Rethinking the ERP Buying Model for Finance Modernization (Hint: Lose the RFP!)

 

Technology changes rapidly, but the last ten years have seen an explosion of business software capabilities due in part to advances in cloud computing, artificial intelligence (AI), and the increased strategic importance of managing and exploiting business data.

So, when we talk of integrating new technologies like generative AI with a new or existing finance/ERP application, it makes sense that the ERP buying model needs to change.

While most RFPs are written with the best intention and the best research available, they tend to emphasize a long list of generic features and functions. This worked well in the past when finance/ERP systems were differentiated by their capabilities. Today, however, most cloud finance/ERPs come with comparable features and functions so judging the products using a checklist of capabilities isn't much use anymore.

Further, RFPs with exhaustive requirements listings often don't address the underlying pains or the desired business outcomes. Most RFPs focus more on compliance than strategic business outcomes. This is where everything goes awry:

• You’ll receive a set of responses from qualified vendors that have wild swings in pricing.
• The evaluation process nearly always takes 2.5 times longer.
• The evaluation costs three times more than you expected.
• Research shows that as many as 60% of these RFP processes end in no decision, frustrating everyone involved.

As someone who has helped Financial Services firms navigate the evaluation, selection, and implementation of new finance/ERP suites over the last 24 years, I’ve learned the following:

1. This project is all about the business objectives and business outcomes you’re trying to achieve. Define those early. Determine how you will measure against them. Those are your North Star. Sharing that information with prospective vendors and partners allows them to demonstrate how their product and technology can solve your most critical problems and align their solution to your desired business outcomes.
2. Put data at the center of your project. There has not been a single finance modernization initiative that we’ve been involved with in the last four years that didn’t also have a corresponding data initiative tied to it. These are not separate projects like they once were. Data is not just something IT “does.” CFOs are partnering more strategically with the business, moving away from reactive reporting to predictive, data-centric business models. Modern finance represents both a move away from manually intensive business processes as well as the adoption of data-centric architecture.
3. Be open to an alternative diagnosis. Just because you think your problems are best solved by implementing a new Finance/ERP application doesn’t mean you’re right. Allow select vendors the latitude to get to the root cause of your challenges and suggest an alternative approach if warranted.
4. Scrutinize your data strategy. How can you access the data in your system and optimize its use for proactive planning and strategic decision-making? It could be that you don't need a new ERP as much as an architecture supporting your business goals.
5. Product is only 25% of the equation. 75% of it is about having the right implementation partner at the table and the right team within your organization committed to the success of the project:

• Evaluate implementation partners who have direct experience in your industry.
• Test them with your most complex processes, not the generic stuff everyone can do
• Give them an opportunity to prove they are worthwhile. What makes a partner worthwhile? A partner who points out the risks, shows you alternatives, or shows you how to move faster or slower on implementation. It’s that simple.