Dec
15
Working with Smaller ERP Vendors: The Pros and the Cons
Filed Under (Manufacturing Operations, Software Selection, Industry Observation) by Gabriel Gheorghiu (see bio)
 

During briefings with small ERP vendors, I often hear the argument that they are more flexible and can better respond to their customers’ needs than larger vendors. The ultimate example: “You can even talk to the CEO if you need to.”

But would you want to? Bypassing the usual workflows and calling the CEO (this actually really happens) may not be a recipe for the best technical support ever.

Besides, from my experience working with and for small ERP vendors, I know that if you want to talk with the CEO, it’s likely that you’re unhappy about something (customers rarely call to congratulate the CEO for the team’s great work). Or, you’re trying to get something from the vendor without going through the formal process of, say, submitting a developmental request for new features.

I know that small ERP vendors are more willing to make compromises and create special relationships with their customers, but there are also disadvantages that you need to consider. Let’s take a look at the challenges you might encounter during the selection and implementation process, and some of the things that you can do to avoid them.

Working with Smaller ERP Vendors: The Cons

During the selection process, small vendors don’t always have detailed and flexible demos of their product available, and they are not always willing to customize the demo. You should certainly insist on getting as many details as you need about the critical functionality needed by your business. Don’t let the vendor get away with “you get the idea” or “it’s a new module and I don’t have it in my demo database.”

Data migration can be a challenge, as smaller vendors don’t always have highly qualified personnel or on hand, which can slow the process (if their DBA only comes in once a week). And if their tools are not up to date, you may find that the process is altogether inefficient (as in the case where you need to manually change some of the imported data). If your organization does not have IT people who can help you understand how capable the vendor is, try to get a commitment from the vendor that the critical data is being imported properly, and make sure you know what the vendor plans to do if the import is not successful. “Do-overs” should not be an option, but certainly you should insist on penalties (e.g., discounts, or extra services) in the worst-case scenario.

The success of the implementation depends on many factors (e.g., project management, solution complexity, etc.), but providing qualified employees can be a real challenge for small ERP vendors. Like it or not, the vendor will establish a certain priority for your project, and not everyone gets the highest. This will affect how (if) available experienced resources are allocated to your project. You may end up waiting longer (and drawing out your project), or else someone with less experience may be assigned to you (my experience: this person may have the best intentions in the world and still cause you headaches). To avoid this, make sure that a) someone in your organization is responsible for managing this project, b) there is a similar person on the vendor side, and c) they are constantly in touch with one another as well as other key stakeholders.

Something similar can happen during training, either because there are not enough trainers available or because the vendor has not invested in training its trainers, with the result that they are forced to learn “on the job.” This can lead to rather embarrassing situations—I remember once being told by a customer “It seems that we’re discovering the system together, aren’t we Gabriel?”

This need not be a huge issue if the trainer follows up on outstanding issues and makes sure to get the responses to your questions. It does become a problem, however, when your questions or problems are simply noted, with no follow-through.

When it comes to customer service in a small company, everyone contributes, from the receptionist to the managers and sometimes even the CEO. This is not a problem if the role of the receptionist is to takes a message and forwards it to the right people, or if the CEO knows the product inside and out, but if you let unqualified people try to help customers, chances are that Bad Things Will Happen (I remember witnessing a case where a staff member told a customer that all of their data was lost!). One thing you can do to ensure proper support is to build relationships with one or a few customer service representatives, get to know and trust them, and ask specifically for their help. (Also: be nice!)

Working with Smaller ERP Vendors: The Pros

There are obvious advantages to working with small ERP vendors.

Smaller vendors may have a stronger understanding of particular industries, as they typically focus on a single market or market segment. They can provide customers not only with specialized solutions, but also with best practices and templates for documents and workflows. They can also be adept at filling the holes left uncovered by large vendors, who usually target broader markets.

Small vendors will typically develop the core application in-house and integrate with third-party tools or add-ons for functionality that is not their focus (e.g.: payroll, CRM, project management). This allows customers to deploy packages of compatible solutions.

Lack of bureaucracy is certainly an advantage of smaller vendors, which may allow them to develop new functionality more rapidly—so long as they are well organized and employ qualified people.

