projects remains distressingly high. What are we doing wrong? It’s a simple enough question, but apparently there’s no single answer. Maybe that’s because there are multiple opportunities to wander off the path to success and having taken a wrong turn (in most cases without recognizing that this has occurred), the project ultimately fails.

Rather than once again laying out a plan to achieve success, let’s approach the issue from a different perspective. Let’s identify the opportunities for failure and possibly avoid taking a wrong turn.

Challenge your ability to create a successful ERP selection project

To put it somewhat bluntly, there are people who know; those that know they don’t know and finally those that don’t know they don’t know. The process of organizing and driving an ERP selection project to a successful conclusion is difficult at the best of times. If you know what you are doing, then the project should move forward effectively in spite of the fact that glitches will occur (but given your mind set you will be expecting unforeseen issues and will be able to deal with them effectively).

If you know you do not have the necessary experience and/or time to pull all of this together, then you will bring in an outside knowledge source (ERP software selection consultant).

The most significant danger is an organization whose leaders think they know, but do not. That almost guarantees failure.

Where do you fit into this maze?

Start slowly

I think many ERP selection projects fail simply because there was an arbitrary deadline. Rushing leads to mistakes and mistakes lead to failure.

Take your time. Assume the project is going to take much longer than you originally estimated. Make sure each task is completed effectively before you move forward. Set goals, but don’t be driven by the clock.

Don’t ask your CEO for support.

I am not suggesting that the approval and active support of the CEO and senior management isn’t required. The CEO is driven by ROI so how can you get this person’s attention and support if you haven’t estimated and justified the ROI. You would certainly want to inform the CEO that you are considering replacing your existing ERP system, but their support is not required in order to launch an ERP selection project.

Do your homework. Identify the improvements that should be generated as a direct result of the purchase of a new ERP system. Justify these savings and revenue enhancements. Prove to the CEO that this is a sound project. Then ask for their full support to move forward.

Start from the bottom

While the support of the CEO may not be required during the investigative phase of an ERP selection project, you absolutely need the support and active participation of everyone else. Any person who has any “relationship” with the ERP system needs to be involved from the get go. The nature of their participation might be different depending upon their job responsibilities, but they will make or break the system once it has been fully implemented.

Keep in mind the fact that your first task is describing your current system and identifying its strengths and weaknesses. Remember that successful ERP selection projects don’t just involve what you see on screen. If you are serious about improvement, you need to figuratively take your organization apart and build a more agile, effective and efficient whole. The ERP system is but once contributor to success (or failure).

Since every day users are going to be (or should be) involved in a critique of your current ERP system, they are just as knowledgeable of the organization’s strengths and weaknesses as they are the ERP system’s strengths and weaknesses. Use this information to create a foundation for success. A lean and mean organization that is utilizing the capabilities of a well chosen ERP system is your goal, not just a new ERP system.

Identify what you need to do well

This applies to the organization as well as the ERP system. To be honest I am not convinced you should undertake an ERP selection project unless you make organizational improvements as well.

In this case let’s just discuss the ERP system. Take each significant business process that is carried out by or supported by the ERP system. As an example let’s look at the order to shipping process. What do you need to do very well to complete an order? That means putting the right goods in the right condition or configuration in the hands of your customers at the right time and at the right price (ignoring for the moment the fact that the order is not complete until the check is in your hands).

What needs to be done at each stage in the order-to-customer process? How can the ERP system help you complete each task? Forget about your current system. That doesn’t matter unless it helps you identify weaknesses and therefore opportunities for improvement. Forget about best practices unless they are your best practices. It makes me cringe sometimes when I hear ERP vendors say that they have invested millions in researching best practices and therefore no system customization is required. Father knows best so no discussion is required or permitted.

Organizational improvement comes before ERP selection

How can you possibly know what role your ERP system should play if you don’t know what your organization is going to look like? As I suggested above, you need to create a vision of the future first. Once you have defined where you want to be, you can then define how your ERP system is going to help you get there.

Actually you can and should be making organizational improvements as a first step toward selecting an ERP system. Once you have completed your organizational improvements, then and only then should you implement the new ERP system. You cannot do both simultaneously and you certainly shouldn’t implement the ERP system before you have completed your organizational improvements. Why install an expensive “machine” if the foundation for that machine hasn’t been completed?

