We recently released the TGI Resources Library. Aside from being able to access Enterprise 21 ERP software demonstrations and view past TGI webinars, one of the most useful aspects of the TGI Resources Library is that it gives site visitors immediate access to all of TGI’s ERP selection resources, including the complete version of TGI’s Software Selection Tool Kit. The tool kit is designed to provide software selection teams with the necessary resources for conducting a thorough, well-structured ERP selection process with a comprehensive and quantitative analysis of various ERP vendors and solutions. From the SSTK Downloads page, site visitors can download any of TGI’s software selection resources individually or download the complete Software Selection Tool Kit as a single executable file. With the conclusion of 2009 rapidly approaching, manufacturing and distribution organizations who plan to select a new ERP system for implementation to begin in early 2010 can leverage TGI’s Software Selection Tool Kit as a guide for their software evaluation projects.
Visit the New TGI Resources Library for Enterprise 21 Demonstrations, Software Selection Tools, and more
Monday, November 9th, 2009 by Alex SmithVisit TGI at the 2009 STAFDA Technology and Consultants Fair
Tuesday, October 27th, 2009 by Alex SmithOn November 9, 2009, TGI will be attending the 2009 STAFDA Technology and Consultants Fair. TGI representatives will be on hand to showcase TGI’s Enterprise 21 ERP software at Table 6. Conference attendees may arrange for a personalized demonstration of Enterprise 21 while at the STAFDA technology fair. The fair offers a great opportunity for organizations in the specialty tools and fasteners industry to see the latest in business management software technology and gain an understanding of the many benefits a distribution organization can derive from integrated distribution software solutions.
Given such an opportunity, business executives and IT professionals in the tools and fasteners industry should come to the STAFDA Technology and Consultants Fair armed with key questions for software vendors that pertain to their unique industry requirements. Some examples of key questions for software vendors who supply solutions for the tools and fasteners industry include:
- What does the software system offer in terms of managing pricing methodologies, promotions, and allowances?
- What types of inventory management and replenishment methodologies does the software offer?
- Does the system include integrated RF and barcode technology to operate the warehouse in a paperless environment?
- Does the software offer integrated procurement functionality that provides RFQ processing, vendor performance management, designation of a preferred supplier for a given item, accounting for supplier lead times, etc.?
- Does the software provide integrated e-Commerce functionality for Internet-based orders?
- Does the software interface with EDI translations?
- Does the software interface with UPS, FedEx, and LTL shipment manifesting systems concurrently?
- Does the software offer both available and capable to promise order management functionality?
- Does the software account for landed costs, import duties, drayage charges, etc. for imported items?
- Does the software offer MRP/DRP functionality?
- Does the software provide functionality for kitting, assembly, light manufacturing, and other value-added services?
- Does the software offer integrated financial management?
- Does the software feature business intelligence, analytics, and reporting functionality with drill-down capabilities?
While these are just some of the many questions for software vendors, they should provide a good basis for discussion in limited time while at the 2009 STAFDA Technology and Consultants Fair. If you plan on attending the 2009 STAFDA Technology and Consultants fair and would like to schedule a demonstration of TGI’s Enterprise 21 software, please click here to complete TGI’s 2009 STAFDA registration form.
Reviewing ERP Vendors’ Pricing Proposals: Does the Proposal Reflect the Demo? Does the Demo Reflect the Proposal?
Thursday, September 17th, 2009 by Alex SmithWhen engaging in an ERP selection process, it is important to require ERP vendors to provide pricing for all demonstrated software functionality and the associated implementation and service fees for such functionality in their pricing proposals. An unfortunate tactic frequently deployed by many software vendors is to demonstrate the full scope of their respective software’s functionality and provide pricing estimates for only a fraction of the software functionality that was demonstrated during the sales process. Some vendors, for example, will demonstrate their software’s ability to allow manufacturers or distributors to operate their warehouse in a completely paperless environment through the use of RF and barcode scanning technology. When these same vendors draft a formal proposal for the selection team, however, the price estimate in the proposal does not reflect a warehouse management system that includes RF and barcode technology. The intent of the software vendor, sadly, is to mislead the selection team, make the selection team believe they are purchasing an ERP system that meets all of their business software requirements – both current and future – and then demand the manufacturer or distributor pay for additional software functionality after the fact. The software selection team should view such practices as completely unacceptable.
