4 Ways the Higher Education ERP Industry Must Change
It's time for a new approach to enterprise resource planning in higher ed — one that involves transparency, cooperative contracts, a cloud-native strategy and more.
As a veteran higher education CIO and now in a role of ERP industry evangelist for higher education enterprise and cloud systems, I have seen the good, the bad and the ugly in the ERP world — both from my own experiences and through the eyes of so many good CIO colleagues across the country. Over the years, I've implemented two ERP systems at two schools and have been a consultant for a number of other educational institutions, and you can bet that I have many wishes for an industry where I have so many ERP company friends who serve so many of my fellow CIOs.
Change is needed in the higher education ERP industry … badly. Here are just a few key items that I believe are crucial to the industry for the coming years — and a cry (of sorts) for a true champion to change an industry so ready for transformation.
1) Transparency, Transparency, Transparency
Nonprofit buying organizations have known for years that there is strength in numbers, and they work hard to promote partnerships between their member institutions and solution providers. The organization that I currently work for, E&I Cooperative Services, and an organization that I helped create, the HESS Consortium, have been working together to build these relationships, to bring about better transparency in the ERP industry through cooperative contract agreements with leading technology providers. Cooperative contracts give our member institutions a more "apples-to-apples" view of top providers, and a more transparent view of costs, features, terms, conditions and services. Since our RFP teams are member-driven and led by some of the top CIOs and CPOs in higher education, these nonprofit cooperative groups give institutions a third-party evaluation of solutions selected for awards, including details on why they were awarded a contract, that is usable by their institution without an internal RFP process of their own.
As you might guess, some ERP solution providers have been resistant to any change in their business model, but a few have seen opportunity in meeting the higher education community via cooperative contracts. Others are unable to do these types of cooperative agreements because of the accumulated problems in their own pricing structures and business practices over the past decades.
Providers that lead with "legacy" products feel that if they were to do group buying contracts, it would risk exposing their own wildly varying pricing to their customers. Additionally, and more importantly, it risks having their existing customers discover how much their maintenance and support costs have inflated over the last 20-30 years, as compared to pricing for new customers.
I feel strongly that these cooperative contracts mark the beginning of a new age in transparency in the ERP industry for higher education. Over time, solution providers must normalize their customers' support and maintenance licensing to be more consistent across institutions, and less like the inconsistent models of the past. Companies that can do this can then begin to build stronger trust relationships with their customers over time through a product cohort model. The challenge for many, more established companies is that this takes years to do successfully. Some higher education institutions are just tired of the smoke and mirrors, and are ready to throw in the towel and move to greener pastures (i.e., another solution provider).
2) Reform an Aged Sales Model
I have often said that the ERP industry has functioned in a reality bubble, seemingly separated in time and space from other markets and sales processes. Institutions have no baseline to understand the discounts available to them from most companies. Moreover, colleges and universities have no way to know whether these offered discounts are based on number of user seats, FTE students or staff or, sadly sometimes, the level of their published institutional endowments or state funding. The challenge is there is no "MSRP" on ERP systems, so institutions must rely on their connections to evaluate whether they are getting a good price or getting hosed. I am not advocating an MSRP for the ERP industry necessarily. I am advocating that group buying contracts with members within a product cohort promote healthy transparency while allowing groups of institutions and solution providers to work closer together and build stronger trust partnerships.