Grab the low hanging fruit first

Rather than launching a comprehensive improvement initiative (and with it fear, uncertainty and doubt, the feared FUD), start by making improvements that are easy to achieve and obvious to everyone. Quick strike improvements are small changes affecting a limited number of people, usually an individual workgroup or department. Although you will have to be careful the changes you make don’t affect people in other areas, these changes can be made independent of any larger initiatives that may affect the entire organization. In fact, quick strike improvements are important to the success of larger initiatives as they demonstrate to people that progress is being made.

One area in particular comes to mind: AR Collections Management. While you might offer payment terms to customers such as Net 30, your actual payment results might be closer to Net 60 or probably more. This is a tough economy and cash flow is being squeezed. The easiest way to manage cash flow is extending the actual payment date. While this works for your customers, it doesn’t work for you as the supplier.

Since I have posted several articles regarding AR Management, I am not going to go into great detail except to say that changing the way you manage your receivables can generate a significant cash flow. If a $10 million company can reduce their receivables by a very achievable 5% (that’s about 3 days sales), it can generate a cash flow of $85,000. That’s a very significant low hanging fruit.

Every accounting or ERP software product supports an Aging Report by which you can identify every invoice that’s past due. Unfortunately the actual process of collecting overdue invoices is for many firms an entirely manual process. By definition that’s inefficient and in most instances ineffective. Look instead for an ERP software product that supports the collections process. My preference would be the equivalent of a contact management application that is designed specifically to support the collections process.

Since you have to justify the purchase of any accounting or ERP system, implementing a software supported collections process will go a long way toward achieving the ROI you need.

Do your homework

Before launching an ERP selection project, spend as much time as you can researching possibilities. Search the web for articles regarding software selection. Talk to people in the business. Search trade journals and even see what your competitors are doing. Attend seminars and conferences. You should even talk to potential vendors; not because you are interested in their products specifically, but to gain knowledge.

Knowledge acquisition is all about identifying possibilities. How can you create a more competitive organization if you don’t know what’s possible?

Just because someone else does it doesn’t mean you have to do it

Researching possibilities is a critical first step, but the knowledge you gain has to be integrated with the type of organization you want to become. This applies to organizational improvements as well as software improvements.

As you are creating a picture of the functionality you will need in your new ERP system, please don’t forget that there are two types of requirements: mandatory and optional. There are very specific things you need to be doing if you are going to be a successful competitor in your industry. In many cases these requirements are defined by the nature of your industry. In other cases you might not need specific functionality, particularly as it relates to how you choose to compete as an individual firm with a unique set of individuals.

Please don’t create an organization that is a refection of your competition or software vendors’ perceptions of what constitutes best practices. Leverage the knowledge and experience of your team. Create your own requirements definition, not one dictated by your competition or software vendors.

Define where you want to be, not where you are

If you implement a new ERP system that is no more than a mirror image of what you are doing today, then you will have accomplished nothing. At the same time please don’t change just because you can change or someone else says you should change.

Before you launch your ERP selection project, step back for a moment. Look at your organization. Identify what you do very well. Identify opportunities for improvement. Create a vision of where you want to be. Then identify how a new ERP system should support this future vision. ERP systems don’t drive change and they certainly don’t generate profits. All they do is process information and help you make more effective business decisions. Only after you have created your vision of the future should you identify the very specific ways by which your new ERP system will help you achieve this future.

Don’t assume improvements will magically appear

If you read the many White Papers published by vendors, it seems as though success can be achieved simply by purchasing their product. 20% improvement in this area. 15% improvement in another area. If you add up the improvements, you should be able to easily double your profitability.

While there is no doubt that a well designed ERP system can help you achieve greater success, please keep in mind the fact that these improvements are just potentials until they are realized by the actions of individual people. People make an organization successful, not software. Software plays a supportive role by helping people complete tasks more efficiently, serve customers more effectively or make better business decisions.

Measure everything

If you assume that inventory turns will be increased by 10% or that receivables will be reduced by 7% and use those targets to justify the purchase of a new ERP system, you had better be prepared to measure your actual results.

