It is an important project for you to find the right ERP system for your company. It requires a well-planned, organized, and intelligent approach. Like any major project, it is possible to achieve a positive outcome.
Suppose you have a group of people with a lot of knowledge and follow a well-organized plan. In that case, it is possible to achieve a positive outcome. They can eliminate unwanted elements and choose the ERP software best suits their needs.
What is ERP Software?
Enterprise resource planning (ERP software) is a comprehensive suite of applications that can be used to manage business functions such as sales, finance, and partner for manufacturing.
Different ERP systems can be tailored to different industries and sizes. Many ERP systems can be adapted to accommodate any organization. Smaller organizations can choose a system for small businesses. Small organizations across industries can choose which modules to implement in a system designed for large companies.
Midsize Enterprises can also choose different solutions from the same vendor. One example is Tier 1 ERP vendors that offer different solutions for different sizes of companies. ERP software can increase organizational efficiency by automating business processes and providing access to reliable information when properly implemented.
How to Choose an ERP System
This guide was not found by chance. You may be looking for ERP software. You may be in the middle or final stages of implementation and want to ensure you are on track. Or maybe you're just curious. No matter the reason, selecting an ERP system is a difficult task.
ERP software can make or break an organization. It is crucial to do it right from the start. A well-planned ERP selection process should support your overall organizational goals. This task requires a solid foundation in strategy and planning and experience. This task should not be taken lightly.
12 Steps to Select an ERP System
1. Understanding Why an ERP System is Important
Do You Need an ERP System?
Perhaps you're a growing business or a startup. Are you going to need expensive software? If you want to be competitive and grow, the answer is YES.
You can only do this with Excel, the world's leading ERP system. Excel is still widely used in many firms as enterprise software. These companies often lose substantial business to competitors who use current solutions.
Are You Looking for an ERP System That is More User-Friendly?
It's common: companies continue to use dumb terminals (green screen), which have slow loading times and incorrect data. These companies frustrate sales reps and employees, who cannot move, and ERP security issues and upgrade constraints due to customizations. Worst of all, they don't offer any support from the company that made the system. This list could go on. You are a prime candidate for a system that will help you grow your business and be competitive in today's market.
These questions will help you plan the first phase of your ERP software selection project.
This time will be spent building an ERP team and creating an ERP plan. You will develop a project business requirements case and align your organization. You will need someone with ERP implementation experience to do this efficiently. This person can be either an external or internal resource.
Organizational Alignment
ERP projects often provide minimal benefits if they don't align with an organization's strategic industry partner goals. It is important to clearly define your goals to evaluate software according to its ability.
Suppose your company wants to improve customer service. In that case, one of the ERP requirements could be to order inventory management automatically when it reaches a specific level. This information can then automatically be updated for the sales department. This functionality would allow the sales department to provide customers with a realistic delivery time and improve customer service.
Business Case
A business case can accomplish a few things. This can help you to align your business benefits and show that you need new ERP software. This is crucial when you approach decision-makers and ask for their approval.
Be clear about how new technology can help you achieve your organizational goals when building a business case. These are the questions you should ask when preparing your business case:
- A new ERP will eliminate silos and allow for the integration of disparate enterprise systems.
- Can a new ERP improve customer experience?
- Can a new ERP increase employee productivity and operational efficiency?
- A new ERP will allow for real-time data and better decision-making by the leadership.
- Can we comply with existing or potential regulatory compliance using a new ERP?
- Can a new ERP system be used to achieve long-term organizational goals and increase the bottom line?
Enterprise software is often purchased by companies simply because it's popular. It is smart to keep up with the competition. Still, you must understand how ERP will impact your business and how ERP can help you remain competitive. Suppose executives understand the return on investment and the benefits of an ERP solution. In that case, they will be more inclined to invest.
It will help you get employee buy-in for the ERP evaluation and beyond. ERP vendor selection will require resources. Managers and employees must be involved in the process. Suppose they want to allow their team members to spend several months on the ERP system selection. In that case, managers must understand the benefits of the new ERP system.
Which Businesses Utilize ERP Systems?
ERP software was traditionally only available to large companies. ERP software is used by organizations of all sizes and in all industries today. Many public sector agencies are using ERP software to modernize their operations. The mortgage banking industry also uses ERP software to streamline its management of loan processes.
A surprising fact is that ERP software does not only benefit organizations that are pursuing digital transformation. ERP software doesn't require you to develop new operating models. It is enough to streamline your operations and optimize your processes.
2. Your Strategy
Your current IT infrastructure may need help to address to help you achieve your organizational goals. Although ERP selection and implementation are only part of the strategy, they should not be ignored.
Deployment Strategy
Complex organizations prefer to use on-premise ERP software. However, there are other reasons to choose on-premise. When developing an IT strategy, there are many factors to consider.
