Webinar Transcript
On Wednesday, January 13, 2021, we hosted a webinar, The Odyssey: Buying Enterprise Software. We were joined by industry veteran, Tom Ryan, who has 40 years of experience in supply chain execution consulting. Along with our very own Michael Wohlwend, they discussed everything you need to know when considering new enterprise software: what to avoid, what works and doesn’t work, along with six steps to success.
Below is an edited transcript of the webinar. If you prefer to watch the webinar, you can do so by clicking here
Moderator: Michael Wohlwend
Panelist: Tom Ryan
Michael W:
Welcome to Alpine’s 2021 monthly webinar series. This year’s theme is book club. And what better way to start a year than The Odyssey, right? 2021, A Space Odyssey. We’re right there, right? So today we’re going to discuss how to purchase enterprise software effectively. We’ve got the poll up to see how many of you are looking to implement new software and when. For those of you that take the poll, we greatly appreciate it.
Michael W:
Before we begin, I’m going to read our non-disclosure statement. Number one, the information discussed in today’s session represents the views of the individuals and does not constitute legal advice. You should consult with your organization’s leadership and legal counsel. Number two, we are recording today’s call and the recording will be available, as well as the PowerPoint slides, after the recording. We will send the link to all of those that registered and it will point you to our website. Number three, please note, everybody is muted. This is an interactive session so please feel free to use the Q&A or the chat for all questions. As your moderator, I will be reviewing them and answering near real-time.
Michael W:
For those of you that don’t know me, my name is Michael Wohlwend, and I am your moderator today. I’m based in St. Charles, Illinois, and I have been in the supply chain space for just over 30 years. I think I have installed darn near close to 70+ warehouse management systems. And I spent eight years in the ERP space and 10 years in the WMS space. When we do consulting engagements, we have empathy for both sides of the equation, working for the software company, helping our clients, and then also the implementation side of it.
Michael W:
With me today is a very good friend of mine. We were actually just talking about how long we’ve known each other. Tom has more than 40 years of supply chain execution consulting experience as a warehouse manager, software solutions architect, a project lead for two different software companies, an RFID solution provider, and, for those of you that might remember, Tom was also with the Gartner Group and the Aberdeen Group. I like to say that Tom Ryan was the first software police out there. Tom was also the director of technology, CIO for a startup, a 3PL, an enterprise application and creation practice leader, and an independent supply chain consultant. He has led on software selections for small companies all the way up to $8 billion in enterprises, enabling clients to replace and upgrade their enterprise systems to support continued growth. Tom has evaluated many supply chain executive operations, systems, and brought together a successful multi-year program.
Michael W:
With that being said, Dave, can you show us the poll results? That way we get a feel for why we’re here. A lot of people are considering a selection in over 24 months, some are not considering it at all. And then some have within the last 12 to 24 months. I’ll turn it over to you Tom and let you review the high-level agenda.
Tom Ryan:
Thank you very much Michael, that was very nice of you in that introduction. For today’s agenda, the focus is how to effectively select enterprise software. It’s a trip, it’s a tour, it’s an odyssey. As we look at this, the first thing we want to consider is, what are we trying to avoid? How do we make sure that we’re not one of those press releases about the most recent failure of implementations of some software? We’re going to talk about what works and what doesn’t, from our perspective. We’re going to give you our methodology and our model on how to be successful. We call it the six steps to success. And then, we’re going to summarize with what it takes to be able to succeed.
Tom Ryan:
So first up, what are we trying to avoid? The reality is, when you look at how software systems implementations fail, you can blame the software vendor, you can blame the integrator, but based on a lot of university studies and supply chain departments, where they’ve done some significant research, it boils down to, about 80% of the time, it being the buyer’s fault. And I’ve been involved in expert witness litigation, which I jokingly refer to as “software implementation failure forensic pathology”. How did this thing die and who killed it? When they invite us in to do that kind of work, sadly, no one’s working with each other anymore, they’re just looking at how to shoot each other
Tom Ryan:
So, what have these studies found with regard to how these implementations can fail? You can see from many of these bullet points here, one of the easy traps is trying to maintain the status quo. The new softwares that we have today, especially cloud solutions, don’t allow for implementation modifications. They’ll be flexible with configuration, but they’re not going to let you modify. If you’re trying to reimplement the status quo with a new label on the software, why are you spending that kind of money? A lot of people are dissatisfied with those projects and they often become overly expensive.