Actually you should not make any “assumptions”. Just because a vendor tells you inventory turns can be increased by 10% or some article in one of your trade publications says so, doesn’t mean it’s going to happen. If you are going to say that inventory turns are going to be increased by 10%, your analysis must be based on the factors that are going to lead to this increase. Inventory turns are influenced by several factors and you need to identify those underlying factors and describe how they are going to change.

Once you have identified the base influencers, then you have to create a system whereby their performance can be monitored. While it would be easier to just measure the overall change in inventory turns (and that certainly can be used to calculate a monetary value that becomes part of your ROI analysis), I will guarantee you that the actual isn’t going to conform to your initial estimate. That’s why you need to measure the base element, not the resulting value.

Improved reporting can be costly

While there is no doubt that ERP systems give people the ability to slice and dice data as finely as a Gensu knife, please keep in mind the fact that more detailed data analysis can occur only if more detailed data is input.

Virtually all accounting and ERP systems give people the ability to define an infinite number of user defined fields. As an example, you can now track the detailed cost of attending trade shows. I’m talking about tracking flights, trade show fees, booth rental, hotel fees, and anything else you want to track. You can also of course define a budget for each of these cost elements. More importantly you can and should track business that is generated as a result of the trade show. If you don’t track revenue, why should you track costs to generate that revenue?

Tracking costs and revenues is certainly important, but keep in mind the fact that tracking this information requires that the information be input in Accounts Payable and Expense Reports. The revenue associated with the trade show also has to be input in Order Entry or Invoicing. In this one example you might be required to input information into 10 – 15 fields. That slows down the AP voucher or Order Entry process.

Tracking detailed revenue and cost information is important, but the purchase of a new ERP system could make the AP voucher input process considerably more time consuming and therefore less efficient.

The fact that you can slice and dice data doesn’t necessarily mean you should do so.

If information doesn’t help you make a decision, you don’t need it

I have preached from this soapbox several times in the past, but I think it needs to be stressed as much as possible. Static reports are no more than a snapshot in time. They tell you nothing except what that condition was at the time the picture was taken. As such you cannot and should not make a decision based on a snapshot. You don’t know where the condition has been and you certainly cannot predict where it is going.

As an example pie charts and bar graphs are pretty to view, but they don’t give you the information you need to make a decision. If you cannot make a decision, then you don’t need the information.

As you are creating the reporting system for your new accounting or ERP product, eliminate any report or graph that cannot be used to make a decision. Identify the lowest level profit, revenue or cost drivers such as the drivers discussed above for inventory turns. Don’t measure inventory turns because they will change over time and you will need to determine why they changed. Measure instead those factors that influence inventory turns. Present them in a time-phased graph that helps you identify where they have been, where they are today and most importantly where they seem to be going. Now you have the picture you need to effect change.

Measure how much your customers cost

It’s very easy to measure the revenue you receive from specific customer and it’s just as easy to measure the cost of goods sold for each shipment. It’s also just as easy to measure project costs if you are in the service industry.

That’s all fine and virtually any accounting or ERP system can do that, but does it really give you the complete picture? Obviously I think we need to create a more complete picture of the cost of doing business with each customer.

Think about it for a moment. How much revenue are you giving away because you offer preferential pricing? Do you cover shipping costs? Does the customer require support after the sale? How much support? How much time does it take to acquire a customer? How much time does it take to keep a customer? How much time is required to constantly change a customer’s order specifications? How long does it take to complete each sale (to many that’s get paid)?

The non-direct cost of doing business with a customer can be surprisingly high. Demanding customers are costly customers, but do you know what the cost is? Maybe they are a lot more costly and therefore less profitable than other “secondary” customers that might not order as much, but don’t require so much attention.

If you don’t know the true cost of doing business with your customers, how can you say they are good customers?

Incremental improvements are better than massive improvements

Large process improvement projects are disruptive by their very nature. Successful firms change to become more effective and profitable. That doesn’t necessarily mean that change has to be painful or disruptive. Maybe it’s better to change gradually over time. Maybe change can be thought of on a work group level. Take a small group of people in one area and determine what can be done to become more efficient and effective. Since work groups are not silos, some changes might need to be made in how they relate to other work groups. That’s fine as long as the changes are agreed upon by the members of both work groups.

