How to Choose the Right ERP Solution for your Business

How to Choose the
Right ERP Solution
for your Business
How to Choose the Right ERP Solution for your Business - 2
Table of Contents
What is ERP ............................................................................................................................... 3-3
Analysis ...................................................................................................................................... 4-10
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
Choose a Selection Committee ................................................................................... 4-5
Manage the Risks......................................................................................................... 5-5
Determine and Understand Critical Success Factors................................................... 5-5
Define your KSIs/KPIs .................................................................................................. 6-6
Define Opportunities for Improvement ...................................................................... 6-6
Define Requirements ................................................................................................... 6-8
Prioritize Needs ........................................................................................................... 9-9
Manage Scope, Budget, and Timing ............................................................................ 9-9
Receive Management Buy-In....................................................................................... 9-9
Vendor Selection ..................................................................................................................... 10-13
3.1
3.2
3.3
3.4
3.5
Identify Potential Vendors....................................................................................... 10-10
Call References ........................................................................................................ 11-11
Know the Total Cost of Ownership .......................................................................... 11-11
Issue RFPs ................................................................................................................ 11-12
Develop an Implementation Plan ............................................................................ 12-12
Vendor Demonstrations.......................................................................................................... 13-14
4.1
4.2
Create a Team.......................................................................................................... 13-14
Keep Score ............................................................................................................... 14-14
Vendor Selection ..................................................................................................................... 14-15
About DP Solutions ................................................................................................................. 16-16
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What is ERP?
Enterprise resource planning systems (ERP) are business management software solutions that allow organizations to use a
system of integrated applications to manage their business. ERP
software integrates all facets of an operation, including product
planning, development, manufacturing processes, sales, and
marketing.
ERP solutions help reduce costs across your organization. As
complex as ERP is, the software solutions have become more
user-friendly, and, in the case of hosted ERP offerings, easier to
deploy. Still, ERP implementations require a lot of planning and
training when deployment is at hand.
As ERP methodologies become more popular, software applications have emerged to help business managers implement ERP
into other business activities. Often, ERP applications incorporate modules for CRM, business intelligence, etc., and present
them as a single unified package. Some of the more common
ERP modules include those for product planning, material purchasing, inventory control, distribution, accounting, marketing,
finance and HR, with each ERP module focused on one area of
business processes.
The basic goal of ERP is to provide an organization with one central repository for all information that evens the flow of data
across the organization.
Choosing a new ERP system can be timely and costly if the wrong
software is chosen. Significant Analysis is needed of current
business processes before Vendors can be selected and Vendor
Demonstrations initiated.
How to Choose the Right ERP Solution for your Business - 4
Analysis
Before you can choose a solution, you must consider your
organization’s business goals, expectations about the benefits
you’ll gain from ERP, and the business processes that will be integrated with the ERP solution. Defining your pain points with
your current systems can help you determine where your new
software solution needs to improve.
What does your future state look like, and what are the corresponding business requirements? These processes and requirements should eventually be used by potential software
vendors to demonstrate their product’s capabilities within the
context of your business needs.
The following are tasks to complete when running your analysis:
Choose a Selection Committee
Recognizing the specific knowledge that your employees have
and their potential contribution to the selection process is key
to choosing the right software solution. Consider creating a selection committee of department heads and other key stakeholders as you prepare to choose a new ERP solution. By including them in the selection process, you by proxy, include your
entire company.
As your committee seeks opinions and suggestions from their
co-workers, they help ensure the processes success by securing
buy-in from your employees. This safeguards employee commitment to the process and the agreement to use the new solution once it’s been selected.
Evaluate The
Technical Fit
Although ERP should
be a business rather
than a technology initiative, it’s also
important to understand how a potential software solution
will align with your
current infrastructure. For example,
if you’re a Microsoft
shop, you’re likely to
find a better technical fit with ERP software products built
on a .NET platform. So
that’s a good place to
start.
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Also consider allocating an “internal champion” for your project.
Choose someone that can help get your employees motivated
about the change, and who will be available to do whatever is
necessary to make the selection process easy, and the transition
to a new software solution as smooth as possible.
