10 Essential ERP Selection Criteria
Picking an ERP system for your company shouldn’t be too hard….right? The vendors are all pretty well established and the products are fairly mature after several decades of ERP evolution. Why so much fuss? Pick one and get back to making money! Maybe we do make too much of a big deal about ERP selection, but it is a big investment and the career risk of getting it wrong is there all the time. So what are the most important ERP selection criteria that we should consider when beginning our selection process?
ERP Selection Criteria: #1 Business Requirements
This is by far the most important ERP selection criterion. What are the pain points you have today? In what ways are your customers suggesting you might improve? What is your vision for your organization ten years from now?
Take as much time as you need on this set of criteria. Ask others in the organization for their points of view. Ask managers, office clerks, vice presidents, and production workers; they all have a stake in the future of the business. Have one-on-one questionnaires and group discussions. Come to an agreement on all the needs, and their priorities. Rank them in buckets such as must have, really should have, and would be nice to have. Whatever ERP you choose must meet all the must haves and should satisfy most, if not all, of the really should haves.
ERP Selection Criteria: #2 Company & ERP Vendor Culture
Are you wildly entrepreneurial or green-eyeshade by the book? “You” means all of you in the enterprise whether you are a dozen people or a 100,000 person multi-national business. There actually is a culture to ERP systems. ERP system vendors definitely have a culture. If your management all comes from sales and you pride yourselves on relationships and winning the next order, you probably won’t get along so well with an ERP that is based mostly on accounting and system controls. It might be highly rated and it works well for many customers but if the shoe doesn’t fit, find one that does.
ERP Selection Criteria: #3 Cost
How much does it cost is a question we all ask. Better still, we might ask what the total cost of ownership will be over the next decade. There are ongoing costs as well as up front expenses. What we really should think about is the return we expect from this investment. That implies we have monetized our plans and goals. The system will cost X and our profit will increase by Y. ERP is just another tool we use and it needs to earn its keep too.
ERP Selection Criteria: #4 User Buy-In
People are going to use the ERP. At least you hope they will use it. On one hand this says they will adapt to the ERP and its screens and reports and find it makes their jobs easier. On the other hand, this says that you will help them to accept the changes required and show them how their jobs will be better. You have given them training and support throughout.
ERP Selection Criteria: #5 Agility & Flexibility
Your business provides what your customers want today. You have some expectations for the near future and already have plans. These knowns are already in your needs definition. What about the unknowns? Your biggest customer five years from now might not even be in business today. Your business grows by staying agile and flexing to meet your customers’ changing needs. Your ERP needs to be the same. Be sure to get actual stories that can be verified when the vendor says yes they can adapt.
ERP Selection Criteria: #6 Sustainability
ERP is a long-term investment. You plan to be in business and still be successful in ten years time. Check out the ERP vendor and check out any third party resellers and support companies. Are they profitable? How is their stock value? What risks such as lawsuits could affect their future?
ERP Selection Criteria: #7 Support Services
You might own the rights to the software today. But you should expect improvements in the future. At a minimum, you want bugs fixed quickly. But you should expect a continuous stream of product upgrades over time. Technology evolves too and you want your software to evolve and take advantage of every improvement. What levels of support are offered? What level are you comfortable with? If you buy through a reseller, who can you count on or will they point at the ERP itself when you are in need? What will happen to their support if you choose not to stay at the latest product revision?
ERP Selection Criteria: #8 Hardware & Network Requirements
They will tell you some minimum levels of memory and server architecture and probably a suggested level too. Go visit another user and find out if they are satisfied. Will you be satisfied? If you expect right-now access from any connection anywhere in the world, be sure you get what you need to make that happen.
ERP Selection Criteria: #9 Your Industry
Many systems have options that enable them to support a wide variety of businesses. Many others are very specifically developed for a particular industry. Excellent ERP systems come from either camp. You should get evidence that the ERP you choose can truly support your business. What if you operate in several industries? You might find one that works well across the board. You might also consider the need to have more than one ERP for different business segments.
ERP Selection Criteria: #10 Integration
You might already use a CRM from another vendor and have no interest in changing. OK, the two systems should be able to talk to each other to pass new orders and status updates back and forth. You have developed a world-class factory automation system that is your key differentiator. ERP needs to know equipment status and parameters to schedule work properly. Many of us have multiple systems to integrate. This should only be a minor problem as most systems can communicate through the internet today and can pass data through web services easily.
If you have the answers to all these ERP selection criteria, you are well on the way to selecting an ERP that serves your business now and for the future. And you might get the employee of the month award to boot.
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