There are many reasons for a manufacturer to reevaluate its ERP maintenance and support plans -- most notably,...
the price. There are also pitfalls along the way. But, despite the danger, learning how to manage ERP maintenance and support, and more specifically, third-party ERP maintenance, doesn't have to be daunting.
According to Howard Kiewe, senior research analyst for Info-Tech Research Group, there are three core types of customer situations that bring third-party support into play.
First, a customer may not have ERP IT specialists on staff -- or may not want to maintain them. In this situation, the manufacturer may consider adding third-party support services in addition to their maintenance contracts with their ERP provider.
"Generally those third party vendors are not a replacement for the ERP vendors' maintenance," Kiewe said, "so you're still going to, for example, pay your 22% to Oracle or 18% to SAP."
On the flip side, a manufacturer might have internal staff members that are quite good at maintaining their system, but a good substantial amount of money is also spent to maintain direct support from the ERP solutions provider. Some companies would prefer to spend less, often because they either don't utilize the support much -- or they are unhappy with the level of support they are getting, Kiewe said. In these situations it can often make sense for a manufacturer to turn to a third-party support provider.
A third situation occurs when a manufacturer has a stable ERP implementation and doesn't anticipate needing any significant changes for years to come.
"One of the justifications for paying the ERP vendor fees is getting to upgrade to the latest versions of the software as it comes out, and that may be reasonable if what you want to do is upgrade," said Kiewe. But in some IT environments, that may not be necessary or even disruptive to business processes. "Even if they don't mind paying the fee, they might not like the disruption when there's no real significant business benefit to justify the upgrade."
In either case, here are Kiewe's four tips for managing ERP maintenance and support:
- Develop a solid governance plan for the entire process
ERP services are not like buying a photo copier, which is a standard piece of machinery where you can get a maintenance contract and if it breaks you can pick up the phone and somebody can come fix it.
"ERP is intimately connected with your business, and so your third-party partner needs to have an understanding of what it is you do, and you're the one who needs to provide that for them," said Kiewe, noting that recent research from Info-Tech Research Group shows that the most important success factor in getting great ERP help and support is good governance of the process.
For example, a common mistake is when companies hire a third-party to support their ERP system and then leave them alone to do their thing. "If they fail," he said, "you don't really look at it as your problem, you look at it as their problem -- and yet, it is your problem."
What manufacturers need to do is establish is a governance process to manage their vendor, achieve good relationship management with their vendor, and select a vendor that's responsive and motivated to understand the business and to work together as a team.
It's important to know that some of the best ERP service providers bring more than just technical expertise to the table, said Kiewe: "They can have process knowledge about how businesses or manufacturers are run because they get to see a lot of different clients and they sometimes have ideas about how they can improve your business processes."
- Create a great service level agreement
Too many organizations focus on the penalties in their SLAs. "The first goal of a good SLA is to make sure everyone is reading from the same page, and that response levels and resolution times and all that are clearly defined," Kiewe said. "What is considered a severe issue? A non-critical issue? You need a common understanding. It's not that you want the SLA there so you can hit your vendor over head with it, or if you have a penalty clause so you can extract money by triggering a penalty--you want to avoid having to trigger a penalty clause."
A great way to encourage better performance -- get a service provider to accept stiffer penalties for failure -- is to offer both a reward and penalty clause in the SLA. "Rewards create an interesting negotiation position and it feels fairer from vendors' perspective. Some of our most successful clients have both in their agreements," Kiewe noted.
- Assign one individual to manage the maintenance or service relationship
A clear escalation path is critical to great service, and that starts with a single point of contact within a manufacturer's organization. One person will not only be intimately familiar with the agreement, that person will also be able to save critical time ensuring that the correct steps are taken by the service provider to mitigate business damage in the event of an unexpected problem.
- Understand your ERP roadmap
Saving on maintenance and third-party support can easily slip into a short-term gain, long-term loss scenario if you don't have an ERP roadmap in place.
"If you're anticipating very few changes and your platform is stable, and maybe in five years you want to switch ERP systems -- and you have some tolerance for risk -- you may consider getting rid of your direct vendor support," Kiewe said.
"By going third-party, it's less costly -- but only if you're not intending an upgrade. If you go off maintenance, you're not entitled to the patches or incremental upgrades, so when you do have to upgrade because your technology is so old, it becomes a much more expensive process," he explained. "The pitfall is when you haven't thought it through."
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About the author: Chris Maxcer is a freelance writer.