Tom Ryan:
Or the organization has unrealistic expectations about the entire process. This is how I explain it: Everybody wants to go to the moon, and if you’re successful, you make it. In order to get to the moon, one must stop in low Earth’s orbit on their way there. They’ve set the expectation, “We’re going to the moon, but we’re going to stop in low Earth orbit and work our way there in steps.” The ones who fail are the ones who say, “We’re going to the moon. Damn the torpedoes, full speed ahead.” And then they land and stay in Earth’s orbit, not taking the steps needed to have a worthy journey. So it’s all about having the right focus, the right organizational commitment, and the right plan.
Tom Ryan:
Vendor and implementation both matter. So when you look at what works and what doesn’t work, you can’t focus mostly on the software or mostly on the implementation. The best software with a poor implementation plan, team, or execution, is going to be a failure. The best implementation with the worst software or with a poor fit, is also going to fail. But if you’re doing a reasonable to excellent job in picking your software, planning your implementation, and then executing, that’s how you succeed.
So, what does it take to succeed? How do you go about doing this? Well, you need to go beyond…
Michael W:
So now that you’ve scared everybody, Tom, about what not to do, let’s talk about what we should do. How about that, huh?
Tom Ryan:
Now that we see the urgency, how do we address these issues? We call it the Six Steps to Success. Looking at the graphic on the right, it’s about the consultant, the business case, how you evaluate and choose your partner, how you plan for implementation, how you execute the implementation, and how you do that globally. The basic idea is that you need to get beyond the mechanics of just executing the steps.
Tom Ryan:
You want to work at achieving buy-in, having credibility, having the right experiences within your organization; empowering your people, listening to them, not lecturing them, and most importantly, involving them.
Tom Ryan:
Do your due diligence on the software, the technology, the vendor, and their integrator. Don’t take shortcuts, don’t rush it. This is a 10-to-15-year partnership, do you really need to get it done four weeks faster? I mean, think about that for a minute.
Tom Ryan:
You need to be diligent with contracting. Unfortunately, contracting is there to ensure you protect yourself in the event that you run into the problem of implementation failure, but it’s also about making sure everybody understands what their roles and responsibilities are. You know, the old joke is that good fences make good neighbors. That’s kind of what a contract is. Understand the boundaries and how we’re going to work together.
Tom Ryan:
And then execution. It really gets down to having the right project management plan, an office in place, and a strategy that allows you to do this in steps. We’ll talk more about change management, scope, and budget control next.
Michael W:
And so, Tom, I think what you’re saying is that the process we’re going to walk through will address all of those concerns. But above and beyond, just going through a selection process helps get buy-in. You’re doing your due diligence, obviously you leverage outside or inside counsel on contracting, and then you go to execute, right? So those are the things that are a by-product or will come to fruition by following a selection process.
Tom Ryan:
Correct. I mean, the six steps will enable you to satisfy the four pillars: achieving buy-in, due diligence, contracting, and execution. But it’s the existence of those four pillars that will help you be successful.
Michael W:
Fantastic. Great. Thanks for the clarification.
Tom Ryan:
Let’s talk about consulting expertise. The reality is, a lot of these solutions feel like an IT project, but they’re really a combination of IT and operations. In many cases, the organization has never bought software before. Perhaps they’ve had people that maintained, modified, or even upgraded their software. But to sit back and say, “What are our requirements and what is something new that we want to get to replace what we have?” Very few companies have the staff to do that.
Tom Ryan:
There is a unique skill set associated with selection that revolves around vendor experience and understanding the industry you’re in. How does that apply? What are the solution applications and what implementation experience does one have? This is where, typically, you’re going to potentially look for a consulting company to help answer those questions.
And as you go through that, you’re looking at these imperatives for how you drive your selection, and how your consulting support or your own internal skill sets drive these imperatives. One is objectivity, risk management, leadership.
Objectivity. It’s the legacy versus the new, vendor versus vendor.
