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ERP Selection Process
Selecting new ERP software is no small task. It’s time intensive and involves collaboration internally and externally. If your organization is thinking about an ERP implementation, check out our list below of top 10 ERP selection criteria when considering how to select an ERP system.
Before we dive into the ERP selection process, what is enterprise resource planning software? ERP is business management software (accounting and operations oriented) that enables organizations to use one system to manage business processes. ERP software has become the leading solution of choice for growing businesses that want to maintain and improve their competitive edge.
Top 10 ERP Selection Criteria
- The Functional Fit for Your Organization
- Industry Experience
- ERP Vendor Viability
- ERP Implementation Project Considerations
- The Technology
- Risk (and how to avoid it)
- Post Go Live
1. The Functional Fit for Your Organization
This might seem straight forward, but evaluating how the functionality of ERP software products and services fit with your business is the most important (and time consuming) aspect in the ERP selection process. Finding the best functional fit includes evaluating ERP software, watching ERP demos, and meeting with solution consultants. It also includes internal work. One of the most helpful things you can do during a selection project is facilitate internal discussions to determine your business requirements for ERP and outline the functional areas to address. Key questions that can help shape these discussions are:
- What is outdated about your current system? Why are you considering a new ERP?
- What works well with your current business systems?
- What manual processes could you potentially automate?
- In what areas of the business are you lacking visibility – or have a hard time with reliable business reporting?
- What other systems need to be integrated with the ERP?
The end result should be a detailed list of requirements for new ERP software solution. The list should be prioritized, and agreed upon by key leaders within the organization – with buy-in from IT as well as the overall executive team.
2. Industry Experience
Another good question to ask during an ERP selection is: what ERP software is used in your industry? While not necessarily industry-specific, some ERP solutions are optimized to perform best in industries such as manufacturing and distribution. This is an important question that can help narrow the list of the ERP software you evaluate. Industry is a factor to consider not only with your software vendor (Oracle, Microsoft, Infor, NetSuite etc.) but also with your implementation partner. Whether or not the vendor and the implementation partner has had success in your industry is essential.
There are a few areas to consider when it comes to the price of your ERP software and implementation.
Return on Investment
The ROI of a new ERP can be measured in a few ways.
- Are there are specific areas of the business where cost savings can be achieved through new technology? For example better inventory management, faster financial close, automating manual or time-consuming tasks.
- Are there technology costs that can be reduced through the new ERP? Cost savings can result from a reduction in hardware or support, new software licensing agreements, or a reduced software footprint.
- What is the long-term ROI? There is no question that the initial software and implementation cost will be a financial investment for your organization. What does the ROI need to be after year one, year five, and beyond, to make the new technology worth it for your business?
- What capabilities will new ERP software enable? Faster ship times, better customer service, streamlined business processes, operational efficiency, modern e-commerce, warehouse and inventory management, real-time business reporting. These are a few of the potential new benefits that should be considered during an ERP selection process.
Other areas to consider when it comes to the price of ERP:
There are direct and indirect costs to be factored in during your ERP selection process. Below are some of the key costs to evaluate:
- Software licensing (how many users)
- Software modules and overall footprint (examples of modules includes: manufacturing, financials, distribution, project management, order management, CRM etc.)
- Hardware (if needed)
- Cloud hosting
- Supporting software (for example warehouse barcoding, or other integrations with the ERP)
- Maintenance, training, and on-going support
Most ERP software today is offered as a monthly subscription, Software as a Service (SaaS) licensing model.
Your ERP implementation partner will provide you with a detailed statement of work that outlines cost, scope of the project, key deliverables, important milestones, and the client’s business requirements. Implementation consulting is usually billed by the hour, at a rate agreed upon before the project begins.
4. ERP Vendor Viability
The viability of an ERP software vendor is crucial to consider as far as ERP selection criteria, including:
- Product viability: how long has the product been on the market, what is the future software roadmap, what is the research and development investment in the product
- Size of customer base: how many active customers use the software?
- Financial status: how solid is the software company?
5. ERP Implementation Project Considerations
Finding the right ERP consulting partner for your business is step one for any successful implementation project and is a necessary aspect of ERP selection criteria. As you select your ERP software, and implementation partner, below are some aspects of the implementation project to consider:
- Timing for the business. Is it the right time to take on this project? If not, when? This is often a difficult question. In most cases, there’s never the perfect time – however there might be better times than others. For example, after a merger or acquisition might be the right time, or when deciding between a major (expensive) upgrade of your current system versus new software. Otherwise, the right time depends heavily on your team.
- People and executive support. An ERP implementation needs both executive support and involvement, as well as upper management and other key internal leaders on the project.
- Methodology and a project plan. To be successful, an ERP implementation methodology is fundamental. Thorough project planning and project communication tools are also keys to success.
6. The Technology
In addition to software functionality, there are other technology considerations that are important to the ERP selection process. Best-in-class ERP software includes, at a minimum, these technology features:
- End user reporting tools – easier access to information, no development skills necessary
- Simplicity in UI and UX
- Business intelligence
- Data security
- Reliable system performance and response time – very limited downtime
- Ability to integrate with other systems
- Ability to make necessary customizations
Technology and ERP projects at the enterprise level inherently come with some risk. Selecting an ERP software with functionality that fits your business, along with many of the other criteria on this list (vendor viability, selecting the right partner, project planning, cost, executive support), goes a long way in mitigating risk during an ERP implementation.
Taking the time to create a thorough map of the key business processes that are essential for the operations of your organization, and using that throughout the ERP selection and implementation, will also negate risk. Essential elements to map out include integrations with other systems as well as necessary ERP customizations for your organization.
Change management and end-user training are also key areas to plan for in order to avoid risk.
Managing the initial scope of an ERP software implementation is necessary to avoid risk and ensure success. You will likely have a vision of future enhancements after the initial implementation. When evaluating various ERP vendors, consider how the technology fits with your business strategy both today and down the road. How will the software help facilitate and support future plans for your organization? Whether future plans include growth, new markets, merging with another entity, the new technology you select should mesh with the strategic direction of your organization.
Both ERP software vendors and implementation partners should have references (i.e. happy clients) they can provide to you. Ask for references within your industry, and with similar business requirements.
10. Post Go Live
What is the on-going support and training plan? How will you handle any issues that arise? Whether it’s building an internal support team, or finding an external partner (often your ERP implementation partner will also offer managed support services) planning beyond go live will set you up for maximum return on your ERP investment.
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