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Midmarket ERP Buying Checklist

Enterprise Resource Planning (ERP) has come a long way from the massive, enterprise-class behe­moths with high failure rates and multi-million dollar implementations. It is of course, quite possible to spend millions of dollars on an ERP system, but the industry has grown beyond the enterprise to accommodate the midmarket as well, with more streamlined products that are available on a modular basis. Up-front costs can be diminished by purchasing only the modules that are required, and ongo­ing costs can be reasonable as well with simpler graphic interfaces and unified management systems.

The earliest midmarket ERP implementations were nothing more than scaled-down versions of the enterprise products, which were limited in scope and still carried the same difficulty and complex­ity of the larger systems. However, the market has evolved. Vendors that previously delivered only enterprise-class ERP systems now offer systems designed specifically for the midmarket; in addition, newer vendors have entered the market with offerings that have been designed for the midmarket from the very beginning.

But a failed ERP system can occur with any size company, and a successful implementation takes careful planning to succeed.

Step One: Your Needs Assessment

Enterprise resource planning is an all-encompassing system, not just a single piece of software. It’s not meant to be an off-the-shelf solution, or all things to all people. You may find that you need certain functions and processes that another company would not, and in any case, you will need some level of customization. Before you even start reviewing vendors, you must determine what precisely you need and what is expected by all stakeholders within your organization. Conduct a thorough assess­ment by asking:

What are the primary business drivers?

What prompted you to consider ERP in the first place? ERP can accommodate multiple business processes, with a primary focus on manufacturing, logistics, distribution, inventory, shipping, billing, and accounting. It is a highly strategic system that incorporates processes from nearly every different department in the company. Which of these areas require improvement? Is there integration between those differentprocesses? Where are your biggest bottlenecks, and what do you hope to improve?



Outlining the problems you are trying to solve, or the processes you are trying to improve, will help you identify and prioritize your needs.

Who are the key internal stakeholders?

ERP implementations bring benefit because they are so far-reaching, but at the same time, that im­mense scope can be its downfall. Before beginning, identify all major stakeholders that will be af­fected by the project. Keep in mind that even if your primary focus is on streamlining manufacturing processes, the manufacturing operations area is not the only part of the company that will be affected. Streamlined manufacturing processes will filter out through virtually every other part of the company.

After you have identified the stakeholders, get them involved in the process early on. Their coopera­tion will be vital. Ask them what challenges they most often face, what tools they require, and explain the benefits of the greater level of operational integration that ERP will bring. These stakeholders should be involved in the decision-making process, including evaluations and product trials.

In addition to the major executive stakeholders, the end-users themselves should be kept in the loop to gain their cooperation and promote greater user adoption once the implementation is complete.

Do you have an ERP project manager?

You will need to have a single “point man” (or “point woman” as the case may be) in charge of the en­tire process of planning, selection, and implementation. Some companies use an outside consultant for this role.

Do you have executive support?

Executive stakeholders and departmental end-users are essential to success, but without buy-in from the C-level executives, the project will never get off the ground. These executives will also need to be included in the strategic planning and decision-making phase. Besides budgetary approval, C-level buy-in will also make the rollout easier. The ERP implementation will bring about changes in long-standing business processes, and there may be resistance—executive support will help overcome that resistance and make for a faster adoption of the system.

How will customers and partners be impacted?

ERP goes beyond the internal operation and may impact business partners and customers as well. Your entire supply chain will likely be impacted to one degree or another, and your partners and sup­pliers may need to change their own processes to accommodate your new ERP strategy. Customers too may see a change in the way they receive their bills, order their products, or interact with your internal data.

Are there any potential bottlenecks?

Almost every ERP initiative encounters roadblocks. Existing processes and organizational structures may not align with new goals. Some employees and end-users may reject the solution, because they believe it will make their jobs harder. IT staff may not have the bandwidth to manage complex imple­mentations and ongoing maintenance. Your technology environment may include outdated applica­tions that will be difficult to integrate with your new ERP system. Anticipating potential bottlenecks in advance, and taking steps to minimize their impact, can help keep your project on track.

What are the critical success factors?

In order to accurately determine whether your ERP project is a success or a failure, you’ll need to identify your key performance indicators ahead of time, and outline how you’ll measure them after implementation. Tracking critical metrics on an ongoing basis can help you determine if your ERP initiative is delivering the results you expected, and allow you to make corrective changes if it isn’t.

