There has been much talk in the business press about the commoditization of enterprise software. Consolidation through merger and acquisition and the stronger position of buyers at the negotiation table are just two of the early indicators of the industry's transition. As Geoffrey Moore described in his book, Inside the Tornado' We're on Main Street now, the commodity phase where convenience and efficiency rule. It's easy ERP. Gone are the days of the tech-centric pioneers. The illustration below represents the text book view of a technology life cycle with a graph that represents the transition point between the market's technology-centric perspective of a product to a user-centric view.
From The Invisible Computer by DA Norman (1998)
In the book The Innovator's Dilemma, CM Christensen explains that new technologies start out at the bottom left of the curve, delivering less than the customers require. As a result, customers demand better technology and more features, regardless of the cost or inconvenience. A transition occurs when the technology is "good enough" to satisfy the basic needs. A new set of customers, the late majority, enter the market with a radically new set of demands. They want convenience, efficiency, stability and low prices.
How will this trend affect your next ERP purchase? It's time to look at software from a completely new perspective and challenge conventional thinking.
The Pioneer's Perspective
To ground the discussion let's start with a review of conventional thinking, the ERP visionary and early adopter view. A company's first few enterprise software implementations were strategic initiatives focused on tangible benefits in cycle time reductions, inventory turns, asset utilization, and improved customer service. The selection process was focused on identifying the unique aspects of the company by defining the processes and the functional requirements of the business. Core technology (the operating system and database) and functionality (the requirements checklist) were the primary factors in selecting a system. Functional gaps were expected, so customization and integration were a standard part of the implementation process. Software prices were high, but could be justified based on gaining tangible hard dollar business benefits so the ROI was clear.
Once the deal was inked software companies would install an empty shell of a system or possibly the "bicycle" demo data base. Customers were starting with a clean sheet of paper. They would have the dubious pleasure of setting everything just the way they wanted it, from unit of measure codes, and invoice terms, to each and every configuration parameter. The user training was akin to trying to make one feel comfortable wearing two left shoes as the instructor would explain that a recipe or formula was really a bill of material in the new system: "You'll get used to it." Time to benefit was measured in years. This was enterprise software pioneer land which molded our baby boomer generation's perspective of how to approach a software project.
Technology Doesn't Matter
Fast forward to today: The days of the wild-west are over, and a somewhat more civilized industry structure has emerged. Technology convergence has cut the link between application software and the technology it runs on. The buzz in the industry says service oriented architecture (SOA) will be the holy-grail of this movement toward a truly multitechnology society. However, other than SOA articles and a few compliance stories, the industry press has been fixated on consolidation news. It seems that nobody is interested in cool gizmos and new product features these days. It's all about risk management and which product is the next to be discontinued. Does it matter which product—JD Edwards, PeopleSoft, or Oracle, is better? I don't think so. Product benefits are so similar that the only real differentiation is expected product longevity. Longevity is the biggest cost in enterprise software. It's the cost of switching systems. In the new paradigm, technology doesn't matter. Stability does.
What's More Important Than Functionality
The day will come when you find yourself in this unenviable position: it's time to replace your old system. Just like an old car, at some point the old system is going to cost more money in incremental programming and maintenance expenses than the monthly payments on a shiny new system with the cool executive dash board. Where do you start? To refresh yourself, you review the old project notes from the last selection project and have a hard time applying them to the current situation. The last project was part of a strategic initiative to improve bottom line business results that were clearly spelled out in the project's ROI. Today's software replacement is basically an infrastructure upgrade to enable a few incremental improvements at the least cost. A hard dollar ROI justification is difficult when compliance issues are the key drivers. It's time to switch to a lowest total cost of ownership (TCO) justification model like you used to replace a phone system. Now you review the selection criteria that formed the basis for selecting your current system. Do you need to re-document all your current business processes and create a new list of 1,000 plus features to select the best fit system for your unique situation? A quick review of the old functional gap analysis showed that all the finalists were grouped in a narrow range from an 89 percent to 93 percent fit. Functionality wasn't a significant differentiating factor then, and is clearly even less so today. Your gut is telling you that usability is more important than functionality. After all, your users are hitting the tab key more than any other to skip over all the frivolous functions you never implemented and clicking window after window to find critical information. In the new paradigm, there is no ROI. It's about TCO, and functionality isn't the differentiator—usability is.
Know What You're Shopping For
Your first challenge today is to get educated to understand the product category-segment you are looking for. Are you looking for the software equivalent of a motorcycle, a sedan, a wagon or a seven passenger SUV? Don't make the mistake of trying to compare a Harley to a Hummer. Both products will get you to the office, but the similarity ends there. Know what you're shopping for. ERP evaluation centers like TechnologyEvaluation.Com (TEC) can help you develop a short list of qualified products. They categorize products by industry requirements, by business complexity, by language support, by functional scope, etc. With a few questions, they present buyers a reliable list of functionally complete products. There are over 3,400 functional specifications that underlie the recommendation list that have been certified by TEC's experts. In just a few minutes you have a short list of packages that offer comparable functionality, and you can run "what-if" scenarios by changing your profile parameters if you like. Then, without leaving the comfort of your desk, you can Google your short-list to find the buzz that's circulating about each company and product. You should be able to find interesting white papers and exciting media coverage. If not, you may want to skip to the next product on your list. Now that's convenience. In the new paradigm, you're not unique. Take advantage of industry best practice. It's better, and it's faster.
