Where the ERP hype in Vietnam can go wrong and what to do with it? (Abridged)

I have posted the first part of the whole thesis, but feel no interest to continue. A recent comment made me to do this, but I will be brief to save time for actions or something more productive. Letting people know their boat is sinking is not at all a pleasure.

Let me start with the boom-burst cycle theory. It says that any new market and technology will go through a phase of booming, but then burst with only a few survivals. Then the whole market will or will not pick up again. The latter case is normally due to a new disrupt replacement technology, or the need is no longer relevant. Take e-commerce as an example. Before the dotcom burst, everyone was talking about e-commerce, some vendors invested heavily into the area. After 2001, only some survived and B-2-B picked up first, then B-2-C. There are many more example, you name it.

Participating in a booming phase is exciting, but at the end, more painful than not. The idea of being the first to capture the new territory may mean jumping off the cliff. If we can see a hype and know to limit the downside of it, market participants will pay less cost and have higher chance of success. This is the main purpose of this article I have here.
The reason why I believe Vietnamese ERP, or in general, business software market is in a slope of hype because it has all qualifying characteristics, namely high profile, many innovations and most importantly, very low adoption. In addition, there is a big gap between vendors and customers. My solutions are straight forward, speed up adoption by bridging the mentioned gap and limit the bad effect by being aware of where it may go wrong. Now, let’s examine the gap in more detail from vendor’s and customer’s side.

On the vendor’s side, problems are not enough emphasis on process design, over customization and lack of change management and support for customer. Process change, or more often in Vietnam, awareness and adoption of process create value, not technologies. However, the lack of process understanding undermines the effort and takes away the ROI.

Over customization to fit with customer’s exact requirements, i.e. hard coding, is the major problem for economies of scale. Vendors and customers will not have the advantage of shared and reduced cost of development, implementation, support and the innovation of the future release. This problem mainly comes from vendor’s failure to develop a flexible architecture with a foundation of core transactions and best practices, while providing options and openness to customize to customer’s specific requirements. Lack of understanding of best practices is also the root cause of the issue, since most of the core architecture design engineers unfortunately comes from IT background, or have no idea about real-world business. This makes it even more difficult for vendors to show the real value of the business software to their customers, a factor that delays ERP adoption in general.

Finally, lack of change management, proper knowledge transfer and support will increase the Total Cost of Ownership (TCO) to customers. Change management is a must in a process introduction or process change. However, most, if not all of the ERP vendors in Vietnam are IT vendors and change management is often considered the customer’s issue. High cost of hiring proper reorganization and change management experts make it the problem of nobody. Meanwhile, no proper knowledge transfer and support will make the situation worst. Low adoption, blaming the software, and gradual abandoning will happen. The customer gets hurt, and so does the vendor.

Conversely, there are corresponding issues on the customer’s side. Management in Vietnamese companies is still lack of emphasis on process, and rely too much on people to run the business. In addition, companies often expect one-shot implementation and require too much customization. As the result, they pay no attention to services, including support and upgrade service. In a fast-changing environment like now in Vietnam, hard coding and no future upgrade is no difference than committing suicide. Last, but not least is problem of having no, or not committing to change management. All of these contribute to slow adoption and more seriously, project failure.
The situation is worsen by the gap in vocabulary and expectation between the vendors and customers. In the below table, I summarize out some of the prominent factors.

Vendor	Customer
I sell IT solution. Learn some IT, will you?	I need somebody to help solve the business problem. Speak to me in business language!
Do you see the advantage you can gain from information?	How about my current business pain points? I can hardly see any value in the information. I have it anyway, just not on your clumsy software and a costly PC. It may be longer, but just on time.
You need to change the way your organization works.	Hey, what about my current business and people?
It quite difficult to calculate the total cost, since you have to factor in that and that and that…	I need a fixed price. Sell me the package!
You need some future service, including upgrade.	What? Your software is too expensive already. By the way, why don’t you build everything into my software now?

OK, enough for the problems. Here are my suggestions for both sides:

Vendor	Customer
Focus on one or two industry verticals. Learn business issues, operations and show specific value proposition and references.	Have IT understanding AND trusted adviser at decision maker’s level.
Gain more process engineering and business knowledge. Mix the team with people from different background. Hire less IT and business newly graduate, but people knowing real business	Focus on process. IT should be the embodiment and result of process establishment, standardization and improvement.
Focus on flexible design. Investigate and incorporate best practices. Here, again industry-specific solution is important in many other areas.	Standardize operation, use ERP deployment as a chance to enforce changes in the process. Adopt best practice, don’t try to reinvent the wheel.
Provide enough knowledge transfer, materials and support service. Have a clear version roadmap and persuade customer to accept services.	Consider TCO instead of one-shot price. Accept service and be aware that low price means bad or no service at all. It’s more easy to more to ERP than switch back to the old way of doing business.
Insist change management. Recommend good partners (local and competent if possible).	Include change management plan, and cost. Need a strong leadership team to drive new business process and software.
Show customer prototype, not demo of the software.	Consider invest in a prototype to see if it really works. It’s worth the risk you can avoid.

Before I stop, there are two addition problems that I see both vendors and companies need to overcome. Firstly, the market needs to have a force to help close the gap. Qualified people should have good understanding of business process redesign, requirement defining, and ability to communicate and educate both sides. I know that we have enough talents to do this, just that nobody pays them to. Sponsoring from an industry association may be a good way to start. Yet, this model only works if there is a clear interest from members of the association and clear deliverables for the task force. Talking is never enough. Secondly, trust needs to grow between the vendor and potential customers. Entering a partnership, in terms of relationship and/or financial contract, is critical at the beginning to start. Only when these factors are addressed, Vietnamese ERP market will pass the hype safely and less painfully.

Anyway, this is my point of view (my blog’s name is “Just another view of life”). Any comment, discussion is welcome.