Incremental change should be driven by the people in the work group. They determine their own fate so to speak. The key to this concept is the fact that change is self-directed, not imposed from above.

Search for a trusted business partner

At some point in time firms searching for a new ERP system will have to connect with an unbiased ERP software selection consultant, a local product reseller/implementer or the ERP product vendor. In every case this firm must become a trusted business partner that is much more interested in your success than they are in selling you a product.

Let’s use ERP resellers as an example. These firms have developed an expertise in the product itself and can implement it for you. That doesn’t mean you should wait until you have completed your requirements document to connect with this firm. Maybe you should make first contact when you are doing your research? Resellers know a lot more about a product’s capabilities than you do. If they are a highly professional firm, they will be more interested in helping you understand what’s possible, rather than selling you the product.

If a reseller is going to become your trusted business partner, they should understand what it takes to compete in your market. They should be able to help you create a vision of your future, a vision that includes business processes as well as software processes and functionality. If they cannot help you achieve your strategic and operational goals, then you need to move on gracefully. You need a business partner, not a salesperson.

Don’t accept claims blindly. Prove them!

You tell a reseller or vendor you need this or that functionality and in most cases they say “We can do that. No problem”! Well of course they are going to say that! They are after all a salesperson!

Reseller or vendor assertions should not be taken at face value. If they say they cannot do something, you can pretty much be assured they cannot, but positive assertions need to be proven. Yes, you would like to assume they are being truthful, but you are going to spend a lot of money and you need to make sure the product does what you need it to do.

When you reach a point in the sales cycle where demo evaluations are appropriate, you need to do two things. First, you need to make sure the product supports the functionality as claimed. That’s the high level view. Yes, it does do this. Of equal or greater importance, you need to make sure the product operates in a manner that makes sense to you and your users.

As the power of ERP systems has grown over the past few years, their complexity has grown as well. You cannot have all of that power and versatility without more comprehensive process flows. To some people this comprehensiveness becomes complexity that inhibits. That’s the danger.

An ERP product might meet your functional requirements, but the manner by which it does so is seen as counter productive. You might also get a lot of functionality that you just don’t need or want.

Avoid road blocking customizations

Many accounting and ERP products give users the ability to change the way a product operates. Maybe it’s just a matter of adding new reporting fields. In other cases the functionality or process flow might need to be changed to meet the needs of individual firms. That’s fine, but you have to be very careful. If a product is highly customized, it might be difficult, if not impossible to import normal upgrades.

If you feel as though you need to customize a product, take a step back for a moment. If the customization is going to prevent you from accessing the upgrade process, maybe you don’t need that product or maybe you don’t need the customization. Maybe you can customize the product, but do so and preserve the upgrade process.

Third party solutions are our friends…sometimes

Virtually all accounting and ERP systems do not contain all of the functionality required by all users. That’s why Independent Software Vendors (ISVs) exist. These firms create functionality that is not provided by the primary vendor. In some cases the added functionality is minor and incrementally improves the primary product. In other cases an entirely new application or suite of applications is created, usually to meet the needs of a particular industry.

In some cases these applications are written in a different language than the primary accounting or ERP product and sit outside the primary product. In other cases the ISV solution is written in the same environment as the primary product and sits inside the product, making it almost impossible to tell the difference.

ISV solutions will supplement the functionality of the primary accounting or ERP system, but you need to be careful. They are not owned by and developed by the primary vendor. They may or may not have been “certified” by the primary vendor. ISVs might be very small firms that may or may not be around even a year from now. ISV solutions might not support the most recent release of the primary accounting or ERP product. They may not fit exactly within the processing methodology of the primary product and might create process errors.

ISV solutions are important additives to an accounting or ERP system, but you need to make sure those solutions are just as acceptable as the primary accounting or ERP solution.

Conclusion

Given the fact that there are any numbers of stories regarding failed ERP software selection projects, care needs to be taken to maximize the likelihood of success. While it’s important to create a road map that specifies each step you should take from first idea to full implementation, you must assume that there are going to be a significant number of opportunities to stray from the best path. Identifying these potential potholes is critical to your success. If you can see the potholes, you can avoid them.