Negotiating with smaller vendors is markedly different from negotiating with software behemoths, and bartering is quite frequent (e.g., the vendor may offer to provide free customization to customers who recommend its products).

Pricing and discounting can also be an important advantage, since the competition between smaller vendors can be extremely fierce. They are often willing to offer flexible payments, and licensing models are not always set in stone. This is an advantage for small businesses, because larger vendors typically offer pre-defined packages that are non-negotiable, most of the time.

Are You Getting What You Pay For?

In other words, if you pay less, do you get less? The answer is usually yes. And it’s not realistic to expect things to be otherwise. But as a small company, you may not be able to afford a larger solution, so the key is to find a vendor that is efficient despite its lack of personnel (there are always fewer people than needed in a small company), and to contribute to the process by involving all your key people in all major activities, from selection to installation, and even support.

Share This

Comments

nilesh on 16 December, 2011 at 1:29 am #

Check this


Ferengi on 16 December, 2011 at 3:49 am #

Beside the fact that you don’t have, actually, past experience with either selling or buying ERP systems, what else can be told?!

Let’s take, point by point, your arguments:

The cons:
1. Small vendors don’t always have detailed and flexible demos of their product available, and they are not always willing to customize the demo

As I’ve said, you don’t have any experience as ERP vendor. The fact is most big ERP vendors don’t sell directly their systems but through partners which, in most of the cases, DON’T provide suitable demo because they don’t want to spend time on that. On the other hand, most of the small vendors have the flexibility to provide real good demo sessions

2. Data migration can be a challenge, as smaller vendors don’t always have highly qualified personnel or on hand, which can slow the process (if their DBA only comes in once a week)

Come on, this issue is the same with most of the big ERP vendors. The fact is, they come and say: “We are SAP(for instance), you are integrating with us, not us with you”

On the other hand, small vendors are eager to get the customer and will provide you what you need in terms of data migration.

3. The success of the implementation depends on many factors (e.g., project management, solution complexity, etc.), but providing qualified employees can be a real challenge for small ERP vendors

You really don’t know anything about it. The implementation team of a small vendor is, in most of the cases, really knowledgeable about the product, more than the consultants of SAP, Oracle - who cannot have the same knowledge because they simply cannot (the products are too big and too complicated because they are built to be so)

4.Something similar can happen during training, either because there are not enough trainers available or because the vendor has not invested in training its trainers.

As I said, you know nothing about it :-)

5. When it comes to customer service in a small company, everyone contributes, from the receptionist to the managers and sometimes even the CEO. This is not a problem if the role of the receptionist is to takes a message and forwards it to the right people, or if the CEO knows the product inside and out, but if you let unqualified people try to help customers, chances are that Bad Things Will Happen

I liked this the most: “(I remember witnessing a case where a staff member told a customer that all of their data was lost!)”

Are you sure you haven”t just dreamed about it???
The problem with you is you just don’t know how a small ERP vendor/manufacturer is doing business. At Dacia you worked only with SAP and Oracle (JD Edwards) consultants and maybe with a small local “friend of the boss” from Pitesti. But what you have met is just because the buyer (your boss) made stupid calls and made deals with “friends” and not because small ERP vendors are bad

The Pros:
1-5 You are right
6 The fact is, actually, when you pay more for SAP or Oracle (unfortunately you don’t have too many other choices because of obvious reasons) you get the same as a small ERP vendors and some gadgets you will use once a year. Moreover, the problem you can go for an Opensource solution (like Compiere) and you get the same as with Oracle or ERP licenses BECAUSE after you pay the licenses you HAVE NOTHING without the consultant to make the implementation.

Bottom line: I’m ashamed, as Romanian, that some guy born here doesn’t have the guts to stick on some principles. If you are good at training, just do training activities, don’t try to pose as ERP consultant because YOU ARE NOT ONE.


Shubham on 16 December, 2011 at 6:36 am #

This is a really heated discussion. Well, I am in ERP industry and I would like to comment on this discussion.

