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Good Contracts Can Help Avoid ERP Disasters

12.03.13

The best way to avoid ERP disasters and avoid litigation is to spend adequate time to work out complete and detailed ERP implementation contracts. It is also essential that the right individuals participate in the contract negotiations, including the business decision makers, financial leaders, IT leaders, and lawyers who are experienced in ERP negotiations.

Providing adequate time with the right individuals to create the best ERP implementation contract possible is essential since about 65% of all ERP implementations contracts are not completed as signed, and as a result there have been dozens of lawsuits and arbitrations.

Ziff-Davis published its 2013 Beginner’s Guide to ERP which includes important information for management to consider before starting down the road to acquire an ERP system. Of course understanding what ERP encompasses is the first step.

Wikipedia defines ERP as Enterprise resource planning which “is business management software—usually a suite of integrated applications—that a company can use to store and manage data from every stage of business, including”:

Product planning, cost and development

Manufacturing

Marketing and sales

Inventory management

Shipping and payment

The Beginner’s Guide to ERP identifies what users want:

  • Better control of inventory such as parts, materials, supplies and equipment
  • Reduced time spent on routine administrative tasks
  • Better control of spending
  • Shortened order-to-delivery time
  • More-efficient customer support
  • Better control of inventory such as parts, materials, supplies and equipment
  • Reduced time spent on routine administrative tasks
  • Better control of spending
  • Shortened order-to-delivery time
  • More-efficient customer support
  • Better overall visibility and control
  • Increased accountability
  • Enhanced competitive advantage

20 ERP vendors are ranked in the Beginner’s Guide by tiers:

Tier I vendors target the largest customer companies, with solutions that have the highest complexity and cost of ownership

Tier II vendors target mid-sized companies with solutions that are less complex and expensive, and easier to support

Tier III vendors target the smallest companies with solutions that are cheaper and less complex, and may be suitable for single-site installations

Cloud providers offer ERP solutions running on their own servers, not on yours. They offer the usual advantages of cloud services, such as lower upfront cost, greater flexibility, and a lower burden on the customer to keep the software up-to-date technically

Ultimately for a successful ERP implementation there has to be a collaborative team effort between ERP purchaser, ERP vendor, ERP implementer, consultants, and lawyers is critical from vendor selection through contract negotiations, and implementation.

The publications contained in this site do not constitute legal advice. Legal advice can only be given with knowledge of the client's specific facts. By putting these publications on our website we do not intend to create a lawyer-client relationship with the user. Materials may not reflect the most current legal developments, verdicts or settlements. This information should in no way be taken as an indication of future results.

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