Dispelling the ‘ERP First’ Myth

This week we heard it again – the CIO nixed the deal.

I just couldn’t wrap my mind around the fact that this prospective customer is losing around $30K a month due to supplier related issues, and they weren’t going to fix the problem right now. I knew we could help them because our experience is that within six months of implementation, we usually drive those costs down by 25%. After a year of implementation, it’s not uncommon to see greater reductions in supplier performance related issues. To that point, in one of the calls we had with the Supplier Chain leader he acknowledged that we would likely cut their immediate problems by 30%.

Regrettably, the CIO killed the deal on the basis that they were beginning the selection process for an ERP as part of their digital transformation initiative. He was hoping to find an ERP that had a supplier portal and supplier performance tools. So why was I frustrated? Partly because I’m empathetic and I’ve been on that side of the business – responsible for the supply chain performance and quality, but with my hands tied because someone doesn’t have the full picture. Really, I was frustrated for the Supply Chain team we had been working with because they would continue to lose $30K a month for the next three years and there wasn’t a thing they could do about it.

ERP and Supplier Performance Platforms should be selected separately.

It is often (far too often) big consulting firms (not going to name names here) who push to consolidate a relationship like this as well BECAUSE they get very long tail revenue from a year’s+ long ERP deployment. Companies ALWAY miss out on ROI from rolling out other beneficial software solutions while waiting on 1) ERP selection process (5-6 months) and then, 2) 8-24 months ERP rollout and change management. In these cases, someone high up in the organization will get away with this by waving their hands and saying “oh we are looking at the bigger picture and the ERP solution is a far bigger picture; we can easily get to that more insignificant value after the ERP is solid”. Unfortunately, ERP developers feed this idea because they know they are in competition with everyone.

Fortunately, it’s not always like this. Some CTOs and CIOs get it. We’ve had several customers over the past few years who were facing this tech dilemma, and wisely chose to move forward with our supplier performance tools knowing that they would be able to integrate with whatever ERP they selected. One customer (an automotive OEM) selected their ERP the same month they chose Open. We began delivering substantial value to the OEM within four months. We went on into two subsequent phases of implementation since then, driving even bigger cost savings.

ERPs don’t solve all the problems that Open Supplier Performance solves for our customers.

Notably, they still have not gone live with their ERP that they selected three years ago. In that time, we’ve literally saved them millions of dollars, help them improve the reliability of their supplier base, and they have greater confidence in the quality of their cars. For us, that is exactly what success looks like. That’s just one of the reasons ERP and Supplier Performance Platforms should be selected separately. A few years ago, another customer selected us while they were in the midst of their ERP implementation. The project had gone long, cost had skyrocketed, and they were beginning to scale back on the scope of the project but still had significant supplier performance problems. Open came to the rescue and was able to fully operate as a supplier portal standing alone without integration, until they went live with their ERP.

After that we were able to integrate and enrich data in their ERP, which only improves their visibility and transparency across their business. What I love about both of these stories is that they prove you don’t have to wait. One of the other arguments we hear is that implementing a supplier performance platform might drain your tech resources or distract from the ERP selection process or implementation. No.

The truth is that the typical Open implementation does not need IT support to gain immediate value. The tiny fraction of our customers that do typically only require 20 to 40 hours to complete an integration of some kind. That’s relatively low impact to realize hundreds of thousands, or possibly millions in annual savings.

Why ERP and Supplier Quality Platforms Should be Selected Separately

Our research around ERP selection and implementations indicates typical ERP selection timeline is 40 weeks, and the average implementation 24 months. That means a ERP project is around 34 months. However ERPs don’t solve all the problems that a supplier performance platform does.

On the other hand, a Supplier Performance Platform selection usually takes 6 – 9 months and the average Open implementation is 6 – 9 months. We have seen supplier performance-related costs result in $1.7M per year. Open can substantially reduce those costs within year one.

ERP’s don’t solve all of the problems that we address. Even if an ERP has some overlap with our solution, we implement in six to nine months. That means Open is delivering value before you have even selected an ERP. Then take into account the time it takes to implement your ERP, that value we drive is multiplied. How much money will you lose in that period where we could be implemented, and the ERP is not? Why wait three years to realize your ERP will never do everything you need it to and only at that moment come to the realization that you’ve lost millions of dollars waiting?

We understand the problems our customers face. That’s why we built Open ground-up to be capable of stand-alone operation, thanks to native tools such as Purchase Order Management, Product Lifecycle Management, a complete supplier database, and the power of a supplier portal that ensures you collaborate with your supply chain for speed, transparency, and clarity. To further automate and improve the efficiency of your business, we can integrate with most ERP systems, including Oracle, SAP, QAD, Dynamics, and SyteLine as well as other databases, no matter where the data is or how it is hosted.

Don’t fall prey to the ERP First fallacy. You can start saving hundreds of thousands a year with Open now, you don’t have to wait. Want to learn more?