- Staff skills and IT support
- Geolocation
- Regulations by the government, such as HIPAA compliance, ITAR compliance, SOX compliance, SOX compliance, or PCI compliance
- Costs of DRP
- Depth of functionality
Although most ERP vendors can address most problems, cloud ERP is still in its early years. It may need help to compete with on-premise solutions. Companies like SAP, Microsoft, and Oracle invest millions in R&D and acquisitions.
Cloud ERP or SaaS ERP may be the right fit for you. You must research and ask the right questions to determine if cloud ERP or SaaS ERP fits you. This is why experts are so important in helping with your evaluation.
There Are a few Questions you Should ask any ERP Vendor:
- What's your product roadmap?
- Are you an industry veteran or expert?
- Which type of technology do you plan to invest in? (Cloud or on-premise)
- Are you interested in cutting-edge topics such as AI, machine learning, or blockchain?
- How often does your website need a major update?
- Are you constantly improving your integration models?
You will also need to think about integration strategies. One option is implementing a single ERP system that provides all the required functionality. This is the most straightforward approach and requires the least technical resources. It may not increase your competitive advantage. You may need multiple ERP systems to support different functional areas. This is called a best-of-breed approach.
Integrating multiple ERP systems (a best-of-breed approach) in data management, process standardization, and organizational change is difficult. A best-of-breed approach can reduce the need for custom software customization. You can select other products to fill in functionality gaps.
It is easier than it sounds. With the standardization of data formats, it is becoming easier to integrate solutions. Several firms combine their ERP system with standalone eCommerce systems and human capital management software to provide customized functionality.
Do you Have a Strategy for Customization?
It is important to outline how your IT strategy will handle customization requests. Although every ERP system will require some customization, it is important to reduce that amount. This will allow you to make future upgrades much easier.
It is important to have your custom approval process documented and follow it. You may experience scope creep if you don't. This has been seen in dozens of businesses, and many people lost their jobs. Scope creep can quickly lead to high-end, sometimes hundreds of thousands of dollars, costs. These are just a few risks of upgrading to an ERP system.
The Decision is Whether to Personalize or not Customize
Consider whether or not you need the functionality. Also, think about what it will affect. Sometimes, you only need to train your employees to make the process more efficient.
Developing a resource allocation strategy to implement industry-specific ERP solutions is important. Many organizations use both internal and external resources. Business and technical skills are required, which can be difficult to find internally. Employer bandwidth can also be a problem when using in-house resources. Be careful when assigning tasks, as employees may experience burnout quickly.
3. Create an ERP Selection Team
Why Create a Selection Team?
The project team is supported by a selection team who assists with gathering software requirements and attends demos from ERP vendors. Each department, business unit, and location should have at least one member on the team. Selection team members should be chosen based on their competence rather than their job titles.
Be sure to include subject matter specialists (SMEs) who can understand each department's business operations. They must understand the downstream and upstream processes in their respective functional areas.
Who Should Manage Your ERP Project?
One of your selection team members should be designated the project manager. The project manager is responsible for ensuring that the ERP selection process moves along and assigning roles. A strong project manager will ensure your selection is on time and within budget.
Although you might want to hire a manager to manage your ERP project, this can slow the selection process. It is a great way to give employees a sense that they are part of the team by recruiting non-management employees with a solid understanding of their processes. Participation in the initial stages of a project will make them more open to organizational change.
What to do if You Need More Resources?
When building an ERP team to help with software selection, many organizations need help with resource limitations. Depending on your specific situation, there are many ways to deal with this problem.
- Consider hiring IT professionals from outside if your company needs more IT expertise.
- If you have sufficient IT resources within your company, consider hiring temporary contractors to fill these positions.
- Consider hiring an external project manager if your company still needs to find the right ERP project manager. An internal project manager can help you make tough decisions and guide your team through difficult situations.
- An ERP consultant can be a great option if your company lacks expertise in ERP selection. They can share their experience in implementing ERP systems across many industries.
4. Find out What your Business Needs Are
Business process management is complete with requirements gathering workshops. The selection team can distribute workshop guides to help them prepare for requirements gathering. These workshop guides help team members to start conversations with their departments.
We have seen the whole spectrum of what it takes to make companies prepared. These scenarios range from people simply showing up at a meeting they have scheduled the night before to well-organized groups with laser focus and prepared notes.
Be Prepared, Just Like Boy Scouts
Getting their knowledge and documentation is much harder if you work with an inexperienced team. Unprepared teams will not only cost you more time explaining what is happening but also in lost labor. Your consulting fees will increase if your consultants save time on optional activities.
We've seen whole projects stop because they needed to prepare. Don't be the dud in your organization. Be the stud and communicate with your team.
What Should You Focus On
You should not be concerned about the "how" during requirements-gathering workshops.
A business process map is an excellent tool for gathering information about how your business works. A process map can be used to extrapolate business needs. This tool will also help you make better business decisions during future upgrades and process improvement projects.
Facilitating business process mapping has one common theme: employees are more aware of their inter-departmental responsibilities and tasks. This can lead to a better company culture and any lack of cross-departmental respect.
Make sure team members know that different needs and wants can be identified when deciding which requirements are most critical. Divide requirements into three groups.
- Mandatory: These tasks are necessary to perform a job function or have an outside influence, such as industry regulations. These tasks are non-negotiable.
- Value-Added: These requirements are important but optional to complete a task. These functions often streamline manual tasks (e.g., automatically importing data into an Excel spreadsheet in the right format).
- It's Nice to Have: These " conveniences " allow you to use the same screen and complete a task.
You should not choose ERP software if a requirement isn't necessary. Each department's requirements should be represented in the final list.
During requirements-gathering workshops, you will need to make important business decisions. You'll need access to decision-makers who can quickly make terminology and process ownership decisions. It is crucial to clarify process ownership, as process owners are responsible for validating requirements and ensuring that all processes are properly accounted for within their respective functional areas.
5. Enhance Your Business Processes
After several weeks spent planning, strategizing and gathering requirements, you will be able to identify and fix any problems. This means that you are ready to start business process reengineering. You may have identified a lot of pain points during business process mapping. Now is the time to document them and outline improvements.
You will need to think outside the box when reengineering business processes. Are you following industry best practices? Do you have redundant processes? While outside eyes are usually the best, you can also be involved as you know your business better.
Once you have determined the scope of your change, you can start process improvement. You can use your current state process map to document any problems. This will lead to additional requirements, such as the "ability to edit a sales order once it has been submitted."
It is possible to establish baselines for benefits by documenting your pain points. If you know when it takes sales reps to complete a workaround, you can calculate time savings after implementation. You can also measure the time savings from ERP financial reporting if you know how long it takes to create a financial report.
The best way to improve your process is by knowing your goals. Ask customers what they would like to do with your company if you want to improve customer service. Are they looking for a web portal? Do they desire a better mobile experience? Is it as simple as the order tracking they desire? Your new system will have an impact on both customers and vendors. It is, therefore, important to get their feedback and suggestions.
6. Create a Data Management Strategy
Quality data is essential for ERP software to be successful. Although you won't migrate data until the implementation, now is a good time to plan.
Likely, Your Data Still Needs to be Prepared for Migration
Data may be scattered across many systems, each with its structure and format. You should create a data management plan to account for the complexity of your data. This strategy will outline how to move your data and clean it up to fix duplicate data.
Data Accuracy
One of the main causes of ERP implementation delays is the inaccuracy of master data. A data management tools strategy will ensure you are ready to migrate ERP data at the beginning of implementation.
Software vendors will rarely organize and clean up your data. This is even though it should be available for implementation.
7. Create a long-list ERP System
Consider updating your ERP system if your company has one. A full software implementation takes longer than an ERP upgrade. Many organizations have modified their software so that an ERP upgrade is almost equivalent to a complete implementation.
Selection criteria are necessary before you can build a long-list ERP system. These criteria could include price, corporate values, industry solutions focus, and other relevant factors your selection team considers important. Your top business priorities should be included in your criteria.
Factors for Common ERP Selection
Industry Experience
Your long-list ERP vendors should have references from similar organizations implementing similar functionality. Similar refers to the size, volume, transactions, requirements, and culture. Referring to other vendors helps validate vendor claims about industry-specific functionality. Software vendors won't provide bad references, so make sure to do some research beyond what they offer.
Vendor Reputation
Review previous customer reviews about the vendor's customer support and long-term support. Their employee tenure is another important factor. It could indicate that they are growing or need to do better in upper organizational change management. Pay attention to the details.
You want to avoid signing a too-expensive contract and playing musical chairs with project managers. Do your research and interview potential project managers.
Cultural clashes can be as problematic as incompetent partners. Find out what customers think about ease of use. What does the mobile user interface look like? What is their uptime and speed in the cloud?
Price
Finding out information about vendors outside your budget is not worth your time. Keep in mind that the price quoted may not include all services. Also, ask yourself, "How much does it cost to implement an ERP system?"
Ask about implementation costs, maintenance fees, ongoing support, and training costs. The sticker price of a new car is only sometimes what you end up paying. An ERP selection consultant may be a good option to negotiate lower prices if you cannot find the right industry-specific solution. It's much cheaper to hire a consultant familiar with the details of these contracts than to do it yourself.
Scalability
An ERP system should be able to grow with your company. An example: Increasing your customer base will increase the number of transactions and users you need. To determine the cost of additional users, look at pricing models when evaluating ERP software's scalability. Some on-premise ERP solutions are only scalable with additional servers.
Vendor Viability
If an ERP system has been recently updated, it is a sign that the vendor is investing in this product. This indicates that the vendor is investing in this product and will continue to do so.
A product comparable to other vendors' products is another sign of viability. A product that needs more important functionality may have yet to be updated recently and could be discontinued by the vendor. Even if the vendor continues support for the product, outdated functionality can be a problem for your company in the long term. You will likely need to spend significant customization to keep up with your competitors.
Actual Innovation vs. Fancy Buzzwords
Vendors have different definitions of buzzwords like IoT and artificial intelligence (AI).
Some vendors define AI as a system that solves problems autonomously. Others may consider AI an automated workflow. Because the most advanced AI can be expensive and difficult to integrate, it is important to know what vendors mean by AI.
While large organizations can achieve long-term ROI if they have the resources and money to invest in AI, smaller organizations may be able to see a return quickly. These organizations may find it more advantageous to integrate a niche application, such as robotic process automation (RPA), with their main ERP.
A specialized cash application is another niche application that small and medium-sized businesses use. These applications automate financial management processes such as receiving customer payments, applying them to the latest invoice, entering the information into the system and verifying it. These applications can be improved and learned over time.
8. Create a shortlist of ERP Systems
You must schedule phone conversations with vendors to turn your long list of potential vendors into a shorter one. These calls will allow you to share your business needs and connect vendors with subject matter experts.
Also, you should issue requests for information (RFIs) that outline your organization's ERP requirements and your short-term and long-term goals.
Are You Ready To Take on Endless Sales Calls?
A third-party ERP consulting firm can be a great option. Consulting team can help you avoid being on the receiving end of aggressive sales tactics. ERP companies pay their salespeople on commission.
9. Plan ERP Vendor Demos
Even after speaking with vendors over the phone, it may be challenging to trust that they will support your processes. ERP demos can help you overcome this problem. Send RFPs to your shortlisted vendors. Include a detailed list of your business needs in your RFP. Expect to wait several weeks before you receive a response to your RFP.
You should also send demo scripts along with your RFPs. You can create customized demonstrations for your business by writing your demo scripts. A small amount of data may be useful to give meaning to the demo to the viewers. A good set of data should contain between 2-5 complete records. Give vendors enough time to prepare for these demos.
It is vital to stay in touch with vendors even though they are busy preparing. We often see vendors arrive unprepared; the demo is standard sales. The demo should reflect your unique organization.
Vendor demos provide a detailed look at the functionality and allow your team to ask questions. Your selection team should evaluate each vendor's ability to meet each business need after each demo. Mark the software as incompatible if the vendor does not demonstrate its capability. Do not rely on them.
10. Do a Business Readiness Assessment
You may experience up to a month's downtime while you wait for vendors to review RFPs and prepare demos. It's a great time to do a business readiness assessment.
This assessment will evaluate your organization's alignment, resistance to change, and ability to champion a project with the help of a sponsor. It simply assesses your readiness to change.
You can develop a strategy and plan for change quality management by knowing how much your organization needs to be more change-ready. How you will communicate with employees, and what training each employee requires. This plan should be implemented as soon as possible before you finalize your ERP selection.
11. Talk to ERP Vendors
ERP vendors are primarily focused on selling. They are not concerned about setting realistic budgets and timeframe expectations. You can benchmark your project against similar projects to help you set realistic expectations.
Finding the right ERP consultant to help you with ERP negotiations can be challenging. It can be challenging to find the right ERP consultant for you. Ask them which terms are most important. They will then create a negotiation guide that compares each system. The consultant will conduct a long-term cost of ownership analysis, including factors like licensing structures and resource rates.
Vendor negotiations can take anywhere from three to six months. You should save between 30-60% and more depending on your vendor's flexibility as well as the size of the organization.
12. Do not Implement ERP without a Pause
You should take a break after the selection process to prepare for implementation fully. Can your team understand the future-state process well enough to answer design questions during technical implementation? What has been the effectiveness of your change management activities in reducing employee resistance to change?
Your selection team might have been enthusiastic about process improvement and requirements gathering. Still, they could have become resistant to implementation. This is the time for them to support the implementation plan and allow them to contribute. Throughout the implementation, change management should be continued.
Conclusion
This step-by-step selection process will ensure that you choose an ERP system that supports your digital strategy. Selecting the right Enterprise Resource Planning system will save money on your implementation costs.
As your ERP system allows for continuous process improvement, you will ultimately maximize your benefits realization.
