ERP or Best-of-Breed? (Part 2): Look to Sourcing Best Practices for Best Software

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In our opening salvo on the latest and greatest edition of the “ERP vs. Best-of-Breed?” issue, I mentioned that baseline definitions are critical to understanding the deeper problems inherent in the debate.

Defining “best-of-breed” (What does best mean? What breed are we talking about? Must the breed be apps-only?) and “app suites” (Single app? Or a ‘sweet suite’?) is the first step of the process.

That’s because there are multiple options between these two ends of the spectrum. And, it’s really important to understand that a single ERP provider (or even BoB suite provider) doesn’t equate to an integrated solution set, a single architecture or a common support model, among other things.

The semantics and the assumptions alone are problematic, but we haven’t even talked yet about the pros and cons of the various options.

So let’s start with how to optimally source this technology (and/or broader XaaS services) — by looking to strategic sourcing.

Why Applying Sourcing Best Practices Makes Sense

As we’ve written before, winner-take-all is a bad idea for any complex market baskets, and spend/supply management technology is inherently complex when you consider the true breadth and depth of increasingly digital supply markets, such as the category-related complexity in logistics, telecom, marketing, travel, etc.

This is why you should apply strategic sourcing best practices to the sourcing of software that is coming out of procurement/SCM’s budget! Let’s talk about creating the market basket and the sourcing strategy.

Herein lies perhaps the greatest challenge: whether to do winner-take-all or have multiple complementary solutions.

It’s important to apply market-informed sourcing and to invite both your incumbent providers and providers from various realms that might meet your need. After you gather internal requirements with a stakeholder-rich set of requirements, perform a fast-paced broad scan with industry analysts (including Spend Matters), peers, consultants, and then the providers themselves to develop an RFI to gather more in-depth market capabilities.

Only once you do this can you properly strategize on what sourcing and delivery options make the most sense based on your objectives/outcomes (and capabilities you’d like to develop).

This strategy helps keep you from framing the grim ERP vs. BoB problem as a guaranteed win-lose approach (i.e., winner-take-all strategy) rather than a potential win-win approach.

Don’t Crucify the CIO for Past Sins!

It’s important to make sure that choosing an additional solution isn’t about casting judgment on old decisions and strategies by the CIO.

Sunk costs are sunk. Future costs (i.e., economic costs) and ROI are what count. This is why you should develop a strong ROI- and risk-mitigation business case and may want to consider framing this beyond a technology-only approach if you have a difficult CIO and IT policy to deal with.

However, CIOs are becoming increasingly more comfortable with SaaS solutions, particularly if the sourcing governance is in place and the evaluation is objective and quantifiable — with IT involvement to ensure appropriate selection rigor for things like information security, training, help desk support, and integration support, among other things.

The issue of choosing between large incumbent providers vs. new niche providers for specialized capabilities is also an issue for professional services. Most large organizations have a few preferred large consulting firms that they have master service agreements (MSAs) with, but consider choosing niche consultants when the incumbents don’t have the niche expertise available.

Up next, we’ll consider the realistic downsides of BoB.

Want to get right into some action items? Download your copy of Pierre Mitchell's "ERP vs. Best-of-Breed Decision Guide: 3 Recommendations to Kill the Debate Once and For All."

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