A Three-party Game

The ERP ecosystem is comprised of three major parties: software vendors, consulting services (including both consulting firms and independent consultants), and adopting organizations. In the ERP game, these parties work closely to achieve a common goal—to improve operation performance for the adopting party, through the establishment of ERP systems.

The vendor is the main source of software technologies. Without the software (behind which are methodologies, system designs, programming and testing, and all other efforts that make the delivery of a software package possible), the adopting organization would have to build its own system from scratch at much greater cost.

The adopting organization is the financial source for the whole ecosystem. Without this party, the whole ERP industry would not exist.

Consulting services are the bridge between the other two parties. The existence of consulting is the result of a division of labor, which allows every party to focus on what it does the best.

If we look at this three-party game from a short-term perspective, or on the level of a single case, it is possible to see that only one or two parties win the game at the cost of the rest. For example, we have seen certain cases in which vendors made good money, but the systems they provided didn't work well. However, taking a long-term perspective, this game is able to reach a triple-win situation in which every party receives what it deserves.

"Triple-win" Success Factors

As there are already many articles talking about key factors for successful ERP projects, it would be interesting to take a different view of success. And so I'll begin by zooming in on the main factors each party requires to be successful in this ecosystem, based on observations and perceptions formed as a result of recent visits to different parties within the ERP ecosystem. To the vendors, the most important factors are development capability, market leadership, and the ability to maintain the balance of the ERP food chain. To the consulting services, knowledge capital, human capital, and creativity are critical, while to the adopting organizations, winning factors are in-house expertise, financial capacity, and independency.

Success Factors for Vendors

1) Development capability
Development capability can be divided into two parts—the technology side and the business side. First of all, as application system developers, vendors need to have sufficient technology inventory. Generally speaking, all the technologies that are involved in a software package for commercial purposes should be mature. However, due to the fast pace of the IT industry, application system developers should always work with the latest mature technologies. For example, the evolution from SAP R2 to R3 and then to mySAP is in tune with improvements to the architecture of information systems.

Secondly, development capability on the business side is also critical since the value of ERP software is to help businesses run better. Some exemplary approaches include: building solutions and best practices on an industry level; maintaining a certain proportion of employees as an in-house consulting team in order to insure direct and tight connections with customers' businesses; and having a group of industry experts who keep the development in line with business processes, to accommodate real business needs.

Hosted vs. On-Premise CRM

There are two primary types of CRM solutions for businesses: hosted CRM and on-premise CRM. Hosted CRM (also known as 'on-demand CRM') entails a company outsourcing a portion or all of its CRM functions to an ASP (application service provider). Unlike licensed on-premise CRM software, hosted CRM tools are payable on a monthly basis without requiring complex implementations or the assistance of an in-house IT team. The result is a cost-effective solution that promises to deliver a quick ROI (return on investment), while freeing a company to focus on its core competencies.

In fact, according to a study from Nucleus Research, more than 80 percent of companies that outsourced CRM achieved a positive ROI. The study reported that problems with the on-premise CRM model include high software and consulting costs, ineffective user adoption, and poor management.

But for all its promises of immediate payback, the hosted CRM model does have its shortcomings. For one thing, whereas on-premise CRM solutions can be tailored to the particular needs of an organization, on demand solutions don't allow for the same degree of customization. What's more, on-premise solutions are easier to integrate into a company's existing business processes and applications.

For small- to medium-size businesses, however, the price is right when it comes to hosted CRM tools. By paying per user per month, a company can gain access to a sophisticated application in a mere 30 days without having to burden its IT department or cut of its cash flow. And of particularly good news to growing companies is the fact that today's on-demand CRM solutions are highly scalable and easy to upgrade.