Massive ERP systems aren’t usually a good fit for midmarket manufacturers. A whole category of ERP vendors targets...
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this segment, and high-end vendors have long struggled to give smaller companies easily deployed versions of their flagship ERP offerings. In these excerpts from a SearchManufacturingERP.com podcast, China Martens, an analyst at Forrester Research Inc. in Cambridge, Mass., offers advice on selecting midmarket ERP software.
Martens explains how midmarket ERP software differs from tier 1 enterprise ERP and suggests criteria to consider before approaching vendors. She also describes the characteristics of midmarket companies that do well with cloud ERP.
First of all, how does Forrester define a midmarket company?
China Martens: We tend to do that by a head count, so typically midmarket is between 100 and 999 employees, and with them we kind of split that further into 100 to just under 500 being lower midmarket; 500 and above for the upper midmarket. We don’t tend to use revenue as a guide, but typically any company above a billion would fall into the enterprise bucket, not midmarket.
More on selecting midmarket ERP software
Listen to this entire podcast
Read Gartner's take on midmarket ERP
Know the five questions to ask before buying ERP
How do their ERP needs tend to differ from those of either really small or very large manufacturers?
Martens: It tends to be in terms of geographic reach. The midmarket firms will tend to have operations in more than one country. They will therefore have much more need of multicurrency, multisite, potentially multilingual capabilities with their ERP software. They really do want to be able to roll up operations so they can have an overall global picture, then drill down into them on a country, departmental level. Typically, this functionality is inherent in enterprise ERP, less so in midmarket ERP. They also will have, as compared with small manufacturers, dedicated IT staff, but these will tend to be a lot more constrained in terms of headcount [and] their availability. So they won’t have the ability [or] the time to devote to doing the kind of heavy customization that enterprises that might have a quite sizable IT staff [can do].
What are some of the best questions to ask vendors -- maybe if you’re putting together an RFP -- to separate out the ones that truly have the needs of midmarket manufacturers figured out?
Martens: It’s really key [to ask] about the existing customers who are in the same business as yourself, the same business parts of manufacturing, and then get to really talk to those guys and to get more of a sense of the deployment time, the ease of implementation, the functionality. You also want to get a really strong sense -- because often you’re going to be dealing with partners here more than the vendors -- about their fields and their expertise.
What would be some of the key criteria to keep in mind when you’re looking over the specific features and modules and integrations of the different suites that have made it to the short list?
Martens: It’s really a sense of “Will this be the right fit for my business today and tomorrow to support your business as it grows, as it changes?” I think also you want to get your short-listed vendors in for a demo. And at that stage, you can get a good sense of their commitment to serving your company’s needs.
How much time and thought have they put into the presentation they’ve given you? Is it generic, [or] is it really tailored to your specific business needs? Is it tailored to your particular company? And how open are they to answering the questions? Do they really understand your business, your business processes? And again, have they worked with similar organizations before?
On the modules side, [it’s] really getting a good sense from them of what particular modules you need to run your business on -- which [ones] you might need to process, which [ones] you might need to purchase later, so that you’re not investing from the get-go in modules that might sit as shelfware, and then later when you might want to take them on board, you might find it too costly to do so.
The integration burden you really want to get a good handle on. Those other third-party products you need: What kind of integrations do the vendors offer with those already? And again, get to talk to customers who are using those particular integrations.
Cloud models like Software as a Service are often held out as the most affordable way for midmarket companies to deploy ERP, but there really are a lot of choices out there, including hosted ERP, public clouds and lots of different pricing models. What are some of the cloud deployment approaches that you think are more likely to work best for midsize companies?
Martens: I think the move to the cloud is moving a lot more slowly in general in the ERP world versus somewhere like CRM, where it’s going gangbusters. It tends to come down to a comfort factor, and the kind of companies that we’re seeing that are moving to adopt some variance of cloud are those that have real drivers behind that move. Typically it might be that their hardware is becoming obsolescent and they need to refresh it. The apps -- they’re no longer being supported. It’s a structure [in which] they might be wanting to change the underlying database. There’s some kind of compelling reason to move.
Typically, these guys are already successfully running some form of third-party Software as a Service or remote hosted software, so they’ve kind of broken the ice on that. They know that they can get CRM running, and so they feel more confident in looking at cloud for ERP. Also, they really want to be able to identify some kind of potential cost savings related to the move so they can more easily sell it to management.
I tend to think some of the fears about security and scalability have somewhat dissipated, but I think customization remains quite a key concern for a lot of folks approaching the cloud. That’s an area that you really need to go into with the vendors, [with] the realization ultimately that it’s a mix-and-match approach. It’s not going to be all or nothing.