Manage the Risks
Seek out any potential risks and be aware of the impact they
could have on the selection process. Encourage all members
of your selection team to develop strategies that mitigate the
risks. Every organization has at least 1 naysayer, which can cause
problems. Include them in the risk management process and
get their opinions early in the selection process so you can avoid
problems and limit any negative impact they might cause.
Determine and Understand your Critical Success Factors
Determining what your critical success factors (CSF) are is the
first step to analyzing what your business and organization will
need with a new ERP solution.
Your CSFs should be the elements necessary for your organization to succeed, i.e. the factors that determine that your business strategies are successful.
Before beginning to research new ERP solutions, you and your
strategy team should first ask yourselves ‘Why would customers
choose us?’ The answers to that question are typically your critical success factors.
How to Choose the Right ERP Solution for your Business - 6
Define your KSIs/KPIs
Not only must you define the CSFs that your new ERP solution
must help you meet, but you also must discuss and define how
you will measure your software solutions’ ability to meet those
CSF’s. These statistics, called Key Success Indicators (KSI), or
sometimes Key Performance Indicators (KPI), must be decided
on by your entire strategy team, and will be used to evaluate
potential software solutions and compare how likely they will
be in achieving the success factors previously set out.
Define Opportunities for Improvement
Defining opportunities for improvement is often one of the most
difficult and most overlooked steps in the ERP analysis process,
but it is critical to the analysis process. You want to invest in a
software solution that will improve all current business processes. Getting input from all of your managers and administrators
about their pain-points with your current software solution is
time-consuming but necessary. Being open to all of the stakeholders’ opinions are key to identifying many opportunities for
increased improvement with your new software solution.
Define Requirements
There are ERP vendors who will tell you that you don’t need a
checklist when selecting an ERP solution. They will tell you that
you need to evaluate solutions based on a transformative process – what you envision your solution being, and where you
want to see your software take you over the next 5 years. While
we agree that this is an admirable approach to ERP selection,
the fact remains that your business likely has needs now that
will have to be quickly addressed by your new software solution.
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Defining the minimum requirements that your new system must
address will help you stay on track during the evaluation stage.
In the end, you will have an ERP solution that takes care of the
pain-points you have today while still having room to grow.
Take the following questions into consideration when defining
minimum requirements:
Functionality requirements
1.
What functionalities do you think your system is missing but needs (many will have been defined during the op
portunities for improvement phase)?
2.
or What functionalities will you actually use? This way, you don’t pay for features your company doesn’t need now
don’t foresee using in the future.
3.
Is the solution scalable and flexible to meet today’s needs
– and does it provide a framework for future growth?
Integration requirements
4.
What’s unique to your industry and business that new
software needs to address?
5.
Does the ERP solution strategically align with its purchase
justifications (business case, return on investment, etc.)?
6.
How much customization will be involved – and what is
the impact of that customization on the software?
How to Choose the Right ERP Solution for your Business - 8
Training requirements
7.
How intuitive is the user-interface for employees? In
other words, does the ERP system offer an interface
similar to software that most employees already use?
Or is this something totally new that employees need to
learn from scratch?
8.
How much employee training will actually be required to
optimize the value of the new system once deployed?
Deployment requirements
9.
What deployment options do the software and vendor offer – on-premise or hosted or combination of the two; a one-time license fee or monthly subscription?
10. What is the deployment process and expected time
frame?
11. What will be required of your in-house staff during deployment?
Vendor support requirements
12.
What on-going services should you expect from your ERP
vendor?
13.
What are the different levels of support plans offered by
the vendor?
14.
What is the availability of after-hours support?
15.
What response times can the vendor commit to?
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Include an SaaS
Prioritize Needs
Not all of your requirements will be equally important. Creating
a rating system for your list will help you prioritize what’s most
valuable to you and your business. We suggest using a scale of 1
to 5, with requirements valued ‘5’ being critical, ‘4’ being highly
significant, ‘3’ being significant, ‘2’ being somewhat significant,
and ‘1’ being non-essential.
If your list has a high frequency of 5’s and 4’s, there might be
other issues to consider amongst your selection team before
looking for an ERP solution.
Manage Scope, Budget, and Timing
Proper project management is the key to success when choosing a new ERP system. Use whatever structured project management methodology you prefer to manage the scope, budget,
and timing.
