"No one is really independent," he reminds me, though that's another debate. Perhaps he'd agree on this: the enterprise needs as many strong, transparent voices as we can get.
Recently Gheorghiu pointed me towards an interesting study on ERP buyers he authored for SelectHub (view the entire report, The ERP Buyer’s Profile for Growing Companies). The data he analyzed upsets a few apple carts, raising questions about ERP buying habits. To get at the issues, Gheorghiu and I had a fast-and-furious messaging session.
Not your typical ERP survey
The is not your typical report. The data was pulled from 225 companies, all of which approached SelectHub to explore SelectHub's platform of software selection tools. This is qualitative data, with an interesting twist: no survey involved. As Gheorghiu told me:
What is different about this is that we did not create a survey to gather responses. The feedback came from companies that contacted SelectHub because they needed help with software selection. The data was less structured, with lots of comments, but the feedback was more authentic.
Gheorghiu and I share an appreciation for qualitative data, and a disdain for surveys:
They weren't limited by the options you provide in a survey which can introduce bias, interpretation, etc.
Though the report technically spans companies up to 10,000+ employees and $1 billion+ revenues, I don't see this as a large enterprise survey. The majority of the companies surveyed were under $50 million in revenue - what is often considered the small to medium enterprise (SME) market in ERP terms.
However, there are also a good 70 or so companies in the $50 to $1 billion range, with many of them landing in the lower-to-middle of that range. This makes sense to me - this is the size of company that often does more of the selection process on their own terms, with the least outside assistance. That they would be in contact with SelectHub fits the profile. So what we're looking at here are the ERP tendencies of the smaller-to-midmarket, with 10-15% large enterprise in the mix as well.
With that in mind, what surprised Gheorghiu the most?
It was a bit surprising to see how many still consider ERP on-premises.
Though only 5 percent of respondents looked only at on-premises software, a full 53 percent considered both cloud and on-premises options. Why?
The main reason was that they look at functionality first. Which I think is the best approach for ERP.
Agreed. Given that only five percent of companies were only looking on-premises, that's an indication that data security FUD is rarely a deal-breaker now that would exclude cloud ERP. However: functionality considerations still give on-premises systems a chance, particularly in verticals where cloud ERP players don't have the functional depth yet.
ERP evaluation - surprises and concerns
Gheorghiu is concerned about the short evaluation periods:
I was a bit surprised by the short time frame for decision, and very surprised that those with short timeframes didn't contact many or any vendors.
On an ominous note, he adds:
They are very likely to make a bad decision.
The report's numbers did surprise me:
We found that 87% of companies that were only willing to spend 6 months on this process had not contacted vendors nor participated in any demos. The scheduling and conducting of demos with vendors takes time and patience, and an individual demo could take as long as 2 months to organize. Given their self-imposed timeframe, these companies will not have the time to gather enough information to make an educated decision.
But can companies make a smart decision in a short timespan, if they do their selection the right way? Gheorghiu is skeptical:
I think they're unrealistic anyway. I wrote than only doing demos takes a few months. Gathering requirements can't take less than one.
Of the 47 percent of respondents who were actively looking at vendors, Microsoft, SAP, Oracle, and NetSuite dominated the top of the list. You could argue that the vendor breakdown resembles overall market share. Gheorghiu and I were still both a bit surprised, given the range of ERP vendors with compelling products. He offered a simple reason for the emphasis on "Tier 1" ERP vendors:
Because marketing works :) We make fun of all the Tier 1 evangelists but they seem to be efficient. It's also about marketing budget. That's my opinion, there was no [explanation] offered from buyers.
And when you deal with Tier 1 vendors it's also important to evaluate partners because you're stuck with them for ten years.
True - though partner selection is always a critical factor. Cloud ERP means selecting partners that will add business value after the go-live, and advise on industry configuration options. Either way, it's more like a marriage than "go-live and go away."
Where independent ERP views and research come in
I'm a big advocate for independent advisors playing a role in project selection and implementation. But this group didn't seem to rely heavily on outside experts, with only 17 percent including consultants in buying decisions. Gheorghiu believes these companies can do more to bolster their decision making with research:
I'm not sure I mentioned it in the report, but I think that companies can do more on their own. There are so many websites, good research, comparison tools, etc.
At the end of our chat, Gheorghiu dropped this zinger:
It also helps if you approach it from a business perspective rather than IT or because everything is falling apart.
That led us back to a report on ERP vendor selection from 17 years ago (PDF link), which said, in part:
Effective IT/IS project implementation requires a clear business vision, which clarifies the organization’s direction, the goals, and the business model behind the implementation of the project.
The more things change...
I'm not prepared to take an alarmist position based on a fairly modest sample size, but this data on vendor selection seems to go against many things I advise. I would have liked to see the "outside consultant" percentage in the 80 percent range.
Gheorghiu and I debated the meaning of "independent" in this context, given there are few folks in this industry that don't receive some vendor revenue, Chinese wall or not. I would advise:
At least one advisor in the vendor selection process that has no stake in the project revenues going forward, regardless of the vendor selected.
Independence is more of an ideal to aspire to, but that doesn't mean there aren't great advisors who disclose their clients or conflicts. These folks can offer a different view than the prime project vendor. Buyers need more than one voice in their ears. As I said to Gheorghiu:
It's not about one true independent voice, but multiiple voices that add up to a picture the buyer can make sense of.
Add in Gheorghiu's advice on research, and more peer-to-peer interactions, and I'd like to think you'd have a better vendor selection process, one that looked at a wide range of ERP vendors without a rush to decision.
That fits in with Gheorghiu's goals. He thinks analysts go too far:
I think we need to allow companies to take control of their selection. Guide them but not influence them. Same with research content... When you say that a vendor is a leader, you influence buyers.
I'm encouraged by the apparent reduction in data security as a rationale for clinging to on-premises. Instead, these respondents are looking hard at functionality to determine their short list. That's where the type of analyst Gheorghiu advocates fits in - alongside tools that contrast the known and less-well-known players.
Quadrants, trapezoids and hot lists fail in ERP and cloud ERP. Too many of the considerations are industry-specific. Knowing which vendors excel in your vertical is not always obvious. Rankings may offer an illusory comfort - or a useful reference point - but they are not a short cut for vertical research.
The industry breakdown of respondents was about what I expected, with manufacturing at 47 percent, trailed by distribution (17 percent) and services (12 percent).
That led me to quip to Gheorghiu: "Manufacturing is alive and well." To which he responded: hold your horses. Which fits into his next research theme: industry-specific customer experience. Gheorghiu shared a link to a report-in-progress on Customer Experience in Manufacturing.
As he warned me: "Take a look at some of the challenges I mentioned in the manufacturing report: slow growth, decreasing productivity, skills gaps, etc." Sounds like a good topic for a follow-on conversation.
End note: for more on B2B buyer trends, check my recent pieces including The B2B buyer's journey - what we've learned, and what we're missing, as well as the comment threads. For more on independent advisors and why I preach them, check my diginomica series, Why independent consultants matter to enterprise projects.