There are two ways for software selection teams to ensure that the functionality that was demonstrated to them is reflected in the vendors’ proposals. First, the selection team should require vendors to guarantee, in writing, that all demonstrated functionality is included in the proposals. If a vendor is not willing to agree to honesty and straightforwardness, then why would the selection team ultimately choose to select that vendor as their preferred solution provider from the selection process? Secondly, as part of the software evaluation process, selection teams should look for a software vendor who has provided consistent, straightforward answers to questions and pricing throughout the sales process and has a proven track record of providing upfront pricing for all demonstrated software functionality.
Requiring software vendors to submit proposals that reflect all demonstrated software functionality will provide the selection team with the necessary information to select a software solution that is free of hidden or unexpected software costs.
Gauging Long-Term Viability of Software Vendors – Examining Revenue-per-Employee
Monday, August 17th, 2009 by adminOne of the key areas companies attempt to gauge as part of their ERP selection projects is the long-term viability of potential ERP software companies. On the surface, one might initially assume the vendor’s annual revenue is the key element to consider, but is it really?
In recent years, Oracle bought PeopleSoft, who had previously acquired JD Edwards. In using Software Magazine’s Software 500 as the data source, PeopleSoft reported corporate revenue of $2.27 billion in 2004 – the last year they reported data as a separate business entity prior to their acquisition by Oracle. Likewise, JD Edwards reported corporate revenue of $904 million in 2003. Assuming revenue alone could be used to gauge long-term viability, would anyone have come to the conclusion that these software vendors would be gobbled up? Some other large entities that have been acquired in recent years with their last reported annual corporate revenue from the Software 500 include Siebel at $1.34 billion, Hyperion at $765 million, SSA Global at $712 million, Geac at $444 million, and Intentia at $425 million.
Rather than merely reviewing revenue, it is our recommendation that potential buyers of ERP systems and consultants with whom they work take a good look at the various vendors’ revenue-per-employee ratios. For example, let’s examine this in light of the recent announcement that SoftBrands was being acquired by Infor. SoftBrands reported corporate revenue of $93.4 million with 775 employees in 2008. This equates to a revenue-per-employee ratio of roughly $120,500.
In reviewing a series of twenty-five software businesses (including ERP, supply chain management, CRM, and financial management software companies) which have been acquired by other ERP software businesses since 2002, seven of these had revenue-per-employee ratios between $100,000-150,000 in their last year of reporting, nine were between $151,000-200,000 (including PeopleSoft and JD Edwards), five were between $201,000-250,000, and three were between $251,000-280,000 (Hyperion, Mapics, and Siebel).
So, what are the revenue-per-employee ratios of some of the familiar ERP software vendors in the market today? For 2008, Microsoft led the pack at approximately $647,000 in revenue-per-employee, followed by SAP at $344,000, and Oracle at $240,000 respectively; however, these numbers include these organizations’ complete portfolios of products and services rather than ERP software sales and associated services revenue alone. In reviewing data for the top ten big name Tier 2 ERP vendors included in the study – using 2008 data if they reported or their most recent reporting in 2007 or 2006 otherwise – four of these businesses reported revenue-per-employee ratios between $100,000-$150,000, while the other six were between $151,000-200,000.
Based on the percentage of employees with strong technical talent that software businesses must attract and retain, and considering a typical employees’ salary and benefits, ERP software companies whose revenue-per-employee ratios are at or below $150,000 may start to raise some serious questions about their long-term viability.
Businesses that are selecting new ERP systems are doing so with the knowledge that they are making a long-term commitment to run their businesses on the new software packages and to work with the associated software vendor for roughly 8-12 years, on average. In doing so, gauging the long-term viability of the software vendor is a key element to this long-term success. We encourage software selection teams to examine potential vendors’ revenue-per-employee ratios and trends over the past several years before making a final commitment to move forward together.
Note: Software Magazine’s Software 500 has been the source of all revenue and employee data for this article.
Once You Sign on the Dotted Line for a New ERP System, You Own It – for Better or Worse; Not if Your Software Vendor Provides You With a Software Acceptance Process
Tuesday, July 28th, 2009 by adminI received a recent email from a firm that provides ERP software evaluation tools and has analysts and consultants who work with clients to evaluate software solutions. Their headline message jumped out at me immediately, which read, “Once you sign on the dotted line for a new ERP system, you own it – for better or worse.” While this statement is true in almost every case, it is not true when companies work with a software vendor that provides them with a software acceptance process.
