It’s a common scenario that we come across when speaking to prospective customers.
On the one hand they have the option to leverage an existing ERP solution, usually by activating a separate module. Whilst on the other hand they have the option of investing in a separate, but specialist contract and vendor management solution such as our partner’s system.
We have a range of customers who have extensive implementations of solutions such as NetSuite and ServiceNow, yet who rely on Agiloft for their specific contract and vendor management needs.
More broadly though, it is helpful to consider the relative merits of each option. In some cases, the ERP option will be the correct one so it’s necessary to understand what those circumstances are.
Here, we’ll lay out the key advantages and disadvantages of the ERP to help you work out which option is best suited to you and your business.
What Are The Advantages Of Managing Contracts Via An ERP?
- Single solution – large-scale ERP or Service Management Solution implementations can make a number of existing systems redundant and this greatly simplifies IT management and overhead.
- Training – as part of any Enterprise roll out, training is a must so having an existing solution that most staff will have some level of familiarity with can speed up the time to adoption.
- Support – IT will be very comfortable supporting the extended solution as it is their core line-of-business application
- Control – using an existing solution provides IT with overall management and control giving IT leaders comfort and assurance
What Are The Disadvantages Of Managing Contracts Via An ERP?
- Simplicity – the contract and vendor management extensions are often limited to a simple database of metadata. This can support basic requirements but a busy legal team, for example, that needs to automate many processes, retain flexibility in their contract data and build out workflows, reports and dashboards to increase efficiency can find themselves limited.
- Cost – ERP and Enterprise solutions are notoriously expensive, even in non-core areas such as contact management. Modern startups providing purpose-built solutions often provide more features and functionality at a significantly lower price.
- Customization – most companies evolving their contract and vendor management requirements will find customizations are required over time. In a dedicated solution, these are often managed as configuration items within the solution as they are common across the customer base. Where non-native contract management solutions require customization the costs can be intimidating and are often not viable.
- Prioritization – busy legal and procurement teams managing active contracts often need support in a time-specific fashion. IT teams managing the whole organization can struggle to respond to these requests, especially in high-demand periods.
- IT Resources – securing IT resources for non-core projects can often be a challenge. In larger companies, this normally results in cross-charges to other departments and these can often grow beyond available budgets.
- Subject Matter Expertise – a specialist contract and vendor management provider manages hundreds of customers with similar needs using subject matter experts within the team. Using internal IT systems often removes this valuable knowledge and resource that can greatly alleviate workload from the key stakeholders both during and post implementation.
- Focus – A good indicator of this can be to review the company’s website. How prominent is contract management as a solution promoted? The real estate of a marketing site is valuable and so is directly related to the revenue and focus of the company. If there is little or no mention of contract management this is indicative of the focus the company will place on this element of their business.
- Evolution – the lack of focus on features unique to contract management can result in legal teams or other in-house functions failing to capitalize on features such as OCR and AI that are disrupting the industry. This places the entire organization at a disadvantage to competitors who are partnered with specialist providers.
ERP solutions will generally offer extensions or ‘add-ons’ to provide contract and vendor management functionality. They are typically simple in nature in comparison to a purpose-built solution such as our solution, but can hold contract data and provide basic date-based alerts.
As a result, there are situations where the contract and vendor management needs of an organization are simple and therefore leveraging an existing ERP or Service Management solution can make sense.
They want an optimized contract management process involving not only clear visibility but also easy collaboration, automation, delegation and the ability to analyze spend effectively.
That’s where a specialist solution has the edge over the ERP, as it brings the benefits of dedicated industry expertise and solves the problems without compromise.