Talk is cheap—a cliché uniquely suited to our age of frenetic marketing. Whether in art or apparel, the voices clamoring for our attention have steadily risen in number and volume. The ERP industry has it worse than most, clustered around amorphous cultural buzzwords like ‘cloud’ and ‘data.’
It’s easy—and understandable—to dissociate from the noise. Yet doing so neglects an important fact: even cheap talk tells you something. By listening to how ERP providers talk about their products, to the terms they use, to the contexts in which they use them, buyers can pry away propaganda and discern—if not the full truth—then at least a healthy portion of it.
In this post, we’ll list and explain four acronyms that often indicate an ill-considered or hastily-developed ERP solution.
1. CAL, Client Access License
Many ERP providers demand that clients purchase a license for each instance of vendor software. Until the cloud made it feasible for vendors to charge by subscription, CALs dominated the ERP industry. To this day, on-premise providers still dictate that clients pay separate fees for licenses, installation, consultation, and maintenance. As countless sources observe, the initial cost of ownership for an enterprise-class on-premise system (following a CAL model) frequently runs in the millions of dollars. Yet on-premise providers do not have a monopoly on CALs. Many hybrid vendors also force clients to pay: first for software licenses, second for expert advisors to oversee local installation, and third (and fourth and fifth) for every new version that comes out. Regardless of the product, a CAL pricing model creates what chess players call a zugzwang: a state in which every possible move would cost you dearly.
2. MBL, Module Based License
Especially common among hybrid vendors, module-based licensing requires that clients purchase an individual license for each software module. These licenses rarely include rights to upgrades or future versions. Clients own the flaws not only of the larger system but also of its component modules. After spending to license a module, clients face the immense cost of integrating it into the pastiche. MBLs indicate a balkanized, piecemeal system which, even if it suffices at present, lacks the unity needed to survive the future.
3. RAD, Rapid Application Development
Here, at least, the name does not mislead. RAD is a pre-made set of protocols and processes that involves high levels of abstraction, recycles code frequently, and allows developers to churn out applications on an accelerated timetable. In some cases, RAD can serve the situation. It might make perfect sense for development teams under strict time schedules, or for customers willing to accept a compromise (e.g., less functionality in exchange for a lower price, or more bugs in exchange for a faster release). Some highly skilled teams can manage RAD compromises for minimal impact. But no matter how well-managed, RAD almost always involves sacrifice. ERP buyers should beware of providers that have made RAD a way of life, as opposed to a last resort.
4. VAR, Value Added Reseller
The acronym ‘VAR’ usually occurs in the context of another questionable practice, commonly known as ‘cloud-washing.’ It works as follows. Facing widespread migration to the cloud, an on-premise vendor decides to rebrand as a cloud player. Developers use the bare minimum of coding to repackage the on-premise product for a single-tenant cloud. The vendor then arranges with a third-party company, known as a Value Added Reseller (VAR), to ‘host’ this cloud-washed product on behalf of the client.
Three problems bedevil these so-called ‘hosted cloud’ systems. First, VARs lack the longevity or capital reserves of the original vendor. When they fail, as they often do, they leave companies stranded without access to their own data. Second, the VAR model maintains the ownership stipulations of on-premise products: the client owns, maintains, and takes ultimate responsibility for any flaw, and the client alone bears the cost of any upgrade. Third, VAR and private-cloud services draw significantly more cyberattacks than other cloud models, with only the hybrid cloud attracting more.
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Next time you interact with Tina from sales, listen for these four triggers. Pay attention to absences as well as words.
What areas does she talk around rather than addressing? How much will an upgrade license cost? Does the vendor charge for additional modules? Will there come a point at which the company stops updating your version? How fiscally sound are their VARs? Who covers the repair tab? Who manages security?
Talk might be cheap—but it’s worth a listen.