Working with Smaller ERP Vendors: The Pros and the Cons
Published On: December 2011
During briefings with small ERP vendors, I often hear the argument that they are more flexible and can better respond to their customers’ needs than larger vendors. The ultimate example: “You can even talk to the CEO if you need to.”
But would you want to? Bypassing the usual workflows and calling the CEO (this actually really happens) may not be a recipe for the best technical support ever.
Besides, from my experience working with and for small ERP vendors, I know that if you want to talk with the CEO, it’s likely that you’re unhappy about something (customers rarely call to congratulate the CEO for the team’s great work). Or, you’re trying to get something from the vendor without going through the formal process of, say, submitting a developmental request for new features.
I know that small ERP vendors are more willing to make compromises and create special relationships with their customers, but there are also disadvantages that you need to consider. Let’s take a look at the challenges you might encounter during the selection and implementation process, and some of the things that you can do to avoid them.
Working with Smaller ERP Vendors: The Cons
During the selection process, small vendors don’t always have detailed and flexible demos of their product available, and they are not always willing to customize the demo. You should certainly insist on getting as many details as you need about the critical functionality needed by your business. Don’t let the vendor get away with “you get the idea” or “it’s a new module and I don’t have it in my demo database.”
Data migration can be a challenge, as smaller vendors don’t always have highly qualified personnel or on hand, which can slow the process (if their DBA only comes in once a week). And if their tools are not up to date, you may find that the process is altogether inefficient (as in the case where you need to manually change some of the imported data). If your organization does not have IT people who can help you understand how capable the vendor is, try to get a commitment from the vendor that the critical data is being imported properly, and make sure you know what the vendor plans to do if the import is not successful. “Do-overs” should not be an option, but certainly you should insist on penalties (e.g., discounts, or extra services) in the worst-case scenario.
The success of the implementation depends on many factors (e.g., project management, solution complexity, etc.), but providing qualified employees can be a real challenge for small ERP vendors. Like it or not, the vendor will establish a certain priority for your project, and not everyone gets the highest. This will affect how (if) available experienced resources are allocated to your project. You may end up waiting longer (and drawing out your project), or else someone with less experience may be assigned to you (my experience: this person may have the best intentions in the world and still cause you headaches). To avoid this, make sure that a) someone in your organization is responsible for managing this project, b) there is a similar person on the vendor side, and c) they are constantly in touch with one another as well as other key stakeholders.
Something similar can happen during training, either because there are not enough trainers available or because the vendor has not invested in training its trainers, with the result that they are forced to learn “on the job.” This can lead to rather embarrassing situations—I remember once being told by a customer “It seems that we’re discovering the system together, aren’t we Gabriel?”
This need not be a huge issue if the trainer follows up on outstanding issues and makes sure to get the responses to your questions. It does become a problem, however, when your questions or problems are simply noted, with no follow-through.
When it comes to customer service in a small company, everyone contributes, from the receptionist to the managers and sometimes even the CEO. This is not a problem if the role of the receptionist is to takes a message and forwards it to the right people, or if the CEO knows the product inside and out, but if you let unqualified people try to help customers, chances are that Bad Things Will Happen (I remember witnessing a case where a staff member told a customer that all of their data was lost!). One thing you can do to ensure proper support is to build relationships with one or a few customer service representatives, get to know and trust them, and ask specifically for their help. (Also: be nice!)
Working with Smaller ERP Vendors: The Pros
There are obvious advantages to working with small ERP vendors.
Smaller vendors may have a stronger understanding of particular industries, as they typically focus on a single market or market segment. They can provide customers not only with specialized solutions, but also with best practices and templates for documents and workflows. They can also be adept at filling the holes left uncovered by large vendors, who usually target broader markets.
Small vendors will typically develop the core application in-house and integrate with third-party tools or add-ons for functionality that is not their focus (e.g.: payroll, CRM, project management). This allows customers to deploy packages of compatible solutions.
Lack of bureaucracy is certainly an advantage of smaller vendors, which may allow them to develop new functionality more rapidly—so long as they are well organized and employ qualified people.
Negotiating with smaller vendors is markedly different from negotiating with software behemoths, and bartering is quite frequent (e.g., the vendor may offer to provide free customization to customers who recommend its products).
Pricing and discounting can also be an important advantage, since the competition between smaller vendors can be extremely fierce. They are often willing to offer flexible payments, and licensing models are not always set in stone. This is an advantage for small businesses, because larger vendors typically offer pre-defined packages that are non-negotiable, most of the time.
Are You Getting What You Pay For?
In other words, if you pay less, do you get less? The answer is usually yes. And it’s not realistic to expect things to be otherwise. But as a small company, you may not be able to afford a larger solution, so the key is to find a vendor that is efficient despite its lack of personnel (there are always fewer people than needed in a small company), and to contribute to the process by involving all your key people in all major activities, from selection to installation, and even support.