Are your needs likely to change in the future?

While your short-term ERP needs must be addressed, you must also consider long-term plans and goals. When conducting your assessment and defining your requirements, make sure you account for any future shifts that are likely to occur in your organizational structure or business model, so the solution you choose can grow and change as your company does.

Step Two: Vendor Review or the “Dog & Pony Show”

After talking to multiple stakeholders to complete the needs assessment in Step One, the input may be overwhelming. In Step Two you decide what you need to have, identify some vendors, gather information on those vendors, and issue a request for proposal (RFP).

Whether you’re gathering information from vendors through face-to-face and phone meetings, or issu­ing a more formal RFP document, be sure to ask the right questions. This can accelerate the evalua­tion process by helping you quickly identify the most credible vendors with the most viable solutions. Here’s a checklist for building your shortlist.

Identify must-haves and nice-to-haves

No two ERP vendors are the same, and it’s hard to determine ahead of time whether a particular so­lution will meet all of your requirements. Compile a list of requirements—what do you absolutely need for your ERP software to do for you? What else would you like for it to do, but might not be absolutely necessary? This list will be very useful in narrowing down your list of potential candidates.

Research vendor background

Analyze each vendor’s history, including financial status, mission statement, and reputation. Do their objectives align with your own goals? Will the company still be around in five years? Have they built a solid base of loyal customers? Are they committed to helping clients succeed after the solution has been installed? Does the vendor specialize in serving your industry? The answers to questions like these will help you determine which vendor is the right partner for you.

Perform a feature overview

Thoroughly review each product’s capabilities, and ask for a future roadmap of planned upgrades and enhancements, so you can understand how the solution will evolve in the coming years. Which pack­ages have the functionality you need to solve your problems and achieve your goals? Will they inte­grate seamlessly into your existing technology infrastructure? Can they be customized to meet your unique business needs? Only those vendors who offer all the features and capabilities you defined in Step One should remain on the list.

Issue an RFP

Once you know more about the vendors and their products, then it’s time to create your short list of candidates and send them your detailed RFP. This RFP communicates your needs precisely, and asks for a detailed proposal that addresses your concerns.

Evaluate the RFPs

An RFP may be very lengthy, and the response may be even lengthier still. It would not be unusual for a response to be 50 pages or more, depending on detail and scope requested. Naturally, evaluat­ing these RFPs will be a time-consuming process and will require the input and help of all the major stakeholders.

Check references

If the solution is as good as the vendor says it is, there should be plenty of customers willing to share their success stories.

sk for a list of references, preferably from customers within your industry, or with similar needs and challenges. Conduct your reference checks away from the prying eyes of your sales representative, since customers are more likely to be open and honest if the vendor isn’t present. Speak to several stakeholders – ITstaff, managers, and end users – for the clearest picture of how the ERP solution has impacted their business. And, if possible, request a site visit, so you can see how the solution is being used in a real-world scenario.

Don’t be confused on price

In the RFP stage, obtaining a definite number on pricing is going to be difficult, and some vendors will even refuse to offer price guidance at this stage. They’re not being secretive, it’s just that there is no easy answer because there are so many variables involved. If a vendor offers price guidance before they have evaluated your needs, that guidance is by no means meant to be a final figure.

f you’ve issued an RFP, you may want to eliminate any vendor who sent in a late response (as this may be an early indicator of their inability to deliver timely service), or who did not answer all of your questions.


Step Three: Beyond the Smoke and Mirrors – Software Demos and Trials

It looks good on paper, but as any marketing executive can tell you, that’s easy. Feature checklists provide a good high-level overview of the ERP system’s features and functions, but a decision can­not be made based on checklists alone. You need to see the application in action, and this requires a vendor demo, or even a trial.

A demo of an ERP system is very different from an ordinary software demo. It’s easy for example, for a vendor to run a demo of a basic software productivity suite that suits all potential buyers, because it is generic in nature. But ERP is a highly customized and specific proposition, so a generic trade show demo isn’t going to cut it.

Vendors will need to come to your office and create a demo that is customized to your particular needs and situation. They may for example, create a simulation of how one of your existing pro­cesses or workflows would operate under the new system. You may need to provide the vendor with a sample of your data to use for this demo. What you’re really looking for is something beyond the standard sales pitch and demonstration of features. While that is important as well, you need a pre­sentation that answers your particular questions and concerns, and shows how the ERP system will work in your own environment.

