An Enterprise Resource Planning system, also known as an ERP, can help businesses in standardizing procedures and centralizing information. As a result, making the right ERP selection is crucial for business success. This system is sold in modules to many industries, such as manufacturing, school districts and hospitals. The modules are interconnected and can be for Human Resources, Finance and Inventory/Sales.
You enter data in one module, and that can be used in other areas, minimizing duplication of time and effort, streamlining processes. For example, an employee's name can be entered in the Human Resource module, and that can be used to approve Purchase Orders.
Things to remember during ERP selection
Selecting the right vendor for your ERP needs can be tricky. Below are some ideas to help you with your ERP selection:
- Make a list of your must-have ERP features to help you focus on your needs, rather than on the whistles-and-bells vendors may show you, but unrelated to your real requirements.
- Solicit for ERP rankings and referrals from other businesses that are happy with their own ERP systems.
- Contact at least 3 ERP vendors.
- Be sure the vendor can meet your budget limitations.
- Ask for ERP product demos, so you can experience the system first-hand.
- Verify that the vendor can meet your ERP implementation and training timelines to get the system up and going.
- Ask the prospective vendor how many ERP implementations they have done in the past with situations similar to yours – the more, the better.
- Request ERP references and check those up over the phone or through emails.
- Run a Better Business Bureau report on the ERP vendor.
- Search for ERP vendors online to check overall reputation and sentiment in the marketplace.
- Meet the ERP implementation members or at least the project manager to make sure it’s a good fit culture-wise.
- Consider hiring an ERP consultant, to get unbiased feedback and recommendations.
- Avoid dealing with multiple ERP vendors that can blame each other when something goes wrong.
- Select vendors that offer pre-configured and pre-tested systems, which are less prone to ERP implementation issues.
- Inquire about training options, not only for existing employees, but for future hires as well.
The 5-step approach to ERP selection
These 5 steps are the best practices to enable businesses with proper ERP selection:
- Evaluating the Total Cost of Ownership (TCO)
- Focusing on industry experience
- Scrutinizing the performance of the potential vendor
- Conducting research with real customers
- Considering your entire IT strategy
Evaluating the Total Cost of Ownership (TCO)
During your ERP selection process, plan out your budget, keeping in consideration the terms of implementation and the Total Cost of Ownership (TCO). Once you know your budget, you can start setting meetings with potential vendors for ERP selection, to see if their solutions fit your requirements and budget. While negotiating on solution quotes, it is important to note that typically such quotes include software, first-year technical support and implementation consulting.
However, in ERP selection, the Total Cost of Ownership (TCO) is a broader quantity that takes into consideration per-user license costs, training, upgrades, internal costs, maintenance, customizations, and other fees. If the system you choose during ERP selection is Cloud or Software as a Service (SaaS), then you must carefully browse through its Service Level Agreement (SLA) to look for any hidden costs.
Some solutions have hidden costs for system upgrades and enhancements. Also, be aware of vendors offering fixed prices during ERP selection, as that might mean additional work in terms of training and requirements not catered to by the vendor. If you are integrating an ERP (instead of purchasing a brand new system), your ERP selection process needs to take data migration and its associated costs into account as well.
Focusing on industry experience
During ERP Selection, it is important to focus on the industry segment and industry experience of the potential ERP vendor. This is because an ERP vendor with the expertise and experience of working in a certain industry may lack the knowledge of the unique requirements of a different industry. While ERP systems have been commonplace in the manufacturing industry, ERPs for non-manufacturing industries are also beginning to gain traction now.
This is why understanding the expertise of a vendor and discussing their true capabilities towards implementing a suitable solution in your industry is imperative, during ERP selection. Make sure to obtain a product roadmap designed for your industry, and see if it aligns well with your requirements and the challenges faced in your segment.
Scrutinizing the performance of the potential vendor
ERP selection is serious business, so you well reserve the right to scrutinize all shortlisted vendors before naming your choice. Study their past performance and read about both their fallbacks and success stories. See if a vendor offers specialized solutions or if they have broader solutions to cater to most of your functions. Your vendor of choice should also be able to address your business’s unique reasons for adopting an ERP – which can further bolster your final ERP selection, in addition to a good reputation.
Conducting research with real customers
Fake ratings and a handful of self-picked customer reviews are nothing we aren’t aware of. When you gear up for ERP selection, make it your business to interact with real customers of your potential solution and learn from their experience. Set up meetings with customers who have used the solution for at least a year and seem to have similar requirements as your business. An on-site meeting will help you gain real customer feedback and make a well-informed decision before you invest in a solution.
Independent ERP consultations may also be of support during this stage of the ERP selection process, as they will be able to impartially guide your team on choosing the right software, sans any sponsored influence from vendors. Learning about the pros and cons of ERP consultants can be handy at this point, so you source only the right individuals for this crucial task.
Considering your entire IT strategy
During ERP selection, it is important to understand that your chosen solution must fit with the overall IT strategy of your organization. Therefore, the IT department should be involved in determining and providing any technology requirements, during every stage of the ERP selection process. Furthermore, having the IT department involved from the start is essential since their involvement and feedback will be required throughout, no matter what your goals of adopting an ERP are, or whether your system is an on-premise solution or a cloud-based one.
ERP selection is important for you to get the most out of your system. Be sure that the firm is reliable, stable and will be around for a while, so that if you have problems, they can come in and assist you. You may decide to implement a couple of modules first and then get the other ones done later. This type of implementation limits your risk – if the vendor messes up with the first modules, you may choose to go to another one for the other modules.
Applying the ERP best practices discussed above will help you understand the strengths and weaknesses of vendors during ERP selection, enabling you to narrow down to a vendor offering the solution that best fits your business needs.