Receive Management Buy-In
If you have not included upper level management up to this
point in the selection process, now would be the time to do so.
Be sure you get their sign-off on all critical steps of the selection
process, ensuring that they are on-board with all the software
solutions you wish to evaluate.
Ambiguity can destroy all the work done during your analysis
phase. Be certain to be as specific as possible, so when you begin making comparisons you are working on an “apples to apples” basis rather than “apples to oranges.”
We suggest including
at least one Softwareas-a-Service solution
in your assessments.
SaaS offerings are
now a viable alternative to premise-based
solutions, and generally have a lower total
cost of ownership.
They also tend to be
easier to deploy, offer greater security
and data control, and
can be implemented
much more quickly
that on-premise solutions.
How to Choose the Right ERP Solution for your Business - 10
Vendor Selection
Any software selection can seem daunting to those unprepared for it. The following are steps to take in order to find
and select the right vendor for your business.
Identify Potential Vendors
Identifying the right vendor for your organization is determined
by two things: the critical success factors set out by your selection committee, and the standards that may be pre-determined
by your industry.
There are three types of vendors to consider:
1.
Generic/Horizontal Vendors – Generic vendors offer ERP
solutions that can be applied to multiple industries. While
they offer many tools, they may not have everything your
selection team designates as needed for your business.
2.
Vertical Vendors – Vertical vendors offer ERP solutions that are industry specific. They often supply the same tools as generic/horizontal vendors, and offer additional functionalities for your industry built on best practices.
3.
Custom Vendors – There are vendors that can start with
a base product, and can then take your specifications and
build what you want. There is typically more risk
associated with custom designs.
There are many resources at your disposal when locating potential vendors. Contact industry colleagues and associations,
run internet searches, look to trade journals and trade shows,
and contact consultants for referrals about potential software
vendors.
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Call References
Calling vendor references is often overlooked by businesses
that are in a rush to purchase and install a new software solution. Make sure you find time to call vendor references. Have a
checklist of questions prepared to ask about their software so
you don’t waste their time, and you don’t forget anything important.
Vendors often only give references later in the sales cycle, so
this step might come later on.
Know the Total Cost of Ownership
Remember that the cost of the software or monthly SaaS subscription is just the first line item on your list. During the sales
cycle, many sales reps are interested in downplaying the costs
and risks associated with purchasing their software. It’s a lot easier, though, to accept potential costs early in the process rather
than after you’ve committed to a solution. Be sure to uncover
“hidden costs” associated with ERP, including implementation
costs, additional hardware or bandwidth, hardware upgrades,
backfilling your project team resources, software maintenance,
etc.
Also remember, that with a new software solution, you might
need IT support. Many ERP vendors have the staff on hand to
help after your ERP purchase.
Issue RFP’s
An RFP is a good tool to accurately communicate your needs to
the vendors on your short list. Ask vendors questions related to:
cost, technology, customer base, developer and implementer
qualifications.
How to Choose the Right ERP Solution for your Business - 12
Also ask questions about their business. Find out how many customers they have, what their financials are, and if they have any
experience in your industry. Ask about the breadth of the offerings, their roadmaps for their products, and how they can adapt
as your company grows. Don’t be afraid to ask tough questions
and demand honest answers.
Include all of your requirements from the analysis phase and
then have the vendors respond to each requirement with a number such as “7” in current release and quoted in estimate, “6” in
current release, “5” available for 6 months, “4” major modification or workaround, “3” third party, “2” available in a year, “1”
major modification or workaround, or “0” not available.
If you don’t want to go through an official RFP stage, be sure to
get the vendors’ scores to your requirements at some point before evaluation. You will need them, as they will come into the
final score tallied for each requirement/criterion.
Develop an Implementation Plan
Develop a realistic implementation plan. Take each vendor’s
implementation duration estimates with a grain of salt. It’s important to develop a comprehensive project plan that includes
not just the activities required to install the software, but the
ones that are required to ensure that the solution is fully functional, tested, and accepted by end-users. This plan should be
developed before the evaluation stage so you fully understand
the cost and resource commitments required to make the project a success. Your implementation project plan should include
everything from business process and workflow design to data
migration, conference room pilot, multiple test iterations, and
key organizational change management activities.
