It’s no secret that wholesale distributors are facing a number of pressures, thanks to a worsening economic climate. This is particularly true for small to medium business (SMB) distributors, who are likely to be hit hard by cash flow difficulties and slow-as-molasses product movement.
That’s why many SMB distributors are considering the acquisition of an enterprise resource planning (ERP) system to help improve their business processes, as well as their control over costs and resources.
Other benefits of ERP systems for the distribution sector include:
reduction in time and costs associated with warranty and returns processing
improved communication and coordination among cross-functional teams, including representatives from logistics, production, purchasing, finance, marketing, and research and development (R&D)
improved visibility into distribution capacity, inventory, and labor
reduction in delivery time and transportation costs through vehicle-routing analysis
However, SMB distributors are understandably reluctant to embark on an enterprise software deployment without some assurance that they can contain both the costs and the time frame of implementation. And in difficult economic times, they’re particularly concerned about the ability to be flexible about changing business requirements, on short notice.
Let’s face it: there’s no such thing as a simple ERP implementation. And unless you have deep expertise in enterprise-scale software implementations, you’re well advised to get some outside help.
We’ll look at ways you can squeeze value out of your ERP selection process by partnering with a value-added reseller (VAR) for the implementation process, and examine one VAR’s approach to delivering that value.
VARs and the ERP Community
First, what a VAR is not:
A VAR is not an independent software vendor (ISV)
. As the developer and vendor of an enterprise software application, an ISV is an expert when it comes to the technical functionality of that software application. That doesn’t mean the ISV is an expert in determining how your business processes ought to change in order to adapt to the new software.
A VAR is not a system integrator
. System integrators ensure that the technical pieces of multiple systems function cohesively. They are naturally invaluable in a troubleshooting role. However, they are not experts when it comes to thinking strategically on your behalf through all the implications of the changes your business will face in adopting an ERP system.
And a VAR is not a consulting service
. The experience and expertise of consultants can help you save time and resources during your software selection and implementation. Consultants can also guide you through the change management process of software implementation.
However, at certain points during implementation, you’ll also need to collaborate closely with a partner who is an expert in the technical aspects of the new software and sensitive to your strategic business needs.
So what is a VAR?
Enterprise software VARs add features, functionality, or modules to existing enterprise applications, and sell them as integrated systems. VARs can also provide value through such services as customization, integration, implementation, application or technical consulting, training, and support.
VARs: The Pros and Cons
Let’s turn now to some thoughts you should bear in mind when considering partnering with a VAR.
VARs can provide significant value and expertise in countries where they exhibit better-attuned localization skills, heritage, and cultural awareness than the vendor.
Depth and breadth of knowledge
Thanks to extensive experience working in particular industries and vertical segments, VARs are often keenly aware of the pain points that affect your business—and are knowledgeable about best-practice approaches to addressing those pain points.
Deep product expertise
VARs typically build their business around implementations of particular products. Paradoxically, they may even have deeper product expertise than the vendor, particularly in a volatile landscape of ERP vendor mergers and acquisitions. Caveat: In order to maintain a viable business model, many VARs partner with multiple “master vendors,” which may result in their becoming “a jack of all trades and master of none.”
Understanding of small-business concerns
Tier-one vendors are increasingly targeting their solutions at the SMB market, but “SMB-sensitivity” doesn’t necessarily translate into significant experience with SMB implementations. On the other hand, VARs not only have experience working with SMBs—they generally are SMBs themselves, and are more likely to understand your business concerns and challenges.
Potentially limited ability to perform software modifications
Depending on the agreement between a VAR and its vendor, the VAR may be prohibited from making modifications to the source code of the vendor application. This is a concern if you need functionality that cannot be provided either “out of the box” or via product customization. However, note that modifications to the source code may not be supported by the vendor (regardless of whether they are made by the vendor or the VAR). And in any case, you should always approach source-code modifications with caution— these modifications spell “complications” when it’s time to upgrade your software.
Less financial security than large software vendors
Naturally, there’s always some risk inherent in partnering with a smaller organization. Will your VAR still be around when it’s time for you to upgrade your system? Again, experience should be your watchword. Even in uncertain economic times, there’s a world of difference between an experienced VAR and a fly-by-night. That’s why it’s incumbent upon you to perform due-diligence research and analysis regarding the financial viability of not only the VAR (see Ten and a Half Questions to Ask Your VAR before You Sign a Contract
at the end of this brief), but also the vendor behind it.
Fewer resources to deploy on software implementations
Obviously, a VAR may not be able to commit resources (e.g., time and labor) on the same scale as the vendor it represents. On the other hand, it is by no means given that any particular vendor will commit to any large quantity of resources either.
It’s worth stressing that these cons are not necessarily dealbreakers, particularly if you’re an SMB wholesaler seeking a “fast-path” implementation.