5 Questions to Answer Before Signing with an ERP Vendor
Skipping due diligence is one of the most common — and costly — ways ERP projects get started on the wrong foot.
Like many industries, ERP system and implementation vendor sales are cutthroat, low volume, and highly competitive. This means that while there are many great vendors out there, there is still a real risk that a vendor may not prioritize your best interests when pursuing a sale. If you are not careful, you can go from identifying a need, to watching a demo, to signing a contract without ever completing due diligence or even fully defining what you want.
This matters because unique aspects of your company may immediately disqualify a selected ERP. There may also be factors lurking under the surface that, if known early, would have significantly changed scope or timeline estimates. This is how ERP implementations fail. Surprises from poor planning snowball into change orders, and those change orders compound into financial and operational consequences that can be catastrophic.
Below are five questions you should be able to answer before signing with an ERP vendor.
1. Where are you, and where are you trying to go?
An ERP is a strategic decision, and it needs to align with your strategy.
Your business has a strategy and has likely identified key metrics deemed critical for success, whether those involve financials, sales, operational efficiency, or other areas. How you approach an ERP project must support that strategy. If it does not, the system is unlikely to pay off the way you want it to.
2. What pain points are you trying to solve?
Your pain points define your priorities, and your priorities define your scope.
Questions one through three are highly iterative and build on each other. Knowing where the pain is tells you where to focus energy first, which matters because ERP projects are rarely delivered as a complete, fully-featured system after the initial go-live. Core features come first, followed by a stabilization period and then enhancements over time. Beyond sequencing, most pain points are financial in nature, directly or indirectly. Failing to address them is one of the surest ways to fall short of the return you are expecting.
3. What is the scope of the project?
Excitement about everything an ERP can touch is fine. Buying all of it without a plan is not.
Over the last several decades, ERP systems have expanded well beyond core financials to cover nearly every operational area of a business, and for good reason. Nearly every operational event drives a financial transaction of some kind. The thought of bringing in a system that can touch everything is exciting, but it may not be necessary once you weigh cost versus benefit and consider whether best-of-breed tools already cover certain functions more effectively. You should have a working idea of which processes and departments are in scope, whether integrations to other systems are needed (this drives cost significantly and must be understood up front), and how much data will need to be migrated. Data migration is consistently the largest risk in ERP projects. The vendor will help refine scope, but you need to come in with a starting point.
4. Who is going to be involved in your project?
Your key players need to be identified before the vendor conversation, not after.
You do not need to identify every individual, but you must know your key players. First, you will want them involved in the vendor selection process to share relevant information and help make the final call. Second, and something businesses frequently underestimate, is just how much bandwidth an ERP project demands from internal resources. There will be periods where team members need to dedicate most or all of their working time to collaborating with the vendor. You need a backup plan for those stretches. Failing to account for their involvement often leads to one of two outcomes: operational disruptions because critical staff are pulled away, or a weaker ERP product because those same staff could not meaningfully participate.
5. How much are you willing to spend?
ERP quotes cause sticker shock. Go in grounded so the number does not control the conversation.
This is a difficult question because ERP project quotes often come in higher than expected. Do some research based on your company size, scope, and industry to calibrate your expectations before you ever sit across from a vendor. From there, define a rough budget you want to stay within. This is typically where planned scope gets cut and tradeoffs must be made, and it is far better to have that conversation on your terms than to be surprised at the end of a sales cycle.
For more direction to get you from recognizing the need to signing with a vendor, check out our ERP Launch Blueprint.