Risk. What do I do to build confidence that we’re all in this project together and we’re all in agreement that we’re doing the right thing? What behaviors might help ensure our success and help us mitigate risk?
Leadership moves the organization forward, guides us through internal interests and requirements—it must be deliberate. The reality is, this is a methodical process. It’s very easy to let emotions get in the way of making a good decision. Mike, you were going to say something.
Michael W:
Yeah, the one thing that I always like to say is that every project is like a whitewater rafting adventure. No matter what happens, you’re going to get to the end because gravity is going to get you there. The question is, are you going to do it on time and on value? And are you going to mitigate and minimize any carnage along the way? So leveraging the consultant at the back of the boat to tell you when to paddle left, when to paddle right, and how to get down that whitewater rapid the right way, is crucial in ensuring you do it on time and on value.
Tom Ryan:
Are you going to be in the boat? Are you going to be floating behind the boat, right?
Michael W:
I’m in the boat.
Tom Ryan:
It’s important to establish a business case. Business cases may not always be solely financially driven, but you need to understand why you’re going through this process, why you want to do this. And that case needs to be grassroots up. Management has their own reasons for doing it, but if you’re involving the grassroots in building the business case, they’re going to start feeling involved and committed to the decision that you’re looking for them to make.
Tom Ryan:
You want a consulting group that’s going to work in collaboration with your team and supplement what your team’s skills are, not somebody that is coming in to do a white glove approach and do all the work for you because that doesn’t help with building buy-in.
Tom Ryan:
At the same time, you want to focus on where you want to take the business, not just where you are in the business today. But you need to do that in a way that doesn’t ignore doing business that you have today. Because when you install the new software, you’re enabling the future, but you still need to operate today.
Tom Ryan:
At this point, you’re also beginning to set expectations with regard to costs, timing, and impact. We tell you to go through and develop a 10-year total cost of ownership. What do I mean by that? Well, the reason for looking at a 10-year cost of ownership is because a lot of people are comparing an on-premise solution against a cloud solution. Cloud solutions look very attractive because in the first five years, they don’t have the total cost over a five-year timeframe because they don’t have that big capital infusion at the beginning that an on-premises solution typically has. They look very positive. But when you go beyond five years, you’ll probably find, depending on the scope of the product, if you’re doing a WMS it might be less than seven years. But if you’re doing an ERP, it might be sooner than that and you will see that those cross lines between a cloud solution and an on-premises solution will merge. But it’s getting harder and harder to buy on-prem solutions today. And that’s why you want to do the 10-year TCO.
Tom Ryan:
The other way I like to approach this is by setting the expectation that we will be better when we have more information. If we’re going to have sticker shock, whether that be cost, time, or effort, now’s the time to get through that before you spend all of the effort and money associated with going through a selection.
Michael W:
And the other thing is with that business case, in the event a new SVP or supply chain comes in, or a new CIO comes in, you’ve got an anchor document. You know why you’re doing the project and the value it brings.
Tom Ryan:
Very good, yes. Selections need to focus on “a day in the life”. A day in the life that goes beyond the desired direction, while remembering I still have to execute within how the operation functions today. You want to require that vendors load your data so that when you look at their demonstrations, you’re seeing something that you can relate to. I mean, if you’re making potato chips, you don’t want to see a demonstration that talks about bicycles. You don’t want to give them everything, you don’t want to overload them with data, but you want to have pertinent information that your team will relate to.
Tom Ryan:
You also want to be focused and objectively driven. I’m an old engineer, I love to have my scorecards, and I love to have my checklists and my questions and all that good stuff. But I tell people that when we have numbers, if the numbers don’t line up with our subjective impression of what we’ve seen or what we’ve evaluated, then we need to be able to answer that. We need to either figure out why the numbers are better or worse and what is it about our subjective impression we need to reconcile. You need to balance them both, but you want to keep emotions out of it. You want to work through contract negotiations, even though they’re tedious and almost impossible to predict how long they’re taking. You want to be able to work out where the vendors continue to have skin in the game because, you’re there for life. How are you going to keep them there for life?
