The ERP selection process is an intrinsic part of the ERP implementation, which involves key steps that determine which ERP system would be the most ideal match for your business. It requires an in-depth understanding of the requirements of your business as well as predicting costs for the project. You need to know every small detail about the project you are undertaking and your expectations from it, to ensure that you choose the best system.
In this blog we will tell you about the ERP selection process, which will help you understand the ideal way of selecting the best ERP system available.
Let us now deep dive into ERP and why the ERP selection process is crucial as it can impact the success and efficiency of an organization’s operations and processes.
What is ERP?
ERP stands for enterprise resource planning and it refers to the process of planning, customizing and deploying your ERP system. ERP selection process is the process of selecting the ideal ERP solution for your business. It helps you manage the daily activities of your business and your data and provides you with fruitful insights into it.
ERP also analyses all your information and saves your time, resources and all the extra effort that you would be using otherwise. If you follow the given ERP selection process, you will see good results flowing from it.
Importance of ERP Selection Process
The ERP selection process is important because it provides you with a single-system solution that integrates all processes across the business. Here are some points for you to understand the importance of an ERP selection process:
a. Collaboration: A lot of times the problem of duplication arises because of different departments using the same information. However, when they collaborate this issue takes a backseat and all that happens is smooth. Implementation of ERP provides you with a centralised form of information and leads to an increase in productivity, collaboration and efficiency of your business.
b. Better performance: By putting all things in one place and ensuring that there is no repetition in work, ERP promises to improve the overall performance of your employees and increases customer satisfaction. It transforms the work from being robotic and monotonous to something that requires less effort and gives better results.
c. Enhanced tracking capacity: ERP selection process helps you manage resources, transport final goods and ensure the satisfaction of end users and your clients. It provides you with an overview of the business and helps you identify and find solutions to the problems that occur simultaneously.
d. Detailed analysis: It further improves the functionality of your business by keeping an account of all that goes on and what each end user does. It helps you create reports and get a better understanding of your functions, thereby ensuring better results.
e. Return on Investment: While the ERP selection process might come out as a costly affair in the beginning but believe us, it is a one-time investment. Once it starts working you will realise that it is value for money as it reduces training, saves time and provides better visibility.
B. Define Your Business Needs
ERP software is crucial in today’s time because it manages the entire business as an integrated whole and takes care of all your needs. It comes out as advantageous by instilling collaboration amongst employees as well. Therefore, it is necessary to have an internal team of stakeholders who will tell you about the intricacies of the business and the direction that it needs.
This team will comprise the top management, project managers and department heads, who will make the entire ERP selection process easier. These individuals will understand the goals and expectations of their respective departments through timely meetings. Once they know of this, they can bring all this information together, thereby benefitting the entire team.
C. Purchasing Considerations
When you are about to buy something new for yourself, you consider your choices meticulously to select the best option. The same is true when it comes to the ERP selection process. If you are going to select an ERP software for your business, you should begin by considering some key points.
I. Size of your Business
This comes out as a major question because the ERP software that you choose must suit your business as well. Consider whether you are a giant in the field or a startup because this will help you define the scale of implementation. Depending on your answer you will be hiring employees, creating departments and bringing together users.
II. Needs of Other Departments
ERP software is quite diverse and it is meant to serve the needs of the many departments that you have. Therefore, it is important to understand the needs of all the departments to get an understanding of which software will be the best for you. You may consult the department heads for this purpose.
III. Your Expected Expenditure
You must also draft a budget before beginning with the ERP selection process. Your choice of ERP will be affected by the amount you are willing to spend so, ensure that you know your expected expenditure. Do not try to overspend and empty all your reserves due to the project.
IV. The Ideal Deployment Option
Understand the kind of deployment you are looking for during the ERP selection process. This will again depend on the factors mentioned above. Here is a list of the possible deployment options for you:
- On-premise: This will let you access all information related to your business on the actual server, which is set up at your office. If you plan on dealing locally, this can be a good option.
- Cloud-based: This will allow you to access everything related to the business while you are on the go. This follows an advanced technique and is ideal for large businesses.
- Hybrid: This is a mix of the above two options and it makes your information accessible as well as safe.