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Vendor Demonstrations
Once you’ve created your shortlist of vendors, it’s time to start
doing demos. The vendor demonstration should be a demonstration of the future state of your business processes. Think of
the ERP demonstration as a “day in the life” process presentation.
A great demonstration should start with defining the product,
and then should progress through the sale, planning, production, shipping, and accounting processes, as well as any industry
specific processes exclusive to the software.
Many companies offer online demos of their products, and
many are willing to do on-site demos. Whichever the case, a
hands-on demonstration that allows you to experience the usability of each module, is most effective.
An important part of the demonstration is ease of uses and access to information. Treat these areas as general topics that
should be understood at the front end of the presentation. Be
sure to go through all highest priority requirements set out during the analysis phase. There’s no need to go through lower level ones necessarily during the initial demonstration.
The following are tips that will keep vendor demonstrations
moving forward.
Create a Team
Include employees from your various departments who’ll use
ERP to evaluate how well the solution would support business
processes.
How to Choose the Right ERP Solution for your Business - 14
ERP and CRM
This can be the same team as the original selection team, or
a microcosm of that team. Have everyone attend the general
sessions, and then, if more than one demonstration is needed
to cover more specific features, bring in the specific team members as applicable.
Keep Score
You will need a way to evaluate each vendor later on during
the selection process. Each person attending the demonstration
should be taking notes and keeping score based on a score system previously set by the entire team. Create a system based on
strengths and weaknesses, and score each of the criteria from
1-10 on usability and importance.
Each criterion’s final score will be Usability X Importance.
Evaluation and Proof of
Concept Demonstration
Evaluate your options. Not all ERP solutions are created equal.
A clue to a product’s relative strengths is its origin. Some ERP
vendors began by developing manufacturing software; others
entered the field via a robust human resources package, or a
data warehouse solution.
Evaluation comes from accessing everyone’s opinions of the
demonstrations. Many times certain vendors can be eliminated
because their ERP solution is missing a very critical requirement
for your business. Once you have the list narrowed in that manner, it’s time to do the final score tallying.
ERP is often sold
alongside customer
relationship management (CRM) applications. Decide now if
you plan to extend
ERP into CRM to narrow your vendor options.
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Each member that attended the demonstrations should take
their scores of the criteria discussed and multiply them by the
vendor’s scores that were listed during the RFP stage. These will
give you the final scores for each requirement demonstrated by
the vendors.
Final Score = (Usability X Importance) X Vendor Score
The evaluation stage should continue until the field has been
narrowed to two vendors. Once you get to that point, send each
vendor a script of a “day in the life” of your company. The script
should include all the business processes that you want to see.
Attach any forms and reports that will help give the vendor a
better understanding of your business processes. Give them all
information they could possibly need, and then have each do a
proof of concept demonstration. Give them all the time they’ll
need to do a quality demonstration. Include all stakeholders required, and get buy-in from all managers. From there make your
final decision.
Keep your options open. While this may sound more like dating
advice, it’s also relevant to choosing an ERP package. Contrary
to common belief, there are more than just two to three primary ERP software vendors.
Although two to three software vendors constitute a majority of
market share and marketing dollars, there are many more viable
ERP software solutions in the market, all with varying degrees of
functionality and strengths. Too many companies choose a solution based on brand name or based on what competitors are
doing. Instead, your organization needs to consider the options
that are going to best meet your unique business requirements
and sources of competitive advantage.
How to Choose the Right ERP Solution for your Business - 16
Providing peace of mind in technology for almost three decades.
Founded in 1988, DP Solutions, Inc. is a software and managed services provider serving small businesses throughout the United States.
Through expert planning, management and support, DP Solutions, Inc.
is a trusted Software provider and IT partner for leading organizations
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Our expert services take you off of the costly installation and upgrade
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services are focused on providing the business tools that small businesses need to compete, providing affordable technology designs
based on business requirements. Our technology solutions cut costs
and put your company in a position to prosper.
We’d love to help you with your software needs. Call us anytime to
discuss how we can help you with your next ERP implementation.
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