This too will require attendance from all the major stakeholders. Each person watching the demo will be looking out for their own special interests, and this is what is important. It has to work for every­body.

After you’ve seen the demo, your stakeholders need to meet together for a group discussion. Each stakeholder should submit a written evaluation to the project manager.

A software trial can provide a more realistic experience, and give you a more accurate picture of how the ERP solution will operate within the framework of your business. While not every ERP solution is available for trial, it is clearly an advantage to try before you buy. Ask the vendor to let you try the software for a minimum of 90 days. During that time, allow users from multiple departments to try the software out, and make sure you attempt to utilize every feature included in your initial requirements checklist.

Once the trial is complete, bring your ERP planning committee and your sample user base together, and answer the following questions:


1) Was the solution easy to install?

2) How much training was required to bring users up-to-speed?

3) Are all “must-have” features easy to access and utilize?

4) Is the solution interface intuitive and user-friendly?

5) Were there any performance issues or technical problems?

A successful software trial isn’t a guarantee that you won’t experience problems later. However, any solution that doesn’t perform well during a trial is likely to fail once it goes into full production.


Step Four: Cutting the Deal

Make no mistake, midmarket ERP is a major investment, and it will be expensive, in terms of up-front licensing costs, integration and customization costs, and ongoing maintenance. The goal of course, is that the end result will deliver enough cost-savings and return on investment to make it worthwhile. ERP pricing is notoriously complex, but vendors have become sensitive to the needs of the midmar­ket both in terms of feature set, and price. There is often room for negotiation.

So, how can you play – and win – the ERP price game? Here’s a checklist for getting the best deal.

Understand what goes into the price

Although many of the major ERP vendors have taken steps to streamline ERP pricing, especially for midmarket customers, there are still multiple factors involved. Some of the biggest factors include the number of modules deployed, along with consulting fees, which can be substantial and are often difficult to determine ahead of time. Training is another major cost, since your end users will need to become familiar with a new platform. The ITstaff will require training on the back-end side of the platform as well.

How many licenses?

The number of licenses you will need to purchase isn’t as straightforward as it sounds. It’s not just a matter of counting the end users and buying that number of licenses. Many vendors will require a minimum number of licenses to be purchased, or may require licenses to be purchased in larger incremental amounts. This can often be a point of negotiation.

Maintenance cost basis

Your ongoing annual maintenance fees may be 20 or 30 percent of your initial cost or more. When presented with this percentage, make sure you know whether that percentage is based on the list price, or the final discounted price you negotiated. Also, determine whether these maintenance costs are locked in for a period of time, or if they can increase without notice.


Midmarket ERP users have begun to expect from vendors, and have been receiving, flexibility on pricing models. Is it possible to buy individual incremental licenses as needed as opposed to “buck­ets” of licenses? And what about slow times—if you are experiencing a downturn, is it possible to reduce the number of licenses without penalty?

Know what the standard discount is

With just a little research, you can determine what each vendor’s standard discount is. This informa­tion can be easily obtained through marketplace analysts, or during your customer reference checks. It is at this discounted price, not at the solution’s list price, that you should begin your negotiations.

Continue evaluating other vendors

Avendor who still runs the risk of losing your business is more likely to be generous during the pric­ing process. Letting the vendor believe that the deal isn’t quite a “lock”, and that a huge price tag may drive you into the arms of a competitor, can give you an edge during negotiations.

Don’t be swayed by free stuff

In lieu of discounts, vendors will sometimes offer additional features or modules at no cost. Unless these are on your initial requirements list, don’t take the bait. This is often a ploy to expand market share for under performing products, or to drive up service revenues. Either way, it will leave you with nothing more than functionality you don’t want or need.

Offer to serve as a reference

greeing to endorse the vendor to other potential buyers or be the subject of a written case study can give you tremendous leverage. Vendors are always on the look out for new companies to advocate on their behalf, and are often willing to offer financial incentives to build up their reference lists.

Hosted ERP delivered as software-as-a-service has just started to come into its own, and depending on your requirements, this may be an option. Companies opting for a hosted ERP solution, as op­posed to an on-site one, have different considerations when it comes to negotiations.

Monthly fees

While most application service providers (ASP) have a pre-defined monthly fee based on user volume or system usage, it isn’t set in stone. Many are willing to offer reduced monthly charges in exchange for longer contract terms.

