In the past six months, I have noticed a trend in government RFPs for ERP solutions that place a significant amount of power in the hands of the RFP respondents. Several RFPs have only been providing a minimum amount of requirements and information, such as existing hardware, number of users and general functionality requirements (e.g., HR, payroll and time management). Some of these RFPs have been as short as six pages. ERP respondents are free to offer whatever products they have that will meet this low bar (and whatever will produce the most profit).
While I appreciate brevity and the absence of micromanagement in many business practices, an RFP for ERP software is not the place to be short and sweet. Before pen ever hits paper, an organization must make a roadmap for its ERP initiative. It should ask itself four guiding questions:
1. What is the organizational purpose for wanting to acquire ERP software? The organization must answer this question to begin setting its goals and expectation for the ERP software. Is the organization expecting cost savings, more efficiency or more functionality? Is this purchase mandated? Knowing these answers, the organization can begin building the business case for this purchase.
2. How critical will the ERP software be to the organization?Not all ERP modules have the same level of importance for an organization. For example, if a customer bill pay function fails on the organization’s website, this could have a greater impact on the organization (and more negative publicity) than if an internal function fails. By understanding the level of criticality, an organization will know what levels of service and remedies to request from vendors.
3. What is the budget for the ERP initiative? Most organizations plan for the year that the ERP software is purchased but fail to look past the first year. Not only does an organization need to plan for the purchase itself but they also need to plan for hardware upgrades, implementation, training and service and maintenance agreements. One area rarely discussed is how much the service and maintenance agreements cost after the first year and what is an acceptable rate of increase. Many ERP vendors tie service and maintenance increases to CPI or a fixed percentage. Organizations have the best leverage when negotiating service and maintenance agreements upfront. After the initial contract is signed and the software is installed, organizations have very little negotiation power over long-term service and maintenance agreements.
4. How long will the ERP implementation take? Most organizations do not research the average implementation times for ERP software. A well-run implementation takes time and average times vary greatly by ERP solution. Organizations can better plan and budget for overrun, project management and staffing when they have realistic timelines upfront.
By discussing and answering these four questions, the organization will have a roadmap to guide the subsequent in-depth research and requirements gathering that is vital to draft a comprehensive RFP for ERP procurement.
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