So, what is a software acceptance process, and how does it work? A software acceptance process is a money-back guarantee to a company acquiring ERP software following contract signing and initial software installation. We know that during a software evaluation process, personnel from the company evaluating software do their best to describe the processes and capabilities they require in a new software solution. The vendor’s responsibility is to understand the prospect’s requirements and to show and describe to them how their software matches up with those requirements. Unfortunately, this process is flawed.
Prospect personnel cannot understand and describe clearly what they are looking for from new software. Likewise, software vendor personnel cannot comprehend perfectly what is being requested by the prospect personnel. There will always be gaps in understanding and communication; however, a software company that offers a software acceptance process embraces this fact and helps to make it a non-issue. Software vendors who offer the software acceptance process don’t want customers to be fooled or misled into buying software that isn’t what they thought it was during the evaluation process.
This reminds me of an old joke about a guy who is given the opportunity to choose where he wants to spend eternity. He visits heaven and finds it to be sedate – with harps and angels singing. He then visits hell and finds gourmet food, great music, and lots of golf courses to play. The guy debates his options and then chooses hell. He’s immediately whisked away to fire-engulfed surroundings to which the guy asks where the food, music, and golf courses went. The response he receives is, “When you visited, you were a prospect. Now, you’re a customer.”
Don’t allow this to become you when you’re buying new ERP software. I saw a recent Web posting by a software demo person who stated that his job was to get the prospect to believe the software would do whatever they want it to do. Even if someone were inclined to approach things in this manner, there would be no value in doing so if that demo person’s employer offered its customers a software acceptance process.
I could cite numerous examples in which people have said they wished they had insisted on a software acceptance process with their vendors. Here’s one such example. Back in 2006 we participated in a software evaluation against a well-known ERP software vendor. The prospect had a consultant guide them through the process, did scripted demos, scored the demos, and saw things as too close to decide. Finally, the prospect selected the other solution. When they did so, we strongly recommended to the prospect and consultant that they insist on a software acceptance process to which their response was, “We don’t need that; we’ve seen the other software’s capabilities demonstrated.”
In following up with that consultant in January 2009, he stated his client regretted many times not going with us. They have been disappointed with the product they chose. There was functionality that was promised to them by the vendor that wasn’t there when they bought and still isn’t there.
There are numerous stories and reports showing that the percentage of failed ERP software implementations is too high. One root cause of this problem is that companies select the wrong software. If vendors offering a software acceptance process became the norm in the ERP software industry, the issue of selecting the wrong software could be minimized.
As part of “The TGI Difference,” TGI offers a risk free, money-back software acceptance period to all of its customers following contract signing and initial software installation. This period allows customers to validate their selection of TGI and Enterprise 21. We encourage all prospects to insist on a software acceptance process when buying new ERP software.
The ERP Selection Process: Developing Your Initial List of Potential ERP Vendors
Wednesday, July 1st, 2009 by Alex SmithDeveloping your initial list of potential ERP vendors is a critical step in the ERP selection process. Your initial list of potential ERP suppliers will serve as the basis for which suppliers you will send Request for Information (RFI) documents. Suppliers’ responses to the RFI will in turn help you to eliminate some ERP vendors and move forward with others to conduct initial remote software demonstrations. The vendors’ performance during these initial demonstrations will then help you to select which suppliers you will send a Request for Proposal (RFP), invite to conduct on-site scripted software demonstrations, and ultimately make a final supplier selection. In other words, your initial list of software suppliers should (hopefully) contain the supplier you will finally select as your software supplier. To help generate an initial long list of potential ERP companies (roughly 25 companies is usually a good start), there are a number of resources available to the software selection team.
Google – Google is a great place to search for potential ERP software vendors. For broad searches, use keywords such as “ERP software,” “ERP system,” and “ERP systems.” These search phrases will provide you with a large number of companies to consider. For manufacturers, “process manufacturing software,” or “discrete manufacturing software” are great phrases to search on when looking for potential software suppliers. You can also search on phrases that are more specific to your industry. Companies in the food and beverage industry, for example, can search for phrases such as “food ERP software,” or “beverage ERP software.” Pharmaceutical distributors can search on phrases such as “pharmaceutical distribution software.” You get the idea. Google is an incredibly powerful tool and provides highly-relevant information in its search results.
