Q&A with Forrest Burnson, Market Research Associate at Software Advice

This week we had the opportunity to sit down for a Q&A session with Forrest Burnson, a Market Research Associate with Software Advice, a company that analyzes and recommends ERP software, recently conducted a survey to better understand the factors that influence ERP software buyers’ purchasing decisions. They key findings from the study were:

• Fifty-nine percent of buyers cite the need to improve the integration of data between different business processes as a top reason for seeking an ERP system.

• Forty-seven percent of all buyers cite the need to improve their customer relationship management (CRM) database as a reason for wanting to purchase an ERP system.

• Among buyers currently using ERP systems, 24 percent cite lack of support and 19 percent cite cost as their primary reasons for wanting to switch to a new system. 

Can you tell us more about why 24% of ERP purchasers cite lack of technical support as one of their main reasons for wanting to switch to a new ERP system?

Many of the prospective buyers in our study who currently use an ERP system are using older legacy systems that they have a perpetual license for. One common theme we see is that they stop paying annual support and maintenance fees because they keep going up year after year, even though they're not necessarily getting better support or added utility to their system. They're essentially put in a position where they need to decide if they would rather risk their whole cumulative investment into their ERP system than keep paying up every year. So that lack of technical support is due in part to the fact that they're not willing to pay for it at the price point set by the vendor, which they tend to view as predatory. In other cases, their ERP system has simply been discontinued so there is no support whatsoever, or they're using a proprietary ERP system and whoever designed and maintained it is retiring or leaving the company. 

As for prospective buyers who aren't currently using an ERP system, that lack of support is usually due to the fact that they're using disparate best-of-breed systems from different vendors, and those vendors aren't able to give adequate support to address whatever idiosyncrasies they're facing when they use those systems in conjunction with each other. 

What recommendations do you have as a solution to this problem? What trends to you see in the marketplace for addressing this issue?

Obviously the trend is toward subscription models/SaaS solutions, which I generally think is better for most customers and vendors at the end of the day. For customers, there's less of a sticker shock and their overall investment will be more predictable and transparent. For vendors, it provides a more steady stream of recurring revenue and it allows them to roll out updates more gradually and uniformly, while also forcing them to be more attentive to their customers' needs. That might mean more work for the vendor on the front end of things, but I would imagine that they would experience greater customer retention as a result. 

The study notes that improving integration was also a key issue for current ERP users. Can you tell us more about that?

The biggest integration issue we saw was with CRM. A lot of the smaller to midsized firms we speak to are starting to realize just how powerful CRM data can be in executing other ERP processes, especially when it comes to improving their sales forecasting, quality control and customer support. Most prospective buyers were using standalone CRM systems that don't fully integrate with their ERP system, or whatever systems they have in place to execute ERP processes. So not only are they dealing with a lot of duplicate data entry and all of the messiness that entails, but they're maximizing the value of all the business data they are collecting; it's easier for serious issues to fly under the radar when your CRM isn't fully integrated with your ERP. 

Many of our customers are in manufacturing, logistics, and heavy industry. What trends are you seeing for those industries around evaluating ERP systems?

There's been a lot of disruption in logistics in the past decade or so, especially when it comes to warehousing and distribution. Between increasing automation, the greater prevalence of technologies like RFID and EDI, volatile fuel costs, and the consolidation and growth of the 3PL sector, there are a lot of market forces at play that are causing prospective buyers to have more specific needs. They want a system that will help them maximize the value of their human capital, give them total visibility into their supply chain, help them better track and mitigate fluctuating operating costs and be able to communicate and integrate with their clients' and suppliers' systems. 

As far as manufacturing and heavy industry go, we're seeing a lot of niche ERP providers pop up that are offering competitively priced, highly-tailored systems for those segments. For prospective buyers in those segments, the question will always be if they should "go with what they know" and implement a less-tailored system from a more established vendor, or if they should take the risk and implement a system that hasn't proven its longevity on the market but still might suit their needs better. 

To learn more about Software Advice, visit http://www.softwareadvice.com/erp/.