ERP Vendors Hype Up Y2K Concerns

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	Bribery, extortion, or reward: the reference account game

Your friendly neighborhood enterprise resource planning vendor is going to be desperate in 1999. Many of your colleagues aren’t going to buy ERP systems this year. Their organizations need the functionality, but the CIO and the CFO realize they have a better chance of keeping their business up and running by fixing the Y2K problems in existing systems, rather than by buying a new system. And many organizations that already have ERP foundations in place will not be buying bolt-ons such as supply-chain management, sales-force automation, and other popular and useful decision-support software until after they have celebrated the millennium.

Bribery, extortion, or reward: the reference account game

Ten years ago, vendors announced a new product with favorable comments from industry analysts sprinkled among the speeds and feeds specifications. None ever quoted a customer. Nowadays, every press release announcing a new product contains statements from users at beta sites, each extolling the merits of the product. Customers have become the new shills for their suppliers, and these days you have to be careful about believing what even your colleagues are saying.

And it’s not just an innocuous statement in a press release anymore. Reference accounts are considered mandatory in the ERP market for case studies, advertising campaigns, and a variety of other types of marketing efforts. Therefore, the vendors go to extraordinary lengths to woo certain customers into becoming a virtual branch of their sales organizations. But before you rely on reference account statements, consider the following questions:

	Did the vendor pay off the company? Newcomers into a market are more than likely to provide “special pricing” for early adopters that become reference accounts. I was involved in a research project where one-third of the nominal purchase price was deducted from the invoice because company officials agreed to provide a substantial amount of time as a reference account, hosting on-site visits by a variety of the vendor’s prospective customers.

	Did the user insist on payment for cooperation? A customer with some issues about a product’s performance nevertheless agreed to be a reference in a case study I prepared for a vendor. In return for its cooperation, the customer asked for–and received–free software maintenance for one year. In addition, the customer insisted on getting special exclusive access to the senior developers when there was a crisis, rather than waiting in the regular support queue.

	Was the user trying to become an employee? In an era of corporate downsizing and outsourcing of IT functions and staff, IT managers may try to grease the skids for a job at a vendor by providing excessive praise about a product they would like to sell someday. I attended a presentation last year where an IT official spent close to an hour praising a particular data warehousing suite. When I tried to follow up with her a month later, I found her working for the vendor. Coincidence or conspiracy? You be the judge.

While I believe the vast majority of IT managers would never succumb to unprofessional behavior and the majority of reference accounts used by vendors have not been bribed or otherwise compelled to provide praise for a product, you should ask about motivations before you take a peer’s word as absolute truth.

To drum up business, panicking ERP vendors’ claims will get bolder, their pricing will get more competitive, and their sales pitches and techniques will get even more persuasive. A sophisticated onslaught of hustle, hype, and hubris is about to descend on prospective buyers of ERP products. Be especially careful about what is said by reference accounts–IT managers or other senior officials may have some undisclosed incentives to provide testimonials for their vendors (see sidebar, “Bribery, extortion, or reward: the reference account game”). When considering any major purchase, the best defense is a good offense, so go on the offensive if you need or want either an ERP suite or a major bolt-on.

A critical part of the purchase process is the competitive analysis phase. While some buyers hire consultants to help them sort through the competing feature and benefit claims, product spec sheets, and customer references, there is no substitute for actually testing the software in your environment.

One of the most comprehensive pre-purchase testing programs I have heard about occurred two years ago in Canada, and it’s worth describing in some detail. You could do worse than follow this aggressive approach to buying ERP software.

A rigorous selection process

Located in Ontario, the Timberjack unit of Rauma Corp., a $2.1 billion Finnish company, makes machinery for forest management. Timberjack is the result of numerous acquisitions over a 50-year period. With a variety of legacy systems impeding coordination, in early 1997 Rauma decided to revamp the unit’s IT infrastructure. The TWIN project–Timberjack Worldwide Information Network–would unite the various operating units under the umbrella of one common systems architecture. A keystone of the project was an ERP implementation.

“We went through a rigorous selection process in 1997,” notes a senior manager at Timberjack, and he understates the effort. After sorting through scores of suppliers, the unit, which has responsibility for the TWIN project, put five companies on the short list: SAP AG, of Walldorf, Germany, Baan N.V., of Barneveld, The Netherlands, QAD, of Carpinteria, Calif., Systems Software Associates (SSA), of Chicago, and Industrial and Financial Systems Group (IFS), of Linköping, Sweden. Note that one unit of Rauma already was using QAD as part of a local automation effort that preceded TWIN. Then the fun began.

Timberjack loaded each of the five software suites on its own servers and began a six-month evaluation of the various contenders. A team of the unit’s executives from finance, manufacturing, quality control, and other functional areas with hands-on knowledge of the existing tools assembled a list of 14 core processes that would be compared. Each core process contained 15 or 20 specific functions. All together, Timberjack tested more than 225 aspects of each of the five programs. Among those aspects were real challenges, such as customer-based product configuration. Timberjack’s goal was simple: determine which package or packages “would do what we want,” notes one of the team members. The team then rated the performance of the five packages in handling each of the 225 aspects.

After Timberjack was done with the functionality reviews, it had three semi-finalists. These middle-market ERP players–QAD, SSA, and IFS–were then judged on business issues. When the unit weighed the cost and ease-of-implementation factors, the short list shrank to two, SSA and IFS. Then Timberjack applied other non-technology criteria. Since the TWIN project was to be a global effort, worldwide support capabilities were crucial. However, SSA was viewed as weak in Europe. Furthermore, Timberjack officials were concerned about the disappointing financial results the company was reporting at the time of the procurement (SSA’s financial results only recently stabilized, after a restructuring and a change in top management).

IFS was selected in November 1997, and Timberjack began rolling it out six months later. By early 1999, the ERP solution was being used by several hundred employees in a variety of Timberjack sites in Canada, Europe, and the United States. Timberjack has begun the next phase of TWIN, recently buying the Windchill product data management (PDM) package from Parametric Technology Corp. of Waltham, Mass. The unit declined to buy the PDM modules from IFS.

While satisfied with IFS and the selection process, Timberjack officials note that interfacing different systems around the world is a lot harder to do than vendors would have you believe.

Phil Doble, manager of information systems at Timberjack, is a lot more skeptical of vendor claims these days. “We’re finding global integration is tough stuff,” he says. “The products’ global integration capability is very new. If you put it out globally, it’s a lot more fun,” he adds, tongue firmly planted in cheek.

So remember, you can’t be too careful out there. //

Larry Marion is an editor and consultant with more than 20 years of experience in the use of computer technology in manufacturing and finance. He is the former editor of Datamation, Electronic Business, and LOTUS magazines. He can be reached at lmarion@mediaone.net.