ERP Value Hypothesis

The latest ERP cloud marketing trend is telling value stories and creating a value hypothesis.  Everyone likes a good story and creating a value hypothesis sounds more like a “scientific/evidence based” approach.  However, new labels do not automatically improve the ERP sales & selection process. 

Consider the definition of a hypothesis within the context of the scientific method.

“a supposition or proposed explanation made on the basis of limited evidence as a starting point for further investigation.” 

Wikipedia

Given that an ERP value hypothesis is based upon limited information, it is important to know the level of accuracy and assumptions made to derive the ERP vendor’s value assessment.

The key question you need to ask is “Is the ERP value hypothesis based on reasonable/realistic evidence and assumptions?” Consider the following:

  • Are there any project assumptions that are problematic?
  • User adoption does not equate to effective user engagement with new ERP cloud service.
  • In the sales cycle, there is an “information gap” between the vendor and the customer which can only be addressed during the implementation. A best practice is to have the ERP vendor generate multiple value estimates based on multiple scenarios (best case, most likely, worst case).
  • Validate your expectations with the ERP vendor by providing specific value statements. Collaborate with the ERP vendor to determine the corresponding KPIs for the agreed upon value statements.
  • Do not have unrealistic expectations. For example, reducing headcount by combining and standardizing business activities is more of a function of a shared service model and not the ERP service.

Summary

Value stories and value hypothesis are the latest marketing trend that ERP vendors are using to persuade customers. These tactics are not inherently wrong, however the customer needs to use the same discipline in selecting the right ERP vendor. With an ERP cloud service, repeatability can not be assumed as given with the additional updates applied by the ERP vendor. Remember that transitioning to ERP cloud results in outsourcing your ERP IT services to the lowest bidder. Quantifying how well the ERP cloud vendor supports their customers is an important consideration which have a direct impact on realized business value.