• Make sure you know what you are doing.
• Start slowly, making sure you complete each step before moving forward.
• Try to avoid deadlines that create too much urgency.
• Prove the ROI for the project before you ask the CEO for support.
• Start from the bottom as well as the top.
• Identify what you need to do well.
• Improve your organization before you define what you need from your ERP system.
• Identify the low handing fruit first.
• Do your homework first.
• Don’t do something just because someone else does.
• Define where you want to be, not where you are.
• Improvements will occur only if you make them occur.
• Don’t just forecast ROI; measure it.
• Slicing and dicing data can be costly.
• If reports and graphs don’t help you make a decision, you don’t need them.
• Measure what your customers truly cost.
• Incremental improvements are better than massive dislocations.
• Search for a trusted business partner.
• Don’t accept vendor claims blindly. Prove them.
• Avoid road blocking customizations.
• Understand the nature of third party enhancements.

Abstract

Why do so many accounting and ERP software selection projects fail to achieve their objectives or fail altogether? Absence of executive buy-in? Implementation failure? Ineffective communication. All of these are legitimate, but maybe there’s a fundamental problem that isn’t addressed adequately. The process of selecting a new accounting and ERP system isn’t just about features and functions. Maybe firms just don’t create a strong enough foundation for success. Maybe they forget that individual people drive a firm’s success. Maybe they forget that the new accounting and ERP system has to help these people do their jobs better and make better business decisions. Maybe they forget these people and their needs and therefore doom a software selection project from the get-go.

Basic Research

Before you launch into your analysis, you might want to spend some time on research or background knowledge accumulation. The more time you spend educating yourself about software selection, the industry and specific products, the better prepared you and others will be when you begin your analysis.

From the point of view of individual people within your organization, how can they know what they need to be successful if they don’t know what’s possible? Rather than one or a very few number of people researching product and functionality options, extend this investigative process to as many people as practical. Rather than building your requirements document from the top down (only including project leaders and departmental manager), build it from the bottom up as well. This might actually give you a more accurate picture of what you need as a firm.

Efficiency and Effectiveness

Efficiency and effectiveness are two key business success elements. From an operational point of view, you want to minimize the cost of doing business per dollar of revenue. However, efficiency isn’t the only answer. People will want to purchase from you because the perceived and actual benefits (other than cost) of doing business with you far outweigh the benefits of purchasing from your competition. In other words, customer service is just as important as price. The way to maximize your customer service is to maximize the effect of what you do. People must work effectively as well as efficiently. Maybe one of your fundamental areas for improvement has nothing to do with software. Maybe it has more to do with customer service and the way you interact with customers.

Identify Requirements, Constraints, Strengths and Weaknesses

Organizing the software selection process is certainly a critical step. Having formed your selection committee, one of your first steps is giving people the ability to critique their own jobs as well as the organization as a whole. Give people the ability to describe their job objectives as they see them, critique the information that flows into them from other sources, critique their portion of the accounting system, and put into their own words what they believe the organization should do well and doesn’t do well.

While you want to launch this software selection process by meeting with most of the people who will be participating in the process, it will not be possible to meet with them personally to discuss requirements. Instead, create what I refer to as a Preliminary Needs Definition document and then let everyone fill it out. The format is open-ended text responses to specific questions as listed below. I have used the term “we” because individuals don’t feel very comfortable talking it terms that refer to them directly.

• What do we do now?
• What works and doesn’t work?
• What can we do individually to improve business process efficiency?
• What can we do to improve customer service?
• What should we be doing that we are not doing right now?
• What changes should be made in the business management system to help us work more effectively?
• What can other people do to help us do better?
• Are these goals or changes reasonable?
• Where is the organization today?
• Where should it be in the future?

If you consider the questions above, you will see that most have very little to do with specific functional requirements. The questions you pose here are designed to build a picture of the type of organization you want to be in the future. Improve the organization first. If you don’t look inward first, how can you possibly define how the accounting or ERP system should assist you from a functional or reporting point of view?

As you move this process forward, you are going to start to build a picture of where you need to be in the future. You may also identify opportunities for improvement (problems are no more than opportunities for improvement). Deal with these issues first as any flaws within the organization can negatively affect the effectiveness of the new accounting/ERP system.

