ERP Selection to SLA: Next Steps Before Signing the Final Contract

The enterprise resource planning (ERP) selection process can be complex and arduous so completing it often leads to a euphoria that encourages the quick signing of a software licensing agreement (SLA) with the winning vendor.

Moving straight from EPR selection to signing a final contract, however, is a mistake.

It’s great that you have selected your preferred ERP, but now is the time for a “cooling off period” that should include a discovery phase during which a preliminary implementation plan can be developed.

Implementing an ERP System: Marathon not a Sprint

Implementing the right ERP system for your business is a marathon, not a sprint, so do not be afraid to hit pause and give yourself time to make sure your selection is not a mistake.

This interim time between ERP selection and signing the final contract will allow you to get to know your vendor better before sealing the deal and will give you enough time to work out the SLA details from payment terms to warranties to data security and other minutiae that matters.

“Implementing an enterprise resource planning (ERP) system can be a complex undertaking that affects many parts of the business. As with any major initiative, a carefully designed implementation plan is critical. Dividing your implementation into phases, each with clear objectives, can maximize your success,” advises Lisa Schwarz, senior director of global product marketing, Oracle NetSuite. “In contrast, diving into an ERP implementation without first establishing clear project direction, scope and structure increases the likelihood of encountering significant problems later.”

What Could Go Wrong? Why “Cooling Off” is Needed

Some may ask: We spent all this time vetting the vendors and their software in the ERP selection process … why do we need a “cooling off” period?

Everyday consumers need legally mandated “cooling off” periods after signing contracts for such things as vehicles, insurance, timeshares and more.

Businesses, from Main Street to Wall Street, also should take their time before inking software contracts because even the best-ran companies in the world can botch an ERP system implementation.

Consider the cautionary tale of what happened to Nike and their $400 million disaster when an ERP system could not handle their supply chain.

CIO magazine says Nike’s ERP failure was a double whammy:

• First, there’s a software problem closely tied to a core business process—in this case, factory orders.
  
  
• Then the glitch sends a ripple through product delivery that grows into a wave crashing on the balance sheet.
  
  

“The wave is big enough that the company must reveal the losses at a quarterly conference call with analysts or risk the wrath of the Securities and Exchange Commission, shareholders, or both. And that’s when it hits the pages of The Wall Street Journal, inspiring articles and white papers on the general subject of IT’s hubris, limitations, value and cost,” reported the magazine.

Add a Discovery Phase Prior to Signing the Final Contract

It is important for businesses to add a discovery phase as a bridge between ERP selection and signing the final contract.

A discovery phase, during which a preliminary implantation plan can be executed, is an accepted way of doing business in Silicon Valley.

“It’s a proven way to reduce risks, estimate & cut costs and create a reliable roadmap to achieve great business results,” says Fulcrum, a company that takes startup products from idea to research to MVP (minimum viable product) to IPO.

Why is a discovery phase needed? Fulcrum points to these statistics from McKinsey:

• 45 percent of software development projects overrun their estimated budget.
  
  
• 56 percent of IT projects deliver less value for the end user than planned initially.
  
  

“Discovery, (or scoping phase) is the initial stage in software development where the main focus is to get to know the end-user, clarify project vision, goals and scope, and identify risks,” says Fulcrum. “Discovery phase in software development is apparently a mystery to most people and even some business owners. It might sound profound and complex, but in reality, it involves well-known business processes.”

Take These 7 Steps After ERP Selection

The vendor, naturally, wants you to sign that final contract and get the full job going, but you agree that a “cooling off” period is a good idea.

Here’s how you can implement the discovery phase of your ERP project after the initial selection. Try these 7 steps:

1. Contact all the vendors involved in the ERP selection process and let them know where they stand in the rankings.
   
   
2. Bring in your top vendor from the ERP selection process and let them know that at this time you will NOT be signing a contract.
   
   
3. Tell the primary selection vendor that you want to start a “discovery phase” and expect a “preliminary implementation plan” within a set number of months.
   
   
4. Be prepared to circle back to your runner-up vendor in the ERP selection process if the primary vendor selected does not agree to your terms of the discovery phase and preliminary implementation plan.
   
   
5. Come to terms with the selected vendor on the discovery phase and preliminary plan – they need to be fairly compensated during this interim period between ERP selection and signing of the final contract.
   
   
6. Sign the service agreement for the preliminary implementation plan which should detail the unique business and technology processes of your organization and how the software will operate inside these parameters.
   
   
7. Use this discovery phase to evaluate the benefits of proceeding to a final contract with the software vendor.
   
   

Discovery Phase Done Right Can Aid EPR Implementation

The discovery phase is more than just an opportunity for your business to avoid “buyer’s remorse” but is a chance to make sure your ERP implementation is executed properly.

This can be a time to:

• Determine the goals, needs and vision of the project.
• Build the technological architecture to achieve specific goals.
• Mitigate development costs by thinking through the implementation plan.
• Identify and mitigate possible risks with the project.
• Creating a clear project implementation roadmap.
  
  

We said earlier that ERP implementation is a marathon and not a spring, but really it can be as tough as completing an Ironman competition.

So, think of this first phase (selecting the ERP system) as your swim – congratulations you are out of the water but before celebrating too much, remember you still need to get on the bike (discovery phase) and only then can get to the final, grueling run (signing the contract and ERP implementation).

You might find your performance is ultimately only as good as your support team, which is why KnowldgePath can be a true asset in helping your business accomplish a successful ERP transformation.