Selecting and implementing a new ERP system is an expensive proposition. A project like this doesn’t just involve the cost of the software but is resource and time-hungry and carries multiple risks to the business all related to ‘not getting it right’.
If you or your business have never gone through this process before it can be a pretty daunting task, as you’ll need to find the best solution in a market that has so many options available. Here are some key considerations to help you with your ERP selection process.
27% of budget overruns in ERP projects according to the 2022 ERP report from Panorama Consulting Solutions are due to the initial project scope expanding. Of course, this can down to various reasons, but it can also be due to organisations not doing enough up-front analysis during the pre-selection phase; in which case the scope will inevitably expand at the implementation stage.
Whilst some business issues can be ‘fixed’ by implementing a new ERP system, most ERP projects now include Business Process Changes. To understand which business processes need adjusting internally, which can be improved by the new system, what are the current pain points in your IT strategy and what processes and goals are business critical, internal analysis needs to be undertaken.
Here are some general points to help you with your internal consideration:
- Analyse your business: Each area and key processes
- Understand your business goals: Identify strategies required to support or maintain them including critical business system(s)
- Involve stakeholders to understand their requirements: Early ‘buy-in’ can bring immeasurable benefits later in the project
- Determine your IT and Data Management strategy: It’s not all about ‘cloud’, but a lot has changed in relatively recent years; ensure your strategy makes best use of new and emerging technologies and opportunities
- Get senior management ownership and sponsorship: Driving ERP Projects from the top can lead to project gains including buy-in, focus and keeping track of the objectives
- Build an ERP selection team: Yes, it really does need a team. To get to the ultimate decision about ‘which’ solution is best for your business, whom or whoever decides; supporting that decision with focused attention from several aspects is essential.
Selection considerations and process
All of this up-front work will start to pay off when you get to the Request for Proposal (RFP) stage. – Depending on your business, you may want to make this more formal with an Invitation to Tender (ITT) or less formal with a Request for Information (RFI). All of the above could be considered derivatives of much the same: inviting prospective vendors to provide information about their solution offering. Some companies may choose to formally step through from an RFI to an RFP or ITT: there is no set formula, necessarily, to ‘success’; that comes from the definitions of what is required and the analysis and interpretation of the responses.
An ERP system isn’t a simple solution and therefore a simple tick-box exercise, in any of the above, features will not give vendors the understanding of what you need from the system, to enable them to assess whether they have the functionality and/or experience available to provide the right solution. Knowing your business goals and processes will enable you to set clear requirements for your future ERP system, allowing vendors to see the bigger picture and present potential solutions that will deliver to your requirements.
Requirements should take into account your future needs, beyond your short-term business goals. The average lifetime of an ERP system is 10 years and you will need to find a system that can be scalable for your future needs and can handle changes in legislation and other external changes.
Here are some general points to help you with your system consideration:
- Functionality: What functionality comes as standard and which features are most important to you? Which functions are true differentiators in each ERP system? What levels of customisation would be needed?
- Scalability: Will the system be able to easily grow with your company? Additional functionality, number of transactions and number of ‘seats’ need to be considered
- Flexibility: Agility of the system to handle external and internal changes at speed
- Budget: This should cover the software, implementation and first-year support
- Deployment: The decision about cloud or on-premise will make a huge difference to your long list. Some ERP vendors are cloud-only
- Integration with other business-critical systems: How easy is it to integrate with your business-critical systems, how many integrations do you need?
Once you have defined what your business needs from a new or replacement ERP System, you will have to determine your vendor selection criteria. This is just as important, if not more important than the ERP solution itself. With a mature ERP market, many systems have similar functionality, but it’s the way the vendor interprets your business’ unique requirements and then implements the ERP system to match your needs that can make the difference between a good or mediocre solution fit, adoption across the business and meeting the objectives set at the beginning of the exercise. Post-project, this needs to be built on: to gain efficiencies, visibility, better processes, improve new staffing onboarding and many other considerations…all made exponentially more challenging without the right vendor as a partner in these aspirations.
Vendors should have demonstrable industry experience with companies and organisations like yours where they have implemented a similar solution. References should be comparable in size, volume of transactions, functionality requirements and sector. Even though a vendor may have experience in your sector, it’s their understanding and interpretation of your exact requirements and pain points that demonstrate their suitability as your potential implementation partner and partner for the future as noted above.
Other vendor selection criteria you can take into consideration:
- Company and culture: Check out the longevity of employees, their training and certifications. How long has the company been in business and what is their USP?
- Cost: Not just the costs related to the software (licensing and ongoing maintenance), but also the number of chargeable days to implement the system. Depending on your requirements the number of chargeable days can vary from vendor to vendor, as they may quote for more (or less) customisation. So check out whether the customisation is really needed.
- Deployment: What are the deployment options?
- Implementation: How long does the vendor estimate implementation will take and what is the handover process from sales to implementation? Do they have a standard implementation methodology?
- Support: How much support are you likely to need after going live, what hours of support does the vendor offer and how can you access support?
- Training: Training should be part of the implementation plan, but training can vary depending on whether you will have super-users trained, who can train in-house or you may require more ongoing training.
Taking everything into consideration
As you can see ERP selection is a huge process for your business. If you do indeed need a new ERP system; taking all of the research, analysis, goals and expectations into consideration now can make the difference between a system that supports your business goals or a poor, or worse failed ERP implementation.
Download our comprehensive ERP selection checklist to help guide your decision on which ERP system to choose.