Tom Ryan:
And the other point is when you get down towards the final days, you want to have a vendor of choice, but you also want to have an alternate. You want to work in good faith with both of them because yours won’t be the first project where you can’t come to an agreement with your vendor of choice, or you want to go back to your alternate. But you don’t want to have done anything prior to that that would sour your alternate’s attitude about you.
Michael W:
I can tell you firsthand it’s very rare that will occur, but it does happen. And so sometimes, you can agree on requirements and the process, but then you can’t come to an agreement on the legal side. So you always want to be careful and make sure that you have two finalists and proceed with caution on both sides. The other side of this is execution, evaluation, and selection. Your executive sponsor has a very important role here to empower the team, and make sure that everybody has a good, open, and clear vote. We just recently had a selection process where we went around the room and let all the other constituents speak before the two executive sponsors spoke so that way they had an opportunity to really share their perspective and their feelings. So that’s important. And we’ll absolutely talk more about that as we continue here.
Tom Ryan:
Agreed. Following along with what you said, I’ve actually done a selection process where I had 79 people on the team who watched the demonstration and helped choose the “winner”. I have always been able to get my customers to come to a unanimous vote with regard to whom they were going to choose. Everybody was involved throughout the whole scenario, everybody got to see, “Well, this is great for me, but it won’t work for them” or “I can’t execute the order, but they have a really good system for taking the order.” That doesn’t mean you’re actually going to have a successful operation and people can see that. That helps build collaboration, consensus, and allows the team to come to a unanimous decision.
Tom Ryan:
Implementation strategy. I think the biggest point I want to make here is that when you go into the selection process, you want to have a plan or an idea for how you’re going to implement it. Where do you think your phases might be? Which modules do you think you might want to start up first? Which warehouses or operations offices do you want to start first? But then you have to realize that the vendor gets a vote, and the software gets a vote too. They know how to implement their stuff, but they need to know what your strategy is. And then during the design process, you’ll refine it and come to a better position. Just remember, the vendor gets a vote because it’s their software and they know how to operate it.
Tom Ryan:
You do want to plan for phases, I can’t stress that enough. I talked earlier about the low Earth orbit story. And when you build an integrated project plan, you need to remember that it’s not just about what the vendor’s going to get done and when they’re going to get done. You need to provide the vendor with what they need to enable them to do their job, in the same way the vendor needs to provide you with certain things to allow you to do your own job. You need to have a program management office that is managing both you and them. It takes a team to get it done—you have responsibilities, and you need to be focused on yourself as well as on the team.
Tom Ryan:
Business process reorganization. People often ask if they should go through a business reorganization process before looking at software selection. I always tell them to think about how they might want to reorganize, but to go ahead and select the software. Again, the software gets a vote. If you do a reorganization first, you’ll have to do it again once you select the software. Why? Because that software is not necessarily going to do everything the way you reorganized your business to do. They probably didn’t do it exactly the way you would have done it before you reorganized it. So you need to do that. But that is actually a part of implementing the software, and it’s all about how you implement. Plus, if you don’t reorganize first, you can make it part of the plan, which can save you money by only necessitating you go through the reorganization process once.
Michael W:
But even then, when you get responses from different vendors, it’s important to note that you’ll see some white glove treatment and some that will be the same dollar value, but the hours might be double or even triple. So it’s really pulling back the onion from the vendors and seeing what’s in there, what the roles and responsibilities are, as well as the assumptions. So it’s really important to think about your strategy and how it matches with the resource requirements from potential vendors.
Tom Ryan:
A good example of what Michael is talking about is when a vendor assumed they were doing the lion’s share of the heavy lifting to integrate their solution with the existing ERP that they were plugging their WMS into, when the reality was the customer was very comfortable with doing their own integrations. That reduced 150 effort hours, dramatically reducing the vendor’s contribution, thus reducing out-of-pocket fees because the customer was doing a lot of that work on their own.
Tom Ryan:
Let’s talk about implementation oversight. Screwing in software, which is what I like to call implementations, is not just screwing in software. You have to manage them, do some re-engineering. You’ve got to focus on cost, vendor performance, and obligations. You’ve got to focus on milestones. When are you getting stuff done? When are they getting stuff done? You have to work on what is needed to clean and convert your data. You’ll have to ask yourself, “How am I going to pilot this?” Or “How am I going to do a user acceptance test?” Having answers to those questions, and managing those activities will help you be successful.
