How Alliances, Referrals, and Kickbacks Undermine ERP Initiatives

ZDNet recently posted an article about the perils of an ERP industry in which most of the major players are somehow aligned with ERP vendors. Panorama’s business model is based on independence from software vendors, which we have discussed in this blog on a number of occasions. It appears as though, finally, we may not be alone in our line of thinking that suggests that the well-established network of ERP resellers and partners may not be the best thing for enterprise software clients and prospects.

To summarize, the way the industry has traditionally worked is like this: 99% or more of the consultants, technology companies, and systems integrators were (and still are) somehow aligned with one or more software vendors. In other words, industry players were (are) paid pretty hefty fees to recommend or sell a particular software package. So if you hire a consultant to evaluate potential ERP systems to meet your specific needs, they are going to most likely recommend the system that they are in essence selling for their respective ERP vendor. My experience working for some of these types of firms earlier in my career is that most of the time, you are not recommending the best-fit software for the organization’s unique needs.

The problem with this is fairly clear, which is a key reason why we started Panorama Consulting Group: most consultants are more likely to act in ways that are aligned with their software vendors’ interests rather than that of the client. Any time money exchanges hands between vendors and a consultant, integrator, or analyst, it is nearly impossible for them to stand 100% on the side of their clients. The deep pockets of vendors simply speak too loudly and undermine objectivity.

I can attest firsthand to the fact that starting a consulting firm as a partner or reseller of one of the major software vendors is much easier than starting an independent firm. Because we refused to align ourselves with a software vendor from the start, we paid the price in that we had to build our own sales, marketing, and support team from the ground up without big money from the big ERP vendors. Some of the established players also don’t like this business model very much, because they know their checkbooks and influence won’t sway us to recommend something that doesn’t make sense for a client.

The upside is that clients trust us more than most ERP consultants, which is why we have been able to double in size each year we’ve been in business, most of it in a weak economy. To this day, we are still a rarity in the industry – good for us that we’re unique, but not so good for prospective clients who don’t know about us or choose to hire someone else thinking that they are independent, when in fact they are most likely not.

Whether you’re choosing or implementing ERP software, it is critical that you have an independent partner to help you through the process. An objective and technology-agnostic partner will help you choose the ERP system that is the right fit for your needs. In addition, an independent partner will ensure that you implement your ERP solution in a way that transforms your business rather than maximizes software, licensing, and ongoing professional services revenue for the ERP vendor. Such a partner is more inclined and capable to help you address critical implementation success factors not specific to the technical facets of the software, such as organizational change management, business process re-design, and benefits realization.

Listen to the podcast below from earlier this year, where we discuss how to determine whether or not a consultant is truly independent. You may also contact us to learn more about how we can help you choose or implement the right software for your organization.

July 4th Edition: Eric Kimberling Talks Independence
Podcast Originally Released June 25, 2010
For this Independence Day interview, Eric Kimberling discusses how independence relates to the ERP software industry, why it is so important to select an independent ERP consulting firm for your ERP selection and implementation project, and how you can tell if a consulting firm is truly independent.