Now that you’ve decided to implement an ERP solution within your business’ IT ecosystem, you will soon be facing the proposition of identifying one vendor out of a pool of many. But be aware: The decision to go ahead with a vendor can take a long time when it’s an enterprise resource planning product you’re considering.
ERP can bring tremendous synergies into your business practices and drive inter-department collaborations to the next level. On the flipside, if the ERP isn’t potent or suitable enough for your business, it could cause severe process bottlenecks and breed discontent among users. The purchase decision makers, hence, need to recognize the need for careful and diligent evaluation of ERP solution pitches. Here’s a guide that will help.
Business first, tech second
Don’t commit the cardinal mistake of buying expensive technology without understanding why the business needs it so badly. Remember, no single ERP can deliver you the best of all worlds. There are some superb all-in-one solutions that get the basics right for each business process, and there are niche superstars too. Your choice needs to be primarily driven by your organization’s business goals. To manage this, translate business requirements into technology functionality requirements and divide them into three categories.
- Must have — The features that drive mission-critical business process success. These functionalities help organizations quickly achieve strategic, compliance, and revenue objectives.
- Valuable — These are features that add value to processes that are already relatively mature and operationally stable. Hence, these features are desirable, but not critical for the business.
- Nice to haves — The features that add incremental value to existing processes but don’t impact many end users, so generally not deemed worth paying for. While comparing two equivalent ERPs, however, nice to haves could become a deciding factor.
Lay down the key guidelines
Your ERP solution will have an impact on every aspect of your business, regarding how information is recorded and processed. So purchase decision makers must actively interact with department leads and get a thorough understanding of their expectations, their key processes, KPIs, and constraints. Post-purchase disruptions and implementation bottlenecks can be avoided, and stakeholders buy-in can be ensured by involving key decision makers into your discussions for prospective ERP solutions.
Based on these discussions, committees reach reliable conclusions about:
- The major information management and analysis gaps that the ERP is expected to fill.
- The key focus area of the organization (sales, finance, inventory, human resources, and more) that the ERP is expected to improve significantly.
- The timeline of implementation.
ERP vendor technology capabilities
Considering how strongly you’ll need to rely on the ERP solution provider for the entire lifetime of the deployment, their technical capabilities can’t be compromised upon. For anybody looking to evaluate objectively, it becomes crucial to evaluate vendors on these three aspects.
Technology: The core database product that the ERP solution is based on. Products built on market-leading database platforms are much safer options that something based on a proprietary database.
Deployment model: Whether you need to go for on-premises deployment or if cloud-based implementation is also possible.
Niche functionality: Several ERP vendors have niche expertise in business applications such as quotation and pricing, inventory management, and vendor management. Does your business need a niche ERP or an all-encompassing solution?
Estimating total cost of ownership
A critical aspect of evaluating, prospecting, and shortlisting ERP solutions for your business is to understand the total cost of ownership. The quote you receive from the ERP solution provider is at best a ballpark figure that can vary significantly from what you’ll eventually pay. Some of the essential questions you need to ask your vendors, and points to be very careful about include:
- The cost of licenses spread across a category of licenses.
- The cost of training the workforce to be able to use the ERP to the best extent.
- The cost of hiring ERP experts to support and customize the software in due course of time.
Shortlisting ERP solutions from a long list
It’s quite natural for your ERP solutions providers list to bloat up if you don’t put in filters. This is the time to shortlist only the most dependable and potent vendors. Here’s how you can do that:
- Float a formal request for information (RFI) for all participant vendors to truly showcase their abilities in tuning the ERP to suit your requirements.
- Hire an ERP consultant to lend balance to the discussions and to ensure vendors don’t take it easy while showcasing technical capabilities of their products.
- Evaluate the industry-specific experience, expertise, and reputation of ERP products and vendors, and shortlist the ones who’ve already served customers from your industry.
Plugging the selection gaps with smart questions
Even if you eventually decide to have a faceoff between two vendors to demonstrate their ERPs by actually mapping one of your complex business processes in the software, you will still need some questions up your sleeve. These questions will ensure the long-term success of your ERP solution.
- How easy and affordable is to customize the ERP to accommodate your industry and business specific requirements?
- How agile is the ERP in supporting new reports requests, automating report generation, and presenting insightful data in a visually enriching manner?
- What kind of provisions does the ERP offer to limit the access privileges and roles assigned to different types of users?
- Does the ERP specifically help businesses address compliance issues and concerns, such as that posed by Sarbanes-Oxley, IFRS, sales tax compliance, DCAA, etc.?
- How does the ERP allow for financial corrections in the financial statements of the company, as well as in individual financial transactions?
Your ERP solution: Choose wisely
The ERP you choose will provide you tremendous leverage in management and will assist your organization in bringing an array of daily business processes under the control of a single digital application. The flipside, however, is scary. So, make your choice wisely, remember these tips.
Photo credit: Flickr / Center for ERP