Industry Publications and Associations – Various industry publications and trade associations are also a great place to find potential software vendors. Members of the National Association of Manufacturers, for example, can check out the software section of the online NAM Buyer’s Guide. Cheese and dairy processers can look at Dairy Foods Magazine’s supplier guide or the Dairy Foods website, while organizations who specialize in plumbing wholesale distribution can frequently find potential software suppliers in The Wholesaler or at www.thewholesaler.com. No matter what your industry may be, your industry’s leading associations and publications are a great place to start looking for potential ERP vendors.
Independent Consultants – Independent consultants are a great resource for not only developing a list of potential ERP vendors but providing assistance and guidance in other steps of the software selection process as well. If you decide to use a consultant throughout the selection process, be sure to select a consultant who truly is “independent” and does not have a partnership or financial agreement with any software provider. Selecting an independent and unbiased consultant will help you select the best ERP vendor for your business.
For more software selection resources from TGI, please see the “ERP Software Selection Process” within the “Resources” section on our website. This area provides tools to assist in the software evaluation process, as well as an option for obtaining a list of ERP vendors based on your company’s industry, revenue, and manufacturing process where applicable.
Find a Proven ERP Software Selection Process and Execute It
Tuesday, May 26th, 2009 by Alex SmithOne of the keys to proper ERP selection is finding a proven ERP software selection process and then executing that process. Many times, manufacturing and distribution organizations start their search for a new ERP system with little understanding of what selection process elements will provide them with the best software solution for their respective businesses. Furthermore, even if the organization has committed to a specific selection process or methodology at the initiation of the selection project, the software selection process is frequently executed incorrectly as the organization gets further along in the project. Fortunately, TGI provides free software selection tools to aid manufacturers and distributors in selecting the best software for their individual business operations. TGI’s proven software selection process can be easily followed, and, more importantly, executed in a timely, efficient manner. TGI’s ERP software selection process consists of five key phases: (1) Project Preparation and Planning; (2) RFI and Introductory Demonstrations; (3) Requirements and Request for Proposal; (4) Scripted Software Demonstrations; and (5) Reference Calls, Site Visit, and Supplier Selection.
While I will not expand on these steps in detail, it is imperative that the organization searching for new ERP software adheres to these five phases and does not initiate the next phase of a selection process without first completing all activities of the prior phase. For example, an organization should not move into the RFP phase of the selection process without first completing the RFI and Introductory Demonstrations phase for all potential ERP software vendors. It is astonishing the number of times we see prospects send Request for Information (RFI) documents and conduct initial remote software demonstrations and move into the RFP phase only to have another software vendor enter the mix of potential software suppliers without conducting the same detailed software analysis for the new software supplier as it did for all other software suppliers in consideration. To provide the most comprehensive, quantitative analysis of each ERP software vendor and solution, the same standards and requirements must be applied to each software vendor at each phase of the selection process. This strategy will give the organization the best apples-to-apples comparison of each software vendor and will ultimately lead the organization to make the best software selection decision.
Again, find a proven software selection process, follow the process, and execute it in full at each step along the way. For more information on TGI’s proven software selection process, click here. You can also request TGI’s free software selection tool kit CD by visiting our online request form.
The Scripted Software Demonstration: Making an Enterprise Software Decision on More than Gut Feel
Tuesday, May 12th, 2009 by adminThe great majority of companies with whom we work perform their own software evaluations without the assistance of an independent consultant. While independent consultants bring a variety of benefits to the table during the ERP selection process, a key element that strong consultants offer which is commonly missing when companies perform their own enterprise software evaluations is an onsite scripted software demonstration.
So, what is meant by a “scripted” software demonstration? A scripted software demonstration is one in which the company has documented a series of its key business processes that it wants to see all potential ERP vendors demonstrate in a consistent manner. While the scripted demo would generally touch all functional areas of the business, the most important areas of focus would fall into three main areas:
- Customer-facing (i.e., quote to cash, customer service, customer self-service)
- Operational (i.e., demand to pay on the procurement side, inventory management and warehouse operations, manufacturing planning and execution)
- Compliance and control (i.e., financial management and reporting, lot traceability, quality management, industry compliance)
In addition to the script which describes the specific processes, good scripted software demonstrations will also include select sample data and instructions that tie this data to specific processes reviewed during the demo. The sample data should be sufficient while not excessive – 2-3 customers, 2-3 suppliers, 2-3 purchased items, 2-3 manufactured items with associated bills of material or formulations and routings, and sample customer pricing scenarios.
