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How to buy ERP software - Step 5: Pick a supplier

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25th Dec 2005
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In the fifth episode of his series on selecting and implementing accounts and ERPsoftware, David Carter offers advice on how to identify the right software provider for your business

You've collected together your test pack, and written up your wish list of special requirements, so you are now ready to talk to software suppliers. What's the next step? Logically, it looks simple. Ring up Sage, Pegasus, Sun, Navision or any of the other well-known package suppliers and take it from there. Well, perhaps.

The packaged software industry is dominated by companies who specialise in accounting ledgers. The rules of double entry and company law mean that the accounts of a major corporation are basically the same as your local corner shop. This makes accounting ideal material for a standard package and pretty well every business nowadays uses a standard package to run their accounts. Many of the accounting software suppliers have grown into major companies.

But when you move out of the back-office of accounting ledgers into the front-office of operations and order processing, everything changes. The conditions that govern the world of accounting do not apply here. There are no strict rules laid down by law, and every organisation is different. People in the operational side of business do not understand accounting and often fear it. Quite simply, front office and back office are different worlds and only a very few of the major accounting vendors are equally at home with operational systems as they are with accounting ledgers.

Vertical market packages
Because front office systems vary so much between different industries, it is impossible to write a single package that will suit all organisations. Therefore many software companies specialise in specific industries.

Usually, these vertical market suppliers supply a complete front office and back office solution. The front office operational software they write themselves. For the back office ledgers they will take a well known accounts package like Sage or OpenAccounts. Then they write an interface program which takes the invoices created by their own software and automatically exports them at the end of the day into the Sage or Open Accounts sales ledger.

In the world of software development, small is beautiful. Being small and writing their own software, these companies are flexible and fast to respond. Being specialists, they need only address the needs of the one industry. Their software is doesn't have to be bloated with features like a cross-industry package. Without a large installed base of existing users, they have less need to compromise their software by making it backwards compatible.

Many of these vertical market developers are the cutting edge of software development. For example, I recently did work with one that supplies software to the courier industry. It employs 10 people and the boss is 28 years old. Small couriers with just a couple of screens use their package, but it also used by several national distribution companies to run their regional networks. All these national companies have their own IT departments who have previously written software in-house, but now they choose to run their businesses on a third party package developed by a tiny company. Why? Because it's the best around.

To stay leading edge, these companies have to stay small. There is a long, sad history of small specialists being bought up by the big-name vendors. The owners make a pile of cash and stay for a year or two, but then they get bored and frustrated working for a big company whose management understands nothing about their industry. Eventually they leave, and with the original designers gone the product slowly dies. For a small, leading edge developer, being bought up by a big company is the kiss of death.

Give the small specialists a chance
Your choice of suppliers may be far greater than you realise. Because specialist suppliers are small and don't advertise nationally, they remain virtually unknown outside their own market sector. As a result, IT writers tend to spend most of our time talking about a small number of nationally-known accounting vendors ' Sage, SAP, Microsoft Navision, SunSystems, Pegasus and so on.

Just because these are the only names that people talk about, they are not the only suppliers you have to choose from. It is well worth seeking out some of the smaller, independent suppliers. You will find that talking to them opens your eyes to what is possible.

How do you find them? The best place is in the local trade magazines that serve your industry. But the big-name suppliers will tell you as well. Specialists usually bolt a standard set of ledgers from someone like Sage on to their systems. This benefits both parties. For Sage, having their software as part of a complete solution for this industry will increase its sales, while the specialist gets referrals from Sage and the customer has the reassurance of the Sage name. Most national vendors keep lists of specialist packages that link to their packages and will put you in touch.

Always seek out a specialist
Whether you search out the small specialists or go to the big name vendors, one rule holds good ' always seek out a specialist in your application. You want someone who understands the language of your industry and the way you operate, who has encountered the same problems as you have already and has solved them. You want to benefit from their experience to solve your problems.

In practice, virtually everyone in the packaged software industry specialises to some extent. Costing and stock control are specialist applications, and even accounting itself is specialist. For example, recent requests on Any Answers have asked for the names of packages that are good for charities, warehouse management, gyms, nursing homes, car mechanics and music companies.

I am pretty sure that any standard accounts package could handle all of these, but the only person who really knows is the person who has actually installed a system. Once a consultant installs a package, s/he has the crucial experience and knows the quirks of the industry and any potential problems.

You need to remember this when you talk the national companies. They do not sell direct but through third party resellers who cover a geographical territory. Do not simply accept the name of a reseller because they are local. Demand specific experience in your type of application. You want a reseller who can teach you, not the other way around.

The ERP/Accounts Software Selector
To help you put together your shortlist of possible suppliers, we have put together the 'ERP/Accounts Software Selector' which you can find in the IT Zone. This contains details of about 100 packages from suppliers who have exhibited at various trade exhibitions over the years. Remember, though, that many potential suppliers will not be here. Find these others in the trade magazines for your own industry.

We have grouped the packages by number of users and into four broad category areas. Financials is for organisations that primarily need a back office set of accounts. Project Costing is for the project-oriented company that needs control of costs by job. Distribution is for the stock-based company that needs order processing and stock control. Manufacturing is for the company that manufactures its own products.

Accounts/ERP software implementation guide
This article is part of a series by David Carter to give you comprehensive advice at every stage of the selection and implementation process. The articles over:
  • Step 1: Defining your requirement
  • Step 2: The Test Pack
  • Step 3: The project team
  • Step 4: Business process re-engineering
  • Step 5: Picking a supplier
  • Step 6: The demo
  • Step 7: The decision
  • Implementing the system.
  • David CarterIT Zone consultant editor David Carter has installed more than 100 accounting systems and always emphasises the need to extract good management information from business software. You can get more advice and help from David on these issues from the following AccountingWEB articles and resources:

  • Accounts/ERP Software Selector
  • Mid-market Software Lab Tests
  • So you want a new desktop accounting package?
  • Choosing the right software reseller
  • Reporting Challenge: Resource planner outgrows Excel
  • Interested in Excel pivot tables? Start here
  • More pivot table tips & tutorials
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    By jvallender
    20th Aug 2004 09:45

    Re: Bad link
    Hello Stephen,

    Thank you for bringing this to our attention,
    Our webmaster has been alerted to this error.
    In the meantime you can access section 4 by clicking here

    Joseph Vallender
    Community Assistant
    AccountingWEB

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