As you move forward, please keep in mind the following suggestions.

• Build a sense of teamwork by giving each person, not just the right to participate, but the right to be heard and taken seriously.
• Begin to build a consensus of what needs to be done by holding open-ended meetings with all groups that will eventually participate.
• Start collecting improvement / requirements information from individuals and workgroups.
• Identify the most important factors affecting your success as a unique business, whether they have anything to do with the accounting or ERP system or not.
• Determine what your customers want.
• Critique current system (software and business processes).
• Determine if specific business processes will require substantial improvement.
• Build a picture of the most important functional requirements.
• Build a picture of the most important reporting requirements, keeping in mind the fact that the reports found in most accounting/ERP systems are static pictures of the firm at a single point in time. What you really need is an effective set of business metrics that help you determine where you are and where you are possibly going.
• Keep in mind the fact that your new accounting/ERP system can produce so much information that it may become difficult to identify where you need to spend you time. Consider supplementing your reporting/metrics system with some form of exception management or alerts.
• Consolidate software requirements into a high-level needs definition document that can be used to review potential candidates.

Commitment to the Process

Now you have reached the point where you must dedicate yourself, your employees and your company to the process of selecting a new accounting / ERP system. I’m not suggest­ing this is anything like a holy crusade, but the commitment is similar. This project will consume a great deal of time and ultimately money to bring to fruition. There will be a tendency on the part of some to lose interest. Their participation and input is critical. They and you must support the project until it has been completed. This is the only way to insure the product you select meets your needs, and will be accepted completely by the people who will have to use it.

Summary

This first step toward selecting a new accounting or ERP system sets the stage for everything that will follow. If you don’t give people the ability to contribute toward the critique of your current system and even the organization itself, you may not receive suggestions that could otherwise prove to be quite valuable, and you run the risk of being seen as imposing a solution on people who have not been included in this process. These people may support your final purchase decision, but they could also resist any changes you might make or resist the new system. That you do not want. Create an inclusive software selection process that will generate enthusiasm. If you ask people how you can help them, they will respond accordingly.

Abstract

Everyone is aware of the fact that accounting and ERP software selection projects seem to have an excessively high failure rate. A month doesn’t go by without hearing that a customer has sued their ERP vendor or implementer/reseller for a failed project. While this is certainly an issue, some of the blame may need to be placed on the shoulders of the buyer and for any number of reasons. While reimbursement could be collected, the lost time and lost productivity can never be recovered. Maybe the following can be used as a checklist to reduce the likelihood of failure.

Introduction

If I attempt to list every step in a typical accounting/ERP software selection project, I could publish a book. Instead, I want to concentrate on those steps you should take before you actually launch the formal project. If you are organized for success, the likelihood of failure will be reduced significantly.

Share the Responsibility

Never launch a software selection project thinking that the vendor/reseller is 100% responsible for the outcome. That almost guarantees failure. Your primary objective in any ERP software selection project should be a successful outcome and that means you need to take whatever steps are necessary to do what needs to be done.

This philosophy also applies to the purchase decision making process. While there is no doubt that you need to appoint a project manager to make sure things get done, no one person should be totally responsible for an ERP software selection project. Every person should be responsible for the final outcome and therefore each person must make the “selection”. The only way this project is going to stand a chance of succeeding is for each person to participate equally in the final decision. The key concept here is mutual responsibility.

Secure Buy In or Kill the Project

It’s really quite simple. If you do not have the active support of each significant stakeholder, go no further. Your ERP software selection project has been significantly compromised.

Educate Yourself

Selecting a new accounting / ERP system isn’t something to be taken lightly. Any project of this magnitude and critical importance can fail simply because you get off on the wrong foot. Start this ERP software selection project by taking no direct action. Instead, spend some time educating yourself so that the decisions you make as you proceed will be based on realistic facts, not dreams or the marketing hype of software vendors. One of the most important steps you can take is learning how a software selection project should be organized. If you don’t understand what needs to be done and by whom, how can you possibly know whether you are on the right track?

