In our practice, we represent many Oil and Gas Industry clients. While most ERP vendors have functionality that they promote as being designed or built for the Oil and Gas Industry, there generally is not a one-size fits all solution. The Oil and Gas Industry is complex and wide ranging, with unique needs that are dictated by the sub-industry within which a customer operates. It can include companies as diverse as refiners, pipeline operators or environmental gas distributors. Below are our top tips for getting the most out of your ERP contract negotiation and maximizing the chance of a successful Oil and Gas Industry ERP software implementation:
Tip No. 1: Utilize An Independent Software Selection Firm: Simply reviewing a vendor selection guide and scheduling software demonstrations from vendors that target your industry may seem reasonable, but does very little to ensure you are selecting vendors with functionality that fits your business. To maximize the likelihood of success, you should engage an independent enterprise software selection consulting firm to assist you with documenting your processes and business needs and creating RFPs or RFIs tailored to those processes and business needs.
Tip No. 2: The ERP Needs Of Oil And Gas Are Unique – Conduct Software Demonstrations: Once you have documented your business requirements and business processes, it is important that you verify that the ERP software incorporate those requirements or processes. You want to see important functionality demonstrated in a live environment. Also ensure that the ERP vendor uses demonstration scripts and that you have access to those demonstration scripts so that you can compare vendors. Finally, if the ERP software does not have key functionality or does not address business requirements or processes, make sure that the ERP vendor has a reasonable plan to configure or modify the ERP software to address your needs.
Tip No. 3: Be Wary Of Out-Of-The-Box ERP Solutions For The Gas And Oil Industry: While ERP software sales people are fond of using terms like “out-of-the-box,” and “specifically designed,” the reality is that no ERP software system will meet all of your specific requirements. Ideally the ERP software system or at least the specific ERP modules were designed with an understanding of the Gas and Oil Industry. It is likely, however, that an existing ERP software product was retrofitted with Gas and Oil specific functionality. Even if the solution was designed from the ground up for the Gas and Oil industry, it can’t possibly meet every individual need of every Gas and Oil customer. Every ERP software system will have some functionality gaps. You should be mindful of this when your ERP vendor proposes a software implementation budget. During the implementation, be prepared to spend additional consulting fees on modification and enhancements to address those functionality gaps.
Tip No. 4: Use Experts To Draft And Negotiate Your ERP Software License And Implementation Contracts: Passing the drafting and negotiating of your ERP software license and implementation contracts to an in-house contract manager or procurement department is usually a poor decision. You want to utilize attorneys and consultants that are familiar with typical ERP vendor negotiation tactics and pricing strategies. Ideally, you should use attorneys with a breadth of experience negotiation against the ERP vendor you have selected. Leaving the ERP contracting process to those with general legal knowledge increases the likelihood the important concessions will be ignored and typically negotiated items will not be addressed.
Tip No. 5.: Negotiate Contracts That Mange Both The Software Implementation and The ERP Vendor Relationship. Most ERP software contract negotiations involve multiple contracts and oftentimes involve multiple vendors. While the complexity of negotiating multiple interrelated documents is high, customers typically focus on cost. While cost is always an important factor in any ERP software purchase, focusing on price to the exclusion of other issues is shortsighted. Negotiating contracts that focus on managing the implementation process and the overall ERP vendor relationship, helps minimize the cost of the software and implementation over the lifecycle of your relationship with the vendor and helps increase the chances that your implementation will be successful.
The Oil and Gas Industry is complex and has unique ERP software needs. The complexity of the Industry means that the selection of an appropriate ERP vendor and subsequently drafting and negotiating ERP software implementation contracts with that ERP vendor must be treated carefully. If you have questions regarding Oil and Gas Industry ERP software issues, please feel free to call our office at 312-263-0570.