The ERP market is in fantastic shape. In France, it pulled in almost 3 billion euros in 2016 and analysts forecast an average annual growth of 3.5% until 2020¹. With more than 2,500 stakeholders in France alone, software publishing now very much looks like a new digital El Dorado. But companies often doubt whether each new El Dorado is fact or fiction. Their main fear: the vendor will go out of business and their tool will be orphaned. So, the first thing you should do before signing a contract is to check the sustainability of an ERP publisher.
How do you choose between an industry giant and a minnow?
Some would say that you needn’t worry about the long-term future of a company when you work with a big software-publishing beast. And they’re not entirely wrong. If you opt for an industry giant over a small regional company, you’re unlikely to see your partner bite the dust overnight.
That said, no company is immune to the odd setback, as we saw with the 2012 scandal surrounding HP’s takeover of software company Autonomy, whose board had allegedly cooked the books to inflate the company’s value². However, save for exceptional cases, industry giants don’t tend to have feet of clay. So, what’s the snag? Well, the bigger the company is, the less time it’ll have for you: it simply has bigger and better things to do.
Read also: Software Publishers—How to Provide a Quality After-Sales Service.
On the other hand, deciding to go with a vendor with a less flashy customer portfolio could involve slightly more risk. It’s not a question of staff numbers—a software minnow could be just as robust as a giant. It’s more a case of how much turnover you generate for the vendor. A big company could quickly bring in significant sales for a small software vendor.
Even though this situation is tempting (after all, your supplier will do anything to keep you happy), it’s not a good strategy: the vendor won’t have time to do its job and keep working on its own program. If you’re its biggest customer, the line will blur between the vendor’s strategy and your needs, and that could weaken its business on the long term.
So, in both cases, how can you make sure that your supplier is in it for the long haul?
5 ways to test the sustainability of an ERP publisher
When choosing a smaller vendor, size matters. Around twenty employees is the critical threshold. Beyond that, the company has a good chance of sticking it out. But above all, size is closely related to the type of software you want.
A small vendor that can offer your SME a CRM system with high added value will find itself in a sticky situation if it has to roll out an ERP software in a company with 3,500 users. An ERP software is not a CRM system: it’s tougher, more detailed and more demanding over time. So, choose a provider that is robust enough to support your company.
Read more: CFO and CRM, a Marriage Made in Heaven?
2) Financial sustainability
Financial health is a key indicator—that goes for both vendors and integration specialists. Even though the French ERP software market is in rude health, there are significant disparities across the industry: there are some giant companies but also many small-scale providers.
3) Find out who is steering the ship
Meeting the captain is a good way of finding out if the boat’s on the right course. Before you choose your ERP company, talk to board members and shareholders, and find out if there is any trouble in the water. Are the board members also company shareholders? Good: strategic coherence means reliability. What if they’re not?
Watch out: board members who are shareholders have excellent future prospects, but shareholders alone have the power to sell or liquidate company assets. Think about how old the principal shareholder is. If the answer is close to retirement age, who is going to pick up the reins?
Another key point. The boss of an ERP company, just like the boss of any other company, has to be motivated by a vision (of the market), ambition (gains in market share) and a plan (for growth). Take a careful look at your prospective vendor’s future projects.
5) Contractual obligations
Lastly, just in case you still have doubts, get everything down on paper to give yourself peace of mind. You could, for example, ask your provider to add in a clause that protects you, should the vendor file for bankruptcy or be taken over. A vendor that is confident about the future won’t refuse your request.
Read more: ERP Contract, 3 Key Points to Consider.
You must take the time to look at how robust your potential provider is and consider its future prospects before you commit yourself. Keep one thing in mind: a confident vendor with a bright future won’t have any reason not to offer you all the contractual undertakings you need to trust their staying power!
¹Shortways, « Le marché français de l’ERP se porte bien en 2016 » [“The French ERP market is looking good in 2016” – article in French], 20 September 2016.
²Le Monde, « Le scandale “Autonomy” conclut une “annus horribilis” pour Hewlett-Packard » [“The ‘Autonomy’ scandal rounds off Hewlett-Packard’s annus horribiliis” – article in French], 21 November 2012.