Some companies with whom we’ve worked performing evaluations have merely dumped complete sets of data from their existing legacy database of products, customers, vendors, pricing, etc. In these cases, vendors will cherry pick the data yielding inconsistencies as to which processes show which data or even how much of the data is used, if any.
The script should also have an accompanying scorecard which will be used by company personnel to score each of the processes on two scales – one that defines whether or not the vendor showed the specific process performed by the software, and the second defining how easily the process accomplished the desired task. There should also be an explicit scoring scale (i.e., 1, 3, or 5), where exact wording is associated with each of the scores and communicated to all participants during the scripted demo process. That way, there is an attempt to make the scoring processes as homogeneous as possible, and allows for a true “apples to apples” comparison.
The facilitator of the demonstration needs to constantly nudge the participants to score the process. To use a sports analogy, there are a lot of people who keep score of the top of the first inning of a baseball game, become distracted or bored, and stop. There are very few who keep score of the entire game. Make sure your participants score each process of the demonstration as it occurs.
Once a given section of the demo is completed, the finalized scorecards should be collected immediately to help minimize the risk of a misplaced scorecard. When the demonstration as a whole is completed, the scores should be compiled for each software vendor and added to a summary for all of the demonstrations.
Without a scripted demo, many software evaluations become a “beauty contest” where people make decisions strictly on which solution looked the best. Don’t be fooled by glitz without substance. Dig under the covers and make software vendors show you real transactions being performed in their systems with your data rather than just showing you sample screens with pre-populated data which may or may not work in a production environment.
By following these practices, a scripted software demonstration should yield a quantitative measure as to which software solution would best align with the key business processes and would be easiest to use by a given company. This will help you narrow down the field to your preferred solution so you can move into a final due diligence process with that vendor.
For additional information about the overall ERP software evaluation process including more detail about scripted software demonstrations and a sample scripted software demonstration template, please review TGI’s free ERP Software Selection Tool Kit.
Justifying a Software Selection Project in Our Current Economic State
Thursday, February 19th, 2009 by Alex SmithAs 2009 arrives, companies of various sizes contemplate the year ahead and consider their options for remaining both profitable and viable in a world of relative economic uncertainty. As such, business leaders are adjusting to the new economic challenges and market conditions. While all of this uncertainty will eventually stabilize, organizations must question what is next for them as a company and for their upcoming projects and applicable expenditures.
As has occurred throughout history, human nature evolves and the strong survive. Businesses are no different. Virtually every industry or sector has evolved in some manner over the last few months. The world of information technology has experienced its own transformation. Technology-based purchases are still occurring and companies are initiating new projects. The difference is the nature of the project and the decision making process surrounding the acquisition of the products or services purchased.
ERP software is, without question, a major endeavor for any organization. While a significant amount of work goes into both the selection and implementation of a new business software system, it does so with the ultimate promise of providing significant tangible and intangible benefits to the organization. ERP software can help transform an organization by eliminating internal weaknesses and by producing a roadmap for leaner, more efficient, and more profitable operations. It can be the saving grace for a struggling company, and it can help provide a solid foundation for a profitable tomorrow.
To achieve the project success and the promises ERP software offers, the ERP selection process needs to be tightly managed and executed in a very systematic manner. Now more than ever, the purchase needs to be based on known pain points or organizational weaknesses. The purchase needs to help solidify the organization’s future. The resulting purchase needs to allow for tangible benefits and a measurable return on investment. The purchase needs to be justifiable for both the selection team and the organization’s leadership.
While this may seem like a pipe dream to some, concrete return on investment is completely feasible when the right ERP software is purchased and implemented. From inventory reductions and improved order fill rates to more efficient back-office processing, ERP software can significantly improve an organization’s bottom line and overall profitability. ERP software can provide a genuine return on investment through lower inventory carrying costs, reductions in overtime hours, and more efficient production lines.
While these are only a few areas of ROI, they are realistic expectations when implementing a solid ERP solution. These benefits can provide a relatively fast payback, and they represent the means to justify the purchase that brings along with it a number of additional intangible benefits such as visibility to data, improved customer service, and an increase in overall customer satisfaction. Intangible benefits aside, in uncertain times, any major expenditure needs to be backed by measurable results.
If 2009 brings the promise of change, an ERP software purchase can help provide the catalyst for that transformation. It can provide the backbone for an organization’s future by offering a path to a more efficient operational flow and a more productive workforce in the months and years to come. It can be a justifiable purchase with solid return and measurable payback.