How do you decide which ERP system to implement when internal bias and vendor enthusiasm threaten to sway you? The best way to evaluate ERP systems is to weigh the strengths and weaknesses of each according to the following six criteria.
ERP Selection Criteria
1. Deployment Options
Most Tier I ERP vendors are heavily investing in cloud technology, but functionality is still limited compared to many on-premise solutions. This doesn’t mean every organization should select an on-premise solution. In the future, your ERP vendor may stop developing or even supporting their on-premise products. At that point, you’ll have to transition to the cloud, which is more complex and time-consuming than vendors claim.
While vendors are heavily investing in their cloud offerings and providing more robust functionality, the novelty of the cloud is still intimidating to many organizations. No one wants to be among the first to take the leap. They want a long list of references from companies of similar size and industry. A vendor’s cloud implementation resume for large organizations may be smaller than you expect.
Software scalability refers to a system’s ability to handle an increasing amount of work and increasing number of users.
Some ERP vendors target large organizations with complex operations, but do you know which products and deployment models can continuously scale to support your growing business? If your customer base increases, the software should be able to handle an increasing number of users and transactions. It should continue to provide real-time data despite an increase in data volume.
Scalability can be expensive for some on-premise solutions. You might need to purchase additional servers to support the increased workload. It’s important to ask vendors what their products can support out-of-the-box and if they can be scaled.
3. Technical Fit
ERP vendors have different functional strengths that make them well-suited for certain industries. While industry focus is a strong indicator of technical fit, your business requirements should have the final say.
If you take the time to map your step-by-step processes and define your ERP requirements, you can ask vendors to demonstrate specific functionality. You’re not expecting too much by asking a vendor to demo their ERP system based on your requirements list rather than presenting a canned sales demo. Sharing your business requirements with vendors and allowing access to subject matter experts ensures vendors fully understand your business.
While no ERP system can address every possible business requirement, you should look for a system that addresses your highest priority requirements. In addition, you should determine which processes should be standardized based on ERP functionality, and which processes are competitive differentiators that could require software customization.
Vendors will make many claims about their system’s capabilities and ease of use. If you want to validate these claims, you should request references, so you can ask previous customers about their experience.
What functionality did they implement, and did they achieve the desired results? Did the vendor offer ongoing support and training?
References should be from organizations similar to your own that have implemented similar functionality. If you’re considering cloud ERP, ask for references that have deployed their software in the cloud.
5. Return on Investment
While total cost of ownership is a common consideration during ERP software selection, return on investment (ROI) is even more important. If you choose an ERP system based on ROI rather than total cost of ownership, your ERP project will result in increased business benefits.
Developing a business case will help you quantify the benefits you expect. This will guide you in improving your processes and defining your business requirements. Your ERP system will be more likely to deliver a high ROI if it’s configured based on optimized processes.
If you’re comparing the ROI of several different ERP systems, you may find Panorama’s ROI Calculator useful.
6. Product Viability
Do you know the long-term outlook of the ERP software you’re evaluating? While SAP and Oracle aren’t likely to go out of business any time soon, they may stop supporting certain products.
It’s also worth knowing where a vendor plans to invest their R&D in the future, as it’s your responsibility to select a product that will support your organization in the long-term.
You should conduct industry research to determine if a software product is on par with its competition. If not, the vendor may be planning to discontinue the product. In the short-term, product stagnation hurts your business as you’ll spend a fortune on customization just to remain innovative.
Other Selection Considerations
Before beginning the ERP selection process, you should define a digital strategy. What are the pain points of your current IT infrastructure, and what needs to change to support your organizational objectives?
While an ERP implementation can bring much needed change, the only way to enable long-term, large-scale change is through business process reengineering and change management. Even if you select one of the top ERP systems, you won’t transform your organization unless you enable change by focusing on your people and processes.