D. Selection Criteria
You must understand what goes inside the entire ERP selection process, to choose a particular ERP software. Why should you select one software over another is something that you must ask yourself. Here are some key criteria to help you out:
I. Functionality and Ease of Use
The first criteria in the ERP selection process must always consider these two. There is no point in choosing something that is not easy to use. You may use the given actions to understand the ERP software that you may want to choose:
- Comprehend the requirements: Understand the challenges faced by your business and see whether they can be solved or reduced with the system you choose.
- Consider automating the business: You may also consider whether there are any processes which can be automated and if the software you want to select is compatible or not.
- Examine end-users: Ensure that your employees are tech-savvy and if they are not, select a system that is easy to get hold of.
- Plan centralization: Check whether certain processes can be centralised and integrated or not and choose the system wisely.
II. Vendor Viability
You just cannot choose any software without knowing about the vendor. If the vendor is not trusted, or is known to not be credible, you should refrain from purchasing the software from them. You can consider the given set of factors during the ERP selection process:
- Credibility: Check the credibility of the vendor’s company and enquire about the future of his business thoroughly.
- Product Viability: Research to understand the period for which the software has been in the market and check if it works satisfactorily or not.
- Scalability: Ask if you will have to hire more end-users shortly and whether the software is labour-intensive or extensive.
All ERP software is based on modern technology and you must check if the ERP software you choose abides by this same idea. During the ERP selection process, you can take some factors into account.
- Customization: Check whether the ERP software must be customized now and then or not. If it requires frequent customizations to function smoothly, ensure that your vendor helps you out with it completely.
- Requirements: Ask if the ERP software can meet the technical requirements of your business or not. It must be able to generate visual, real-time sales reports among other things.
- Value: Ensure that the software is value for money. You cannot just spend on an outdated system unnecessarily, after all.
Cost is another important criterion to consider when it comes to the ERP selection process. You may take a look at the given factors for a better understanding.
- Basic Pricing Information: Evaluate the cost of the software and whether it suits the requirements of your business. Do not give in to an unjust pricing structure and consider other options.
- True Cost: Once the above step is done, determine its true cost. Calculate the long-term TCO, which guarantees to incorporate all applicable costs.
- Return on Investment: You must also check if the expected return on investment will be more than the TCO or not.
V. Support and Training
Support and training are equally important parts of the ERP selection process. There are two points to be kept in mind, to ensure the smooth working of the software.
- Needs of the End-Users: Understand the needs of your end-users or employees who will be using the ERP. Find out what kind of training they will be most comfortable with and check for an internal team that can help you out with all the technical support that you need.
- Pricing: Is the cost for support and training part of the licensing fees, or will it require an additional expenditure?
VI. Industry Expertise
Industry expertise is basically the ability of the ERP vendor to cater to your specific needs. You can find a solution that is specifically designed for your business, based on your requirements. When you are working with your vendor, you should take advantage of it. Ensure that they have expertise in the field and are known to have a good reputation. A good vendor will make the entire ERP selection process and implementation smooth.
Implementation is a crucial criterion for the ERP selection process. Here are some points that you may refer to while choosing the most ideal software for yourself.
- Ideal software: You should find the best solution for yourself through lean selection or any other methodology.
- Plan: Bring together a project team and construct a foolproof plan of installation. You must also assign the team members their duties.
- Data migration: Ensure that you migrate recent data and do not miss out on anything. Check for errors wherever necessary.
- Training: Train the end-users well through offline or e-learning methods.
- Conduct testing: Before deploying the system, conduct regular tests to ensure that the ERP is working as per your expectations. This will prevent any hiccups on the big day.
- Post go-live duties: You must analyze the return on investment, study the performance of your employees and monitor client satisfaction. You should also assess the performance of other companies to understand how well you are doing.
E. ERP Selection Process
I. Understand the Need for ERP
Begin the ERP selection process by asking yourself whether you really need an ERP solution or not. Ensure that it aligns with your organization because this will ensure its success, in the end. Analyze if it will help you achieve long-term goals and improve your current condition or not.
You should always invest in a solution that guarantees a good return on investment. Another important thing to keep in mind is the need to understand that whether you are a small or a big company, you will need ERP by your side. You cannot deny its importance.
To be sure, you should begin an ERP selection process when you are facing management issues and getting fewer results for more effort! Understand how the system will work for you and whether it will live up to your expectations or not.
