The most overlooked cost item in ERP system selection

During ERP system selection, the various costs and possible benefits are analysed in considerable detail and assessed for each vendor. Oddly enough, one crucial factor is often completely missed during this process and that is – the cost of the next system!

The selection of a new application is never made as a back-of-an-envelope exercise. After all, most organisations have wanted to benefit from the new solution for many years. Many prospective buyers say they ideally want to work with a new solution for ten years or more.
Anyone who wants to work with a system for that long must have a good crystal ball. Because in ten years, a lot can change! What will the world look like in the year 2032? Which devices will we be working with then? How far will the technology be developed? There are plenty of questions, and we can only guess the answers from today’s vantage point.

If we turn the clock back some ten years, can you remember the actual state of technology in 2012? No one had ever heard of tablets back then, let alone the verb ‘swiping’! WhatsApp did not even exist at that point. Google was a relatively small company, and cloud technology was in its infancy. Perhaps this comparison provides a bit of perspective into what we can expect regarding new developments in the coming ten years. But far more importantly – can you comprehend what all this means for your potential ERP vendors? Consider the required competencies, for example, the required R&D budgets, the availability of international sales channels or the necessary entrepreneurship and decisiveness.

If you think about the future of ERP technology, and conclude that you are selecting more of an ERP concept nowadays than an ERP solution. A concept that is developing at a furious pace and because vendors that fall behind or miss the boat are quickly lost in this market.
Companies that are considering new solutions would do well to test their vendors’ degree of future-proofing rigorously. Do the vendors on your shortlist have any chance of surviving this rat race until 2032? Are they (sufficiently) profitable these days? Do they have a sufficient international scale? What is the size of their R&D budget? How innovative are they? And is a formal product roadmap available for the solution on offer?

By understanding the prospective vendors’ commercial legitimacy during the selection process, you can prevent many unpleasant surprises in the future. However, if you fail to look to the future, just ensure you include a considerable sum in your budget for your next ERP system!