A Guide to ERP System Selection
ERP System Selection
Is your organization ready for ERP? Choosing an ERP System may seem like an overwhelming task for those who have never gone through the ERP System Selection Process.
While most organizations can usually find a few staff members who have used an ERP System in a previous life or have even been involved with an ERP System Selection, there are several reasons you will want to employ a third party to manage this process. Before we get to these reasons, let us start by answering some basic questions and talking through some factors to consider when choosing a new ERP System.
An Enterprise Resource Planning (ERP) System is an integrated suite of software applications designed to automate processes and manage business functions. These business functions often include finance, human resources, sales, procurement, and manufacturing.
Examples of Popular ERP Systems on the Market
Some popular ERP Systems include:
Microsoft Dynamics 365
SAP Business One
Sage Business Cloud
This list is not exhaustive and each year new ERP solutions emerge that you may want to consider as potential candidates.
Choosing an ERP System
The short answer is you should invest time in an ERP System Selection. Different ERP systems are designed for different industries, company sizes, and business complexities. Many have different modules designed for specific business functions and you should understand which modules you will need. Some systems are cloud-based, and some are designed to manage hardware on-premise.
Another option is to look at a best of breed approach that might combine multiple software solutions, as opposed to choosing a single ERP. Of course, vendor pricing and the implementation approach of the vendor also weigh-in to your decision. Going through a deliberate ERP System Selection process will help you sort through what you really need in an ERP system and which solution best meets your needs
Factors to Consider When Choosing an ERP System
Although each situation and organization are unique, here is a list of considerations that are routinely discussed when we are doing an ERP System Selection.
Functionality Alignment. You will want to understand how well the ERP System will meet your business requirements. You will want to understand the capabilities of each system you are considering, the existing modules, and the strengths and weaknesses of each compared against your high-level requirements.
Integration Capability. Your new ERP System will need to integrate with other systems. Common examples include interfaces with major banks, internal analytics tools, ability to upload spreadsheets, and integration with 3rd party platforms like Salesforce.com.
You will want to understand what integrations are already built and what might require custom code. Some systems also have flexible interface platform tools for integrations that you do not need now but may be required in the future.
Budget/ERP System Cost. Purchasing an ERP System is a significant investment. It is not just the upfront licensing and implementation cost you need to consider, but also the Total Cost of Ownership.
What will be the maintenance cost?
What is the licensing model?
Will you need ongoing third-party IT support?
Will you need to hire system administrators?
How much should you allocate for implementation?
The cost of the ERP is much more than just the software cost.
Configuration vs. Customization. Some ERP Systems are designed for configurability, where some require customization to work in your environment. Customization typically takes longer and has more inherent risk while configurable systems have already been “field proven”.
Implementation Capability/Vendor Approach. When conducting an ERP System Selection, you are not just evaluating the software, you are also evaluating the Vendor. You will want to get comfortable with the implementation capability and the vendor’s approach to implementation.
The duration of the implementation, the time investment from your staff, whether you will need a dedicated full-time team, and similar factors will all play a role in your decision.