Tom Ryan:
Global program management. I know this doesn’t apply to everybody, but the reality I want to get to here is when you do a project that is going to involve a global rollout, you need to focus in one country first, and only involve other countries to gain some pertinent information early on. But the reality is, each country is a project of its own. We’re predominantly looking at warehouse management systems, but if you were looking at an ERP system and you were going into China, you would have to worry about the Golden Tax tables. And that’s really only about China, a place where you might actually have to focus on having a Chinese consulting company that will make it happen for you.
Tom Ryan:
If you’re going into France, there’s a whole different set of government requirements for how financials are filled out. Depending on the country, there may be certain labor rules and things like that that you need to focus on that are unique to them. In effect, each country is its own rollout, its own project. And some of that stuff will have an international rollback feel and you might end up pulling some new learnings from the next country back into the previous countries. It doesn’t apply to everybody, but it does really reinforce the point that you have to have a plan, you have to think this through, and then you have to manage the plan.
Michael W:
Absolutely. Whether it’s a WCS global rollout, an ERP global rollout, or WMS global rollout, being able to think about how you implement in each of the different countries, taking IT support, and project teams into consideration, is a must. It’s a daunting task for some of those larger organizations on that side. It can be a challenge in any organization, so you have to think with the end in mind.
Tom Ryan:
To wrap up our formal presentation part of this time together is I’m going to highlight what we think are the key steps to succeed.
Strong leadership. Executive management has to be brought in to reinforce project execution, to keep the project on time, to hold the project team’s feet to the fire, and to ensure they have the resources to do what they need to do. Helping traffic cop activities or interact with other segments of the business.
Tom Ryan:
Both the selection and implementation teams need to be good people. This can be a problem. Your good people are needed to run the day-to-day, so you’ve got to figure out how you’re going to make those good people available, and how you’re going to backfill behind them in order to make them available. If you don’t, you won’t have as good an implementation as you want.
Tom Ryan:
Organization change. I had a client once who had a team of 4 who were all in charge of order entry, and though their jobs were exactly the same, each of them performed their duties differently from one another. I asked my client how they would address that, and he said his hope was that the new software would force them to change. I explained to him, “Yeah, it will. But six months later, they will all be doing it the wrong way again because they don’t have a plan, they don’t have a culture that says we do all of this the same way. Now’s the time to begin to do that, but you don’t build it without involving those people.”
Tom Ryan:
The key here is have a methodology—to be deliberate.
Tom Ryan:
Implementation is really the start of your story. This is a 10-to-15-year program, and people don’t buy WMS, TMS, ERP, or any of the big enterprise softwares willy-nilly. It is a major implementation. I see a WMS as being similar to a kidney transplant; an ERP is like a heart-lung transplant—it’s a big deal. You don’t want to do them often. So focus on this being an on-going process, continuous improvement really applies here.
Tom Ryan:
So Michael, any questions?
Michael W:
We do have a couple of questions. First one, “Eight years ago we purchased a WMS system. If we were to go out to bid today, what would be the biggest change in the WMS landscape?”
Tom Ryan:
I think the biggest change in the WMS landscape is twofold. One is how much customization they are willing to do, and how much is appropriate. When we perform these evaluations, we look at it and ask, “Do you have this capability?” One answer is, “Yes, we do.” Which means, they can do it in their own way. Or they might tell us, “Yes, we have it, it’s configurable.” Configurable means, “I have a way to make the system behave differently, tell me how you want it to behave differently, and I can make it happen without writing new code.” And then the last one is, “No I don’t, but I’ll write it for you.” That gets into all kinds of support-related issues going forward. And eight to 15 years ago, we used to do that all the time. Nowadays, especially with cloud-based solutions, whether they be single tenant or multi-tenant, upgrades and software maintenance and software management is much more difficult. The vendors are much less willing to do customizations.
