When you’re the one responsible for selecting the right ERP software solution, it’s a huge responsibility. Without proper planning and thorough reviews, this sophisticated and expensive enterprise software can become your biggest nightmare. ERP software performance and functionality will affect every aspect of your operation including your staff, productivity, customers, and sales.
On the flip side, an efficient ERP system can save you millions by streamlining productivity, inventory, supply chain logistics, customer support and keeping track of everything. The goal is to synchronize various functions such as manufacturing, order management, HR, accounting, and CRM from every location. With its ability to monitor and control everything from a centralized software, implementing an ERP solution is indeed worth the risk.
The ERP software evaluation process can be complex but selecting and implementing a system that is not the best fit for your specific business can result in lost investment, wasted time, and lost productivity. In fact, nearly 50 percent of ERP implementations fail the first time around.
Denis Rousseau, TEC's Senior Business Systems Analyst
How Do You Choose the Right ERP?
There are many options of software and ERP providers from which to choose. The selection process begins by determining your needs now and for the foreseeable future. Here are ten critical steps in determining the best ERP solution for your company.
1. Review Current Processes, Strengths, and Problems
Document the company’s current processes, strengths and weaknesses in all areas. Analyze the limitations of the current system, what processes could be improved, and how to achieve them. The completed analysis shapes the future vision of the company and becomes a yardstick to measure the effectiveness of any ERP solution.
With a clear picture of what you want to accomplish, have vendors match their solutions to your goals. The vendors must demonstrate how their product’s capabilities will meet your business needs.
2. Evaluate Short and Long-Term Total Costs of Ownership (TCO).
When evaluating an ERP solution, tally the TCO over a three-year period. Socialize this process with all stakeholders to get a realistic cost. Some of the considerations include:
- Implementation services
- Annual maintenance fees
- Upgrade fees
- Internal resource costs
- Third-party tools
If the company is on a steady growth curve, anticipate the costs associated with upgrading, expanding the system to other users, new processes or locations. Don't forget to review your goals with your ERP partner. You need to understand their flexibility and limitations to avoid excessive upgrade costs or discovering too late that your needs have outgrown the software.
3. Sponsorship, Stakeholders, and the Implementation Team
As with any company-wide project, sponsorship must come from the top tier of management to drive through the initiatives. The sponsor and other leaders are critical to the success of the project by removing any roadblocks that impede progress.
It’s essential for the top leaders to reach out to the management teams in all the divisions who will be impacted by the changes and get them onboard. Each department must feel that they have a say in the decision process. Recruiting these stakeholders into an implementation team increases the likelihood of success. You will need them to support the changes before, during, and after the go-live day of the new ERP project. The goal is to have a dull and uneventful go-live day because everything performs as planned.
4. Develop A Plan That Goes Beyond Installation
While you are still evaluating various solutions, the implementation team will develop an implementation plan that’s realistic. The vendor timeframe estimates are typically overly optimistic. You need to factor in time for:
- Upgrading the business processes
- Workflow design
- Data migration
- Conference room pilot (CRP)
- Multiple tests, in all areas, by end-users
- Organization and managerial changes
Know your estimated costs and resource commitments before making a final selection.
5. Understand How the New ERP Solution Will Align with Current Infrastructures
Any ERP solution must mesh with your current technology. Otherwise, the complexity and costs can increase substantially by having to replace the entire infrastructure. Discuss the options with your IT department and potential vendors to ensure the new system will work with the current one.
6. Keep Track of The ERP Potential Benefits
As you explore the various options and vendors, have a system to keep track of the benefits from each provider. Use the original review in step 1 to set up a simple spreadsheet program with all the features and benefits you need for your business.
As each vendor demonstrates their solution, your survey will reveal who has the best software package to reduce costs, increase productivity, revenue, or scale for rapid expansion.
7. Consider All Options That Fit for Your Business Requirements
There are more than 70 ERP software solutions in the market. Don’t be swayed by a big brand name. Instead, choose the option that offers all the functionality needed without extra features you don’t.
An excellent place to start is with a conference room pilot (CRP) to test the end-to-end functionality. It helps to demonstrate how closely the solution meets the business’s requirements. Because end users are part of the testing group, you’ll identify gaps and weak points in the system before you purchase it.
8. Seek Independent Views and Recommendations
It’s important to look for impartial input from management, stakeholders, and end users before deciding on a final choice. Validate any vendor claims with proper research and third-party reviews. If you are not familiar with ERP, you can hire an ERP consultant who can help you ask the right questions and guide you to the right solution.
9. Choose an Experienced Vendor and Implementation Partner
When selecting a vendor, look for longevity and a proven track record. Not only do they need to be there for set up and implementation, but for as long as you own the system. Be sure you meet in person with the vendor and anyone associated with the implementation.
Make sure you understand who is responsible for each part of the implementation process. Will the vendor use a third-party to install everything? What is required from your team?
As with any sale, you need to check references and ask about support. Are they any guarantees? Borrowing a favorite Russian proverb from Ronald Regan, “Trust but verify.”
10. It’s Decision Time
By now you have compared the functionality, prices, and references for your short list of vendors. The facts should make it a relatively easy choice. Functionality and support should hold the most weight in your decision.
Other Considerations Before Purchasing an ERP Solution
There are always other determining factors for a purchase of this size and scope. We’ve added a few more considerations to help you make the right choice.
- Going global or staying regional?
- Can the new system handle the variables of international business?
- How much visibility will the system provide?
- What kind of scalability and customization will it provide?
- Cloud-Based or On-Premise?
Implementing an ERP system has its drawbacks ranging from temporary downtime to a total meltdown. Here are some of the causes of failure you and your team need to understand before beginning an ERP search.
Why ERP Implementations Fail
Part of choosing an ERP system is ensuring it will work as planned.
In a recent report, Deloitte & Touche LLP stated, “Analyst firm Gartner estimates that 55% to 75% of all ERP projects fail to meet their objectives. Whether your project is a few months or a few years long, whether it’s an upgrade or a new implementation, the financial and cultural well-being of the entire organization is at stake, and the associated costs of failure range from disruptive to catastrophic.”
The most significant roadblock to installing a new global management system is the people’s resistance to change, not the technology.
Does your organization traditionally resist or accept change? Frequent changes can lead to “change fatigue” from the entire staff, resulting in a lack of engagement and commitment jeopardizing the new project.
It’s up to the sponsors and the implementation team to keep the end users informed throughout the implementation process. Keeping everyone informed provides a sense of ownership for a smoother transition.
Changing to a new global ERP can be challenging. However, with proper planning, testing, the right team, and partner, your business can expand exponentially.