3 emerging trends in the ERP purchasing cycle impact transformation
The way organizations deploy and use enterprise resource planning tools is shifting.
As data and analytics continue to converge, organizations must change how their people, processes and technology interact with each other. Instead of operating in silos, these disciplines must increasingly collaborate, according to the Gartner Top 10 Trends in Data and Analytics for 2020 report. Organizations that continue to keep the disciplines separate are likely to fall behind competitors in their ability to provide personalized customer service.
By using enterprise resource planning tools, organizations can manage, in real time, the end-to-end business processes necessary for this level of collaboration. However, with the increased rate of change, businesses cannot afford to spend a lengthy amount of time on the ERP purchasing process.
Additionally, the way organizations deploy and use ERP tools is shifting, affecting the seller’s approach to the buyer’s journey. Forrester Research found that only 24% of ERP implementations are primarily deployed as traditional on-premises systems. Instead, most are software-as-a-service, cloud/hosted, or hybrid solutions. Forrester found that clients are increasingly interested in an out-of-the-box product, with only 17% planning to develop a custom ERP solution. The report also found that 64% of companies plan to keep their current ERP product in 2021. However, the 29% of companies looking to switch products and vendors in 2021 offer a significant opportunity for sellers.
These business shifts have affected the approach clients are taking toward their ERP transformation process. Here are three emerging trends in the ERP purchasing cycle:
1. Sellers are focusing on ERP education.
When companies begin the ERP purchasing process, many are not aware of what’s possible — both in terms of outcomes and available features in ERP solutions. Additionally, ERP technology changes at a rapid pace, making it challenging for business leaders to stay in the loop. Many ERP sellers begin working with clients by explaining features and benefits.
David Dixon, architect and finance transformation specialist at TruQua, an IBM company, says that instead of focusing on innovation, he is now having a lot more conversations about how clients can prepare to transform their operations and finance processes, along with discussing what the journey looks like.
“More and more, I see the conversation as where to start, what to do and how to lay the road map to get prepared rather than how to optimize what they have,” says Dixon.
2. The purchasing cycle is shorter.
Because of the pressure by clients to see ROI, ERP vendors need to look for ways to shorten the purchase cycle. Both clients and sellers are realizing that lengthy RFP cycles for ERP transformation are no longer a best practice. Additionally, organizations are rolling out ERP solutions in a division or department, instead of through the entire enterprise, which allows for the ability to make adjustments and iterate effectively.
Sellers can support this shift by providing a buyer experience based more around demos and examples. Some sellers are increasing sales by combining these strategies with shorter contract periods.
By using journey mapping and design thinking, clients can begin strategizing how to best use ERP to transform their businesses. Liz Herbert, a principal analyst at Forrester, says that while this is a very effective strategy, she cautions clients against overdoing it — such as in the case of an organization that conducted over 1,000 design thinking workshops, which had the reverse effect of its goal to be faster and more agile.
3. Finance is increasingly leading purchasing decisions.
While lines of business are still heavily involved in the purchasing cycle, the decisions for buying an ERP solution are now led by finance 40% of the time, up from 25%, according to Forrester. Herbert encourages clients to have both finance and technology management involved to prevent choosing a solution that either does not address business needs or does not take into account existing architecture and integration needs. Sellers who primarily tailor their approach with heavy LoB involvement must now shift their strategy to also highlight the needs and concerns of finance departments.
Moving forward with managed services
After completing the buyer’s journey with clients, sellers should continue to look for opportunities for professional and managed services. Because of the increased complexity of ERP deployments, leaders have significant questions about modernization approaches and business cases. Organizations are increasingly turning to a managed services partner to help them migrate to the cloud. Because many organizations do not fully realize the complex nature of ERP transformations until they begin the process, sellers that actively continue their relationship with clients after the sale can often demonstrate the need for managed services throughout deployment and implementation.