Service level agreements

Although most of the contract verbiage ASPs use to define service levels is standardized, it can be changed or customized as needed. Performance guarantees (i.e. system availability, security, in­cident response time) and user support services are flexible, and can be negotiated to meet your needs.


Be sure your contract clearly outlines the financial penalties the ASP will face if it fails to meet the prescribed terms. Additionally, make sure that the contract can be easily terminated in the event of consistent under-performance, severe service disruptions, or security breaches.


Step Five: Getting Your ERP System Up and Running

The most expensive and labor-intensive phase of your ERP initiative has arrived. The actual imple­mentation may well be more expensive than the initial licensing. How do you ensure this process goes as quickly and smoothly as possible?

An effective implementation plan can be broken down into four key activities.

Restructuring your business

n ERP implementation isn’t just the installation of software, it is the complete remaking of business processes in all areas of the business. “We’ve always done it that way before” no longer applies.

This radical restructuring starts on paper, before any software systems or data warehouses are even put in place. Existing procedures are documented with a detailed workflow included, and then it is re­structured based on the features and capabilities of the new ERP system. During this process, older business processes may be identified as inadequate or ineffective, and they will be scrapped and remade from scratch.


After the workflows and processes have been diagrammed and mapped out, your IT department, along with consultants from the vendor’s office or third-party integrators, can go about actually install­ing the system. This may be a lengthy process, and it may be necessary to operate using parallel systems during the implementation.


Customization is really the heart of ERP, which has never been a “one-size-fits-all” proposition. Every ERP solution requires customization on many levels to help companies achieve specific goals, and to integrate with existing internal systems. These customizations will have been laid out already in strategy sessions with the vendor; at this point, the vendor’s consultants or a third-party integrator will carry them out.


here are two schools of thought to ERP deployment. Since it is a modular system, one approach is to roll out each module incrementally, which may ease the transition. The other approach is the “big bang” deployment, which rolls out all modules simultaneously. Both approaches are equally valid. Either way, deployment may be time-consuming, and there may be a need to operate both systems in parallel during the implementation phase to provide for a more seamless switchover.

he parallel operation will allow for the bugs to be worked out of the new system should they occur. With the new system operating in parallel, but not yet “live,” it is easier to go back and fix any defi­ciencies before they cause any serious problems.


Step Six: Getting Your Users to Actually USE It

An ERP implementation involves radically changing long-standing business processes. End-users are resistant to change, and ERP is inherently disruptive. There may be confusion or outright rebellion. If your users in every department do not embrace the ERP system from the very beginning, the risk of failure is great.

Getting users to embrace the system, appreciate it, and use it to its fullest potential will result from two things: User training, and user participation/buy-in. At this point, the deployment has already taken place, and gaining buy-in from the users should have started way back in the selection phase. Through every step, let the end-users know what’s going on, and keep them up to date on the ben­efits the system will bring. Build excitement, instead of dread.

User training is the second factor in success. You may be throwing away everything your end users know, and for many, it will feel like starting over from scratch—and that’s really what it is. Training should include not only the features and functions of the ERP solution, but any new or revised busi­ness processes that have been implemented as a result of your ERP initiative. is usually most effective when it combines classroom-style learning with interactive, hands-on workshops and extensive documentation.

Many companies organize training by department, or by groups of users in similar roles. However, the nature of ERP is to promote greater data sharing and collaboration between departments, so you may want to consider cross-training a few members from each team, so they can understand how other customer-facing roles across the business fit into the broader ERP picture.

Step Seven: Measure Your Success

Immediately after deploying your ERP solution, you need to start measuring its effectiveness. Early in the planning process, before the implementation even started, determine a set of key performance indicators that will be used now to measure the success of the implementation.

nvolve users at all levels in the performance management process by allowing them to monitor the indicators that are most relevant to their roles and functions. This will enable them to make “on-the-fly” changes to their own individual performance, or in the case of managers and team leaders, allow  them to instantly identify and correct areas in need of improvement. And, remember that performance management is not a one-step process. Key metrics must be periodically analyzed to allow for con­tinuous enhancement, and to ensure ongoing success.


Done right, your ERP system will save your company money, streamline operations and processes, and promote inter-departmental collaboration and cooperation. It will have identified existing bottle­necks and problems that may have been costing money for years.

ERP is a disruptive technology, and there will be resistance along the way—but the payoff can be substantial. Get everybody on board, get ready to spend some money, and most of all, have pa­tience—and you’ll enjoy a successful implementation when it’s over.