Construct a Foundation for Greater Success

Rather than duplicating what you are doing today, take your business apart and create a stronger, more effective structure. While formal Process Improvement should not be undertaken lightly, maybe you don’t need such radical change. Maybe you do. The key concept here is creating an organization that is more efficient, more effective, more productive and therefore more profitable. Then you can determine what you need in terms of business functionality that will help you move to this future vision.

Assess Your Ability to Change

Even though you may have recognized the need to change, and have identified specific areas of the business or business management system that need to be changed and to what degree, if you cannot manage effectively such a n ERP software selection project, or your management and employees are not ready to change to the same degree you believe is required, the project’s basic foundation will be compromised.

Develop an Understanding of what’s Possible

This is to some extent an educational step, but focused more on the software functionality you might need. The more you know about the potential that can be released through current accounting / ERP systems, the better prepared you will be to define exactly what you require to improve your own operations. Learn what other people are doing. Contact prospective vendors or resellers to learn more about what’s possible in terms of functionality. At this stage make it very clear that you are conducting research, not buying.

Remember to Include your Customers

Since your customers are your most valuable business partners next to your employees, involve them in this process. Ask them how you can serve them more effectively.

Build from the Bottom Up

One of the mistakes firms make is driving software selection from the top down. Executives, managers and project leaders will all contribute significantly to this project from defining requirements to making the purchase decision. What about everyone else? Is their input important? Are they ready to change? Will they accept the new system? Any person who will be using the new accounting/ERP system is a vital contributor to the firm’s success and the success of this project. Their contribution may shed light on important software requirements or business improvements. If you want to increase the likelihood of failure, leave these people out of the process.

Answer the Critical Questions

Your first step is giving people the ability to critique their own jobs as well as the organization as a whole. Give people the ability to describe their job objectives as they see them, critique the information that flows into them from other sources, critique their portion of the accounting/ERP system, and put into their own words what they believe the organization does well or does not do well. Maybe you should ask and answer the following questions.

• What do we do now?
• What works and doesn’t work?
• What can we do individually to improve?
• What should we be doing that we are not right now?
• What changes should be made in the business management system to help us work more effectively?
• What can other people do to help us do better?
• Are these goals or changes reasonable?
• Where is the organization today?
• Where should it be in the future?

Please keep in mind the fact that everyone needs to be involved in these initial questions. Leave people out at your own risk.

Build an Effective Information Management System

Let’s admit that it’s now possible to track anything you want. That isn’t the issue. Modern accounting and ERP systems can analyze data and spit out reports and graphs and dashboards that have the potential to either overwhelm people or give them information that they don’t need. Instead, you need to use this power to your advantage. As I have discussed in previous posts, what we need is a truly effective decision management system, not multi-page status reports or meaningless metrics and useless dashboards.

• Start by designing a targeted reporting system. Ask yourself why you need the information. If it doesn’t lead to a decision, then you don’t need it.
• Build a system of business metrics that gives people the ability to “see” where they need to concentrate their attention and to “see” if decisions they have made are leading to improved results.
• Finally, design truly effective Exception Management systems that give people the ability to identify and address issues that need to be addressed.

Summary

I have chosen to address only those software selection tasks that should be undertaken by the buyer and only the most important steps that precede  any form of needs analysis and product evaluation. While I would certainly hope that vendors and resellers would help people understand what needs to be done and by whom, I choose to follow the maxim “Let the buyer beware”. If you are contemplating the purchase of a new accounting or ERP system, you need to take responsibility for the project. If you organize yourself for success, it’s very likely you will succeed.

Cloud computing is becoming one of the “hot” topics regarding accounting and ERP software system deployment. Most of us just think that there are only two real options: on-premise as we have for years or the Cloud where we access a system via a browser and have no local network to worry about. Unfortunately this isn’t the case. There are any number of deployment options: on-premise, hosted, SaaS (Software as a Service) and the Cloud. Within each of these alternatives are several options. It’s all very confusing.

The ERP Software Blog web site (an excellent collection of blogs regarding all things Microsoft Dynamics (GP, NAV, AX and SL) has published a comprehensive white paper (35 Questions Every CFO Needs to Ask about Cloud ERP Software) that might help us understand the Cloud and how it can be utilized to our advantage.