Now it's time to meet the vendors and take the packages for the test drive. Keep in mind that when you take that car for a test drive the focus is on the feel. You're not taking an inventory of every nut and bolt. Ease of implementation and ease of use have replaced the functionality inventory as the top priorities in a selection. We have already talked about changing the justification methodology from ROI to TCO, which changes the focus from maximizing benefits to minimizing cost. The primary objective of this project is to minimize the disruption to the business. Wouldn't it be wonderful if we could slip a new system in over the weekend without anyone noticing? Convenience factors are implementation cost minimizers that are packaged into systems to reduce the time to benefit and the man-hours required to implement a system. A preconfigured solution that can be implemented in 120 days is worth a lot more than the blank page solution that requires a year of sweat equity to get running. Convenience factors can include a wide range of offerings such as
- Pre-configured industry templates
- Best practice business processes templates
- Business performance templates
- The SOA integration architecture
- Concepts of on-demand and open source software
- Integration to popular third party applications
- Data conversion templates
- User tutorials and e-learning on-demand
- Internet support services and a 7x24 hotline
Efficiency factors, on the other hand, are usability features that reduce clicks and improve the user experience. Think lean where less really is more. The functional bloat that software suppliers added to their systems to win functionality contests and to serve multiple markets has created complexity and inefficiency in the daily life of a user. Most people rank their personal satisfaction working with application software programs near the bottom when compared to other tasks they perform in their job. Why? Because the user experience was a design afterthought. Features were added wherever screen real estate allowed. Your kid's X-box or PS2 should be the benchmark when evaluating usability. No documentation manuals or training classes required. It's intuitive. Speed is paramount to winning—even in the game of commerce. Simplicity is fast. Keeping score is fun and we all like to take pride in measuring our progress. How do you evaluate efficiency? Replace the old workflow demo with a role based demo to show what the day-in-the-life of your key users will be like. Rank each scenario based on the following metrics:
- Effectiveness is the system helping people prioritize their work based on the organization's objectives?
- Information is it easy to get the right information in the right format to do the right thing?
- Efficiency is it easy to get the job done once we know what needs to be done? Count the clicks.
- Feedback does it provide performance feedback to the user in terms of more, better, faster?
In the new paradigm, you're not counting features. You want to install faster and make it easier to use.
And The Winner Is
Today's biggest risk factor is product viability because of the high cost of switching systems and the industry trend toward consolidation. Picking a stable product in your category or segment is critical to the longevity of your investment. "The Rule of Three" by J. Sheth and R. Sisodia documents the evolution of markets into two complementary sectors: generalists, which cater to a large, mainstream group of customers; and specialists, which satisfy the needs of customers at both the high and low ends of the market. Any company caught in the middle ("the ditch") is likely to be swallowed up or destroyed. This doesn't mean your choice is limited to either SAP, Oracle, or another major player. If that was the case, most of us would be driving a black Ford Model T. The next generation of killer-apps will deliver innovations in convenience, ease-of-use, and emotional appeal. The key attributes of a successful product, and hence a successful business partnership in tomorrow's ERP market include
- A Complete Product Good enough technology and enough functionality to simplify getting the job done right
- Convenience Packaging The extended product is bundled with implementation accelerators and usability efficiency features
- Quality The product and process quality standards enable very high reliability standards
- Stability The industry is rallying to create a collaborative development and support community
In the new paradigm, you're not a buyer—you're an investor. Product longevity matters.
The Check Before the Check
You've selected a finalist, but you've still got some homework to do before you sign a contract and start writing checks. You're still going to have to answer to those old school folks in your organization who claim to be from Missouri, the "show me" state. Know what you're not getting. Go back to TechologyEvaluation.Com's detailed product rating report and review the product's unsupported features from their list of up to 3,478 criteria to make sure there are no ugly surprises down the road. Accountants and quality engineers tend to be very good at this task, but make sure your lean champions get a final review of the list to eliminate the excess functionality that contribute to organizational paralysis. Then visit customers in your industry and ask them how they've addressed the few outstanding perceived software gaps. In most cases innovations in business processes have eliminated the need.
As you complete these validation steps the implementation team should get started on some pre-implementation tasks that will validate many of the convenience factors identified in the evaluation phase. Start the e-learning process and get access to the templates to separate reality from hype.
In the new paradigm, some things never change: Trust but verify. When the going gets tough, some people will second guess the decision and will want to see your due diligence.
The Pen Please
Once you've completed these steps you can rest assured that you are implementing a system that has the traction to remain or become a stable player in your segment of the enterprise software market. But even more important, you've aligned your implementation team to focus the project on a low risk, low cost, fast implementation. Above all your team will deliver a user-friendly system to your workforce.
After all, isn't the ultimate goal to enable your users to do more, better, faster, every day?
About the Author
Emmett Holt founded The Holt Group to help client companies market and sell the way customers want to be sold. The firm's goal is to create a measurable improvement in the value of your brand, from product awareness to customer advocacy. The Holt Group is a collaboration that provides best in class expertise to organizations focused on earning a greater return on customer loyalty. Emmett has over twenty-five years of experience in the complex selling and marketing environment as an executive in the enterprise software industry.
He can be reached at Emmett.Holt@HoltGrp.net.