How to achieve a healthy balanced relationship with your ERP provider.jpg

Observing the enterprise software market today is like observing a major relationship crisis where one side is failing to listen to the other.

It appears that suppliers are unrelentingly pushing their customers to move to the cloud. Their customers want to move to the cloud too, but not to rip and replace their perfectly functioning back-office systems of record. From the customer perspective, the cloud may be more suited to their datacenters or infrastructure as a service (IaaS) or platform as a service (PaaS), but not necessarily their ERP applications or SaaS systems of engagement that extend the reach of business processes and functions to employees, customers and partners. That is a very big ask and an enormous unplanned cost that is not budgeted and won’t be any time soon.

These forced strategies are leading customers to realize that their relationship is in serious trouble. However, with the right actions, it is possible to regain a healthy balance in your supplier relationship.

Back in the early days, customers had been content in their long-term relationships with the likes of Oracle and SAP, because every year they saw marked improvement in software capabilities and value in upgrades and maintenance. 

Gandhi’s Wise Words 

The following wise words have been attributed to Mahatma Gandhi, but no matter the source, the message rings true: First they ignore you. Then they laugh at you. Then they attack you. Then you win.

He could have been talking about the way suppliers treat their customers when they say they are not happy with their maintenance costs and the forced march to the cloud. Gandhi’s quote succinctly maps to the supplier behavior I have seen over the years. 

First, they ignore you 

In my experience, most mega-suppliers are rather blasé about customers expressing their frustrations, because they believe there is no credible alternative.

They think nothing of forcing their customers to pay full maintenance, despite what many customers perceive to be declining innovation in the supplier’s core invention while redirecting its focus and investments in moving to the cloud. Which, by the way, customers would most likely have to repurchase again, not to mention rip and replace what they have today to migrate to their cloud platform. 

Then they laugh at you 

In the mid to late 2000s, Salesforce began to eat away at application revenue; nothing too serious, but it prompted a response from suppliers.

The suppliers would listen, knowing that once the customer had calmed down and time-honored there was no real alternative, the supplier would be able to construct a new contract. It would appear reasonable to all parties, but not really change the status quo as they chuckled internally about locking clients into another three-year deal.

It appears history is repeating itself with the new and potentially forced –march to the cloud, and the opportunity to further lock customers in. 

Then they attack you 

With companies such as Salesforce and AWS becoming more established, the suppliers have no choice but to listen when a customer expresses disappointment. However, rather than laughing it off, now things have turned ugly. Industry experts estimate that supplier audits have gone up by 6% in the past year alone. The confusion around SAP’s approach to indirect access is symbolic of this threat. 

Achieving a healthy relationship 

To achieve a healthy relationship, it is necessary to let customers win. This requires an acceptance that ERP customers may not migrate immediately, that they may only drift some of their applications in the short term, and that they may even want to keep some of their systems on existing platforms.

Rather than pushing a timetable that appears, in the short term, more suited to the supplier, consider the potential long-term benefits of allowing regulars to pause to evaluate the best strategy.

Ultimately, the suppliers will have to decide what is more important short-term profit potential or maintaining long-term customer goodwill but if they do not change their mindset about encouraging migration to the cloud, I predict more turbulent times in the relationship ahead.