What I have learned from my industry experience is that an ERP system is a tool to achieve a particular goal. I would completely agree to the point that bigger ERP solution providers are not selling their products directly, instead, the third party implementer do the task who in turn do not have the authority or expertise to do any changes in the core functionality at all. Therefore if any organisation has some special needs, then it has to adapt its processes according to the system.The branded ERP will have a lot of success stories to boast of and they wont be interested in doing the customisations after a certain point. On the other hand the smaller ERP systems would have their expertise in the area, alternatively they would be very willing to accommodate the user needs. Simply gauging the big ERP implementer as the God’s of the industry and treating the smaller ERP vendors as startups wont help.

According to me, both have their pros and cons and they needed to be judged accordingly

The established ERP solutions have their strengths lying in the product architecture which is very robust and efficient. Also they have a lot of tools and addons on offer, which can be deployed on need basis.

On the other hand the smaller ERP solutions have their strengths in the product functionality. Their extensive research in their domain makes sure that the product takes care of every possible need of the business. Cherry on the top would be that they would be really willing to listen to the customer’s needs and do the necessary changes according to his needs.

The cons of established ERP systems would be that their representatives can be very arrogant sometimes in accomodating to the needs of the customer as they have the ego of being associated with one of the biggest solutions in the industry. Also a point worth noting would be the high costs associated with them which would result in lower ROI

Similarly, smaller ERP solutions may have the resourse crunch. Also their ability to accomodate the special demands of the customer like integrating a CRM system or a BI tool could be a daunting task for them.But this is primarily because their systems are low cost and they have less money to invest in the extra development effort.

Therefore the net conclusion is that it depends on what do you want out of your investment.Both the solutions are good in their respective place. If you dont have special needs and deep pockets, a branded ERP could be a solution otherwise, look forward to smaller vendors, give them enough money and they will definately deliver as expected.


Paul Sita on 16 December, 2011 at 7:11 am #

Great discussion - tend to agree with the responders- seems to have been written by someone not in the ERP business. The post is a good list of POTENTIAL pros and cons - but in any situation the client has to assess the actual pros and cons and risks of any approach. We are a small consultancy - and have done very well picking up the pieces from failed implementations of the “big guys” who had a lot of fluff but too little substance, and simply lacked the tight commitment to the client to get them to the finish line. As one of the commenters said, ERP is a tool to achieve certain objectives. The only thing that matters is achieving those objectives.


Gabriel Gheorghiu on 19 December, 2011 at 3:33 pm #

@Ferengi Please let me know if you find some valid arguments, so we can have a dialogue. For your information: “you have no idea what you’re talking about” is not a valid argument in a civilized conversation

@Shubham I agree with what you say about the ERP solutions, but i was mostly talking about ERP vendors. The solution is one thing, but the way it’s sold, implemented, supported, etc, is a totally different challenge. Actually, there are vendors offering good solutions but bad services and also those who don’t have a great product but are really good at keeping their customers happy.

@Paul If these are POTENTIAL pros and cons, what are some actual pros and cons? Of course every situation is different, but at least some of these pros and cons will apply to any implementation. Assessing the risks is a good idea, but not as easy to do as it seams.

A general comment: this post is not about small vendors vs big vendors. And it’s not about ERP solutions and the objectives that they help companies achieve either. It’s about the services that small ERP vendors provide and some of the advantages and disadvantages of working with them.


David Too on 2 January, 2012 at 5:24 am #

We did Engadget a smalls vendor to provide my employer with ERP, the contract was for three months starting April 2011 to date the software is not complete. However some of the modules completed does not meet the minimum accounting standards. As earlier commented it seems we were all discovering the system, since members of this team to only have basic accounting skills. An attempt to overhaul the system is hampered by the fact that most of the company transaction is running on this system including the POS.


AssetGlobe on 8 January, 2012 at 7:52 pm #

I think many of the issues raised in the article (data migration, implementation, training, customer service, industry knowledge…) depend on the quality of the vendor’s team working on the project, not the size of the vendor.

It is better to have an “A” team from a small vendor than a “B” or “C” team from a big vendor…


dinesh parashar on 16 February, 2012 at 8:18 am #

Great discussion


*Name:
*E-mail (private):
Web site:
*Comments: