ERP SYSTEMS – SELECTION CRITERIA

Between choosing an ERP system, there are decisive points and several factors. Where to start? What are the basic selection criteria the team need to know before starting? ERP is a software tool that we all use, and it is at the heart of our business that helps us achieve our goals. Selecting the right one for the business is one of the most important decisions we will make. The decision must be correct. Here are some ERP system selection criteria that should be considered when planning your selection. 

Functional / Non Functional Requirements

In terms of process, the specific industry will order the details. The company’s needs governs the most important features. Keeping track of all the activities that occur on an average business day, and then plan to review all of those functional areas, even if your current operations are currently “out of the system” on spreadsheets or whiteboards. This will be an excellent time to identify the areas that are required to automate and standardize.

Scalability

Software scalability refers to the system’s ability to handle the growing amount of work and users. Some ERP vendors target large organizations with complex operations, but do you know what products and deployment models can consistently scale to support your growing business? If the customer base grows, the software should handle the ever-increasing number of users and transactions. Despite the increase in data volume, it should continue to provide real-time data.

Scalability can be expensive for some on-premium solutions. You may need to bring in to scope for additional infrastructure to support the increasing workload. It will be important to ask potential vendors what their products can support out of the box and how they can be measured in terms of KPI’s / Outcomes for the business.

Technical Fit

ERP vendors have different functional strengths that make them suitable for specific industries. While the industry’s focus is a strong indication of a technical fit, the business requirements must be finalized. 

If you take the time to map out your step-by-step process and explain the ERP requirements, you can ask potential vendors to demonstrate specific functionality. Instead of offering a canned sales demo, you shouldn’t expect too much by asking a vendor to demo your ERP system based on your list of needs. Sharing your business needs with vendors and allowing access to subject matter experts ensures that vendors fully understand your business. While no ERP system can meet every potential business need, you should look for a system that meets the highest priority needs. In addition, one must determine which processes should be standardized based on ERP functionality and which methods are competitive distinctions that may require customization.

Budget and resources

There is a big difference in the price of ERP software. The most expensive system can be up to five times the cost of the least costly solution. There is a reason for this. Some companies require advanced functionality in high-cost plans, but others may have less complex standards and opt for more moderate-cost ERP solutions. More expensive doesn’t necessarily mean better. There is a fee to running each type of system. A high-cost system can be designed for companies with single task individuals. These systems break down functions into smaller pieces. A small company with individuals who do multi-tasking may feel that they are taking too many extra steps and are reducing performance with a more expensive system.

A team you trust

Who will implement this system? Who will manage this project? Who will support it if needs and processes change? People’s choice, both interior and external, is probably the most important factor in choosing an ERP system. In a study that was conducted, businesses looking for a new system were asked to name the top ten criteria used for their selection. People buying their first system were separated from the companies that purchased the second number. Answers then were categorized by importance.

Return on Investment

Although the total cost of ownership is a common consideration when choosing ERP software, the return on investment (ROI) is even more important. If you select an ERP system based on ROI instead of the total cost of ownership, your ERP project will result in increased business benefits. Developing a business case will help you gauge the benefits you expect. It will guide you in improving your process and defining your business requirements. Your ERP system is more likely to deliver higher ROI if configured based on optimized processes.

Define the process

This is the part that everyone is afraid of. Meetings, demos, and research raise more questions than answers. A team approach can help with the process, but it can also slow things down. Before you start, it’s best to decide who is on the decision-making team. Consider the needs of all stakeholders and do not allow anyone group to overshadow the needs of other organizations. Accounting / Finance, Distribution, Manufacturing, IT, Human Resources, Procurement, Sales, Marketing, and Executive Management all have different ideas about their importance. Listening to groups but not getting too much caught up in the needs of one individual, is important to arrive at a workable solution. It can usually be adjusted.

Product Viability

Do you know the long-term perspective of ERP software you are reviewing? While SAP and Oracle are unlikely to go out of business any time soon, they may stop supporting certain products. It is also essential to know where a vendor intends to invest in your R&D in the future, as it is your responsibility to choose a product that will help the organization in the long run. The team should research the industry to determine if any software product is comparable. If not, the vendor may plan to discontinue the product. Product stagnation hurts your business in the short term because you only spend as much as you need to be innovative.

Conclusion

Choosing the right ERP should never be mystical or accidental. There is a proper procedure for choosing ERP software, and it starts with identifying pain points and growth limits that can negatively affect your business. Choosing the incorrect software can have devastating consequences. That’s why establishing the proper vendor evaluation criteria before the ERP selection process is key to success.