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Transacting for a Successful ERP Transformation

ERP systems have been around for many years, but there is now a significant focus on modernizing ERP systems by shifting them to the cloud. 

In this 8-minute podcast, Marc Lindsey, a partner at LB3, joins Tony Mangino to discuss the risks and opportunities companies face when transacting for and adopting ERP SaaS, including: vendor lock-in, ERP implementations, and strategies for controlling costs.

If you would like to learn more about our experience in this space, please visit our Network Services Transactions and Information Technology Advisory Services webpages.


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In today’s rapidly evolving business landscape, organizations are increasingly turning to ERP SaaS solutions to modernize their operations and enhance efficiency. ERP SaaS, or cloud-based Enterprise Resource Planning software, is becoming a crucial tool for managing core business processes such as finance, HR, and supply chain in a standardized and streamlined manner.

Unlike traditional on-premises software, ERP SaaS is sold on a subscription basis and delivered remotely from the vendor’s single-instance multi-tenant platform. This means that the SaaS vendor handles the entire technology stack, eliminating the need for organizations to worry about infrastructure acquisition, installation, configuration, operation, and management.

However, adopting ERP SaaS comes with its own set of risks and opportunities. One significant risk is vendor lock-in, where a customer becomes so dependent on one provider’s solution that switching becomes nearly impossible due to high costs, disruption, or complexity. To mitigate this risk, enterprise buyers should build flexibility into their ERP SaaS subscription agreements. This can include clauses that provide clear termination rights, establish rights to customizations, define data extraction tools and services, and commit the ERP vendor to provide post-term transition assistance.

When it comes to deployment, many companies outsource their ERP implementations to systems integrators (SIs). However, there is no standard playbook for deployment, and each implementation is unique. ERP systems touch almost every department and must communicate with many legacy systems. Deployments often fail due to unclear scopes of work (SOWs), lack of organizational change management, and poor integration strategies. To avoid these pitfalls, businesses should competitively procure experienced systems integrators and define detailed SOWs with a mature deployment methodology that involves frequent checkpoints for critical feedback.

Controlling costs is another important aspect of ERP projects. Organizations should focus on Total Cost of Ownership (TCO), which includes not only subscription fees but also customization, integration, training, and renewal costs. Competitive bidding can help find the best fit for implementation, rather than defaulting to the vendor’s in-house services. Additionally, implementation work should be performed on a fixed fee basis, with payments tied to the successful completion of major deployment milestones. Holdback payments, where a portion of the total fees is held back until the system goes live and post-go-live stabilization is achieved, can incentivize integrators to deliver quality work on time.

Artificial Intelligence (AI) is also becoming a game-changer in the ERP SaaS landscape. However, it comes with its own set of risks. Organizations should ensure that their vendors disclose how client data is used for AI model training and adopt their own AI policies to guide vendors. It’s important to remember that AI is only as good as the data and policies behind it.

In conclusion, approaching ERP SaaS with a strategic mindset is essential for success. Leveraging competitive bidding, contracting for flexibility, and investing in organizational change management can help organizations transform their businesses through ERP SaaS. Preparation and partnership are key to navigating the complexities and reaping the benefits of this powerful technology.