Tom Ryan:
The other piece gets back to the point I was making with regard to on-premise versus in the cloud. WMS is rarely a multi-tenant cloud solution. You can still get them in an on-premise world, but they’re getting harder and harder to find. TMS is often capable of being in a multi-tenant client world just by the nature of that type of business. ERPs are all over the map, but generally everybody is getting more and more into a cloud-based solution.
Michael W:
Tom, can you clarify the meaning of the words “modification” or “configuration” or “extension,”? We always used to say mods were bad, but what about extensions? Are there good mods, or how has that changed?
Tom Ryan:
Well, extensions, depending on how they’re implemented, are ways to get in and out of the software to do something that the software doesn’t do. The vendors sometimes call them access points, exits, or extensions, and they will promise that their new versions will support those extensions. Well, yeah, new versions might support those extensions, but the difficulty is in the detail. How will they support those extensions? And can you change the how? Modifications are about writing a new custom code just for you. And I tend to think that in today’s world, those are bad. Configuration, to me, is the best answer when you tell me whether you can do something because you’re telling me I have a choice. In some places, I have a choice in how your software will behave for me and that choice doesn’t cause custom code. Does that answer it Michael?
Michael W:
Yeah. I think nine, 10 years ago, right, wrong, or indifferent, ERP, WMS, tell us how you do it and we’ll make the software execute like you want. And that was where there was a lot of customization and extensions or, they called it RICEFs, right? Reports, interfaces, customizations, extensions, and forms. And today, right, wrong, or indifferent, the evolution of cloud implementations be it Salesforce or Workday, where it is a multi-tenant enterprise offering with a templated approach, because it’s multi-tenant, everybody gets the same functionality, it’s upgrading this and that.
Michael W:
So the gap between what was a whiteboard marker ERP implementation to a CRM or an HR solution that you can’t make modifications to, what we’re finding is that ERP vendors today are saying, “I don’t want my upgrade to be very, very expensive and intrusive so I’ll create certain exit points and then if we need to do extensions, we can” you’ll go out of an exit point, do a call, run a program, bring the results back in, and that way you don’t have to adjust the software, you can take the upgrades. But now, instead of doing a bunch of modifications and extending the acceptance testing and such, now the base code is the same and then you just have to do a little bit of work on those extensions. So I think it’s the evolution of incorporating more of a cloud-based approach to software implementations. Those are my thoughts. But to your point, nine years ago and now today, software companies’ willingness to do customizations is lower. Is there anything else you want to add on that Tom?
Tom Ryan:
Yeah. Well, I agree with you, Michael. It raises what’s probably a topic for another webinar some day, the idea of how you tie all these pieces together? And what is the overall IT architecture for the enterprise? Today, a lot of people, almost everybody, has what I call an ERP-centric IT architecture. We have this ERP, it’s supposed to do everything, it doesn’t, so I will bolt on a best-of-breed or I will integrate with a legacy thing or a homegrown thing that gives me something that I feel is specific to my business.
Tom Ryan:
The other side of that approach is to look at a message-based, or enterprise service bus, or enterprise application integration-centric world, which says I’m going to have common standard interfaces between these different pieces that I want to hook together, typically ERP and maybe some other bolt-ons, but I’m going to go after the extensions in the integration space. Back in my early warehouse management days creating those custom systems, I would bury modifications in the integrations because I always had to do integrations. I would do that to avoid getting my software guys to open the hood on a piece of software and make changes inside that software. One, it made it unique. And two, every time they made a change, they usually broke something. And so my startup was a little more tough. So that flavor of architecture is also at play here.
Michael W:
Excellent. All right. Well, we want to thank everybody for taking the time to attend today. If you want to learn more, you can schedule an Alpine Supply Chain Systems Best Practice Assessment with us. And as I said, this will be available on our website with the slides as well.
Also, please be on the lookout for February 17th, 2021. We’ll have our next webinar, War and Piece. And please note that “piece” is spelled incorrectly because this is our book seminar series, but we’re planning for every part. So thinking about all the raw materials in your network, where they need to be to ensure that you can manufacture and execute appropriately.
On the behalf of the entire Alpine team, Tom, thank you so much for taking the time today. All the attendees, we appreciate you taking the time as well. We look forward to seeing you at future seminars. Thanks and have a great day.
Tom Ryan:
Thank you all.