How to Choose an Enterprise Resource Planning System

Enterprise resource planning (ERP) systems include functional areas such as financials, human resources, manufacturing management, inventory management, sales management, etc. Some functions will vary according to the ERP’s targeted industry and the feature set within each functional area differs among competing ERP solutions.

An ERP supports and integrates vital business processes, and a modern system is all but dispensable to most organizations. Even among small and midsized businesses (SMBs), the question is usually which ERP to choose rather than whether to use one. However, because the features and functions vary so widely, choosing an ERP requires careful consideration regardless of whether the ERP will be a first-time deployments or a replacement for legacy systems.

 

Choosing a Well-Matched ERP Solution

The right ERP solution can streamline processes across a company from finances to supply chain management to HR and more. It automates record-keeping and increases cross-company collaboration while improving customer service.

Companies in manufacturing, transportation, financial services, retail, and virtually any other industry find that the right ERP software improves business agility and competitiveness. But, since no single ERP software is optimal for all, each company must evaluate ERP solutions to identify the functions and features that align most closely with their organizations requirements and strategic objectives.

Therefore, before deciding upon a particular ERP, each company should follow a systematic enterprise software selection process in line with established best practices, aided, if necessary, by impartial outside expertise to help identify the most relevant criteria from which to evaluate vendor solutions.

 

The Initial Selection Process

A selection team usually initiates the selection process by considering high-level factors such as viability, collaboration, configurability options, deployment alternatives, etc. Before anything else, however, it’s important to begin the process by gathering business requirements and defining what functions and features any new ERP system must have.

Setting up your team appropriately means including members from each of the stakeholder or user groups who will be using any new ERP. Therefore, each department, not just IT, should be represented. Anyone with in-depth knowledge of the current system or experience with ERP deployments ought to participate.

In other words, it won’t do to have only senior management and IT staff involved. If, for example, the ERP will support purchasing management, be sure to have someone from purchasing involved – especially when it comes to defining requirements.

Businesses should state – and periodically revaluate – a realistic “ballpark budget”. Costs include expected total cost of ownership (TCO), including ongoing licensing fees, maintenance costs and the cost of disruption as the new system is deployed across the organization. Keep in mind, however, that implementation will require a separate process, with its own budget and timeline. At this point, it’s also wise to consider whether there will be any legacy systems that will need to be decommissioned.

 

Use Templates and Tools as a Guide for Selection

A request for proposal (RFP) or request for information (RFI) template can assist in identifying your business requirements and establishing objective benchmarks for any ERP systems your team will evaluate. These templates are invaluable in triaging vendor responses and guiding relevant system demonstrations. Standardized, industry-relevant RFP templates are available for capturing functional and technical requirements.

In addition to standardized templates, there are several online tools available to help streamline selection process such as TEC Advisor. Tools such as these assist in defining business needs, prioritizing requirements and developing a short list of vendor candidates that you can analyze further.

In addition, give some consideration to how well the extent to which the ERP solutions you are evaluating align with today’s generation or workers. For example, if your employees expect mobile applications in order to do their jobs, will the ERP accommodate that? Consider, too, how configurable any new system will be. What happens if you decide you need to expand some functional characteristics, especially as needs change down the line?

Related to this alignment question is the question of deployment and graphic user interfaces. The two main deployment options are on-premise systems and cloud-based ones. The latter is increasingly becoming the more viable option. No matter which deployment method makes sense for your organization, be sure the software can be implemented as a global, single-instance application. In terms of user interfaces, remember that an intuitive user-friendly design is vital, even though that is mostly subjective. Later in the process, you’ll want to have stakeholders look at demos to help determine which candidates will stand the best chance of being readily adopted by the workforce.

Other questions to ask include, what does the vendor’s research and development (R&D) look like? How do they work with the innovation selection and development process? Last but definitely not least, do the vendors have references they can supply you from clients in your industry? (Be sure to contact those references!)

Vendor Demos

Prior to making a selection decision, your team should work on developing a demo script. Each of the vendors of the finalist candidates for your new ERP system should be invited in to provide your selection team with a demonstration that follows your script. Do not accept a standard canned presentation, as that will inevitably emphasize the given software’s strong suits and gloss over any weak points. It will also not directly address the particular requirements your team worked hard to identify and apply as selection criteria.

Double-check that ERP solution demonstrations are on the same version that you would be purchasing. If for some reason your team does not develop a demo script, at least ask for demos derived from your RFPs. Present demos to as many stakeholders as possible including frontline users. Going a step further, consider live, in-depth test runs of ERP software with a select group of employees.

 

Moving Forward with Vendor Comparisons

As your team narrows the list of potential ERP systems, the characteristics of each vendor become a serious consideration. It makes sense to create an assertive vendor vetting process. At the start, if you base the vetting process on your standardized RFPs, presentations and demos will focus on your needs rather than the features vendors are keen to sell. You’ll also want to consider whether the vendor will allow you, as a customer, to influence product development. What happens when you require an upgrade – is non-disruptive upgrade capability available?

Can the vendor’s R&D process accommodate your business requests for new or improved features that are essential for future innovation? Ask if the vendor’s R&D focuses on incremental improvements or is there room for out-of-the-box proposals?

Globalization Support

For companies with global operations, it is vital that an ERP system support both a standardized set of features as well as locale customization to meet customer and regulation requirements. Cloud-based systems with around-the-globe availability and 24/7 uptime have an advantage here.

 

Avoid the #1 ERP Selection Pitfall

The most common way ERP selection goes astray is to let vendors drive the selection criteria instead of developing these internally with broad stakeholder input. Given how critical ERP is to smooth business operations and innovation, it’s surprising how many companies fail on this point.

 

Software Technology Selection Consultants

A thorough ERP selection process taxes the resources of small businesses. Fortunately, there are technology analysis consultants specializing in software evaluations.

Not only do they relieve you of developing an evaluation plan but they can also manage stakeholder meetings and vendor demos. Additionally, they will provide the most objective assessment of candidate ERP solutions.

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