II. Determine an IT Strategy
Be clear with your IT strategy by beginning with the deployment. Most businesses prefer an on-premise solution because of its complex processes. However, other factors like geolocation, government regulations and IT staff also play a considerable role. But, cloud-based solutions have their advantages which we have enlisted in the preceding sections.
Next, you should consider the strategies for integration. You may either select one ERP system that addresses all your concerns or you may choose multiple software for the several functions. However, the latter is challenging due to data management, process standardization and organizational change.
You may also consider a customization strategy, just in case the ERP that you choose requires the same. If it does not, you may not worry about this section.
III. Select a ERP Project Team
The project team comprises people who will be responsible for your implementation project and oversee everyday activities. Each business will have a different form of a team depending on the size of the company and the type of ERP being deployed. An ERP project team will include project managers, analysts, developers, key users and engineers. Each member will be assigned a set of roles that they will take care of on their own.
If you have a small business and you are deploying a cloud-based solution, the team will include a project manager, some key users and a consultant. But if you have a larger business, your project team will include a steering committee as well. Such a committee will include the executives and management.
IV. Define your Business Requirements
You should understand the needs of your business thoroughly during the ERP selection process. Your project team will help you out with this along with the department heads, who will analyse the needs of their respective departments and formulate a potent plan.
You can divide your business requirements into three separate groups for convenience:
- Mandatory: These are tasks that are required to perform a job function and are not negotiable.
- Value-added: These tasks are not needed to perform any task and are meant to streamline manual functions.
- Nice to have: These tasks are meant for convenience, just in case you may need them.
V. Improve the Business Processes
It is crucial to understand the weaknesses of your business process and find a solution for them. You need to keep an eye out for the various opportunities for improvement that may come your way. As a business, if you need to transform your whole operating setup, your scope of change will be high.
After understanding the scope of change, you can start the improvement process. In this, you will list out the major weaknesses or issues that act as hindrances to the smooth working of your business. Their solutions will be extra abilities required on part of the ERP system that you choose. This way you can improve your business as well.
VI. Form a Data Management Strategy
You should start planning data migration as well because your data is the most important part of your business as well as the ERP selection process. Ensure that you have a good plan for this purpose, before you start the process. Keep in mind the selection of accurate data because you would not want outdated data to be a part of the system.
You should only include the data that is most relevant to your business so that the new software can deliver the best results by making use of the available data. Therefore, you should identify the data that is most important and accurate.
VII. Enlist Major ERP Systems
This is an important part of the ERP selection process, in which you are finally going to jot down the top ERP systems available in the market. You can consider the following criteria to make your ERP selection process easier:
- Industry experience: Ensure that the vendor is experienced in this industry and possesses the technical know-how to make the entire transition a smooth and effective one.
- Reputation of vendor: You can also find out about the previous projects undertaken by the vendor and see if they have remained true to their word. This will help you understand their reputation.
- Vendor viability: Ensure that the ERP system is a recently updated one as this means that the vendor is viable because they are continuously investing in the solution.
- Scalability: Look for a system that is modifiable and grows with your business. This way it will suit your requirements as and when it grows.
- Cost: Ask the vendor about the actual cost of implementation, training, maintenance and support. If the costs are quite high but the system is top-notch, you may hire an ERP consultant to negotiate.
- Actual innovation: Make sure that the system you choose has the features that the vendor claims it has. Do not give in to fancy terms like artificial intelligence, among others. Analyze the system yourself.
VIII. Shortlist ERP Systems
Begin by shortlisting the list of major ERP systems based on functionality. Choose those systems which are good in terms of their functions and not based on their popularity. You should conduct market research and consult people who are already using those systems to get a better understanding.
IX. Schedule ERP Vendor Demos
You cannot just choose any vendor to help you out, can you? You should therefore ensure that you have the best person for this job. Conduct market research to know about them and their reputation in the field. You should also find out about their expertise and support structure.
Once this is done and the ERP systems have been shortlisted, you should schedule demos. Ask the vendors to demonstrate the working of their system and see if it suits the needs of your business or not. Ask questions about the probable need for customisations among other things and score the demos accordingly.
X. Begin a Business Readiness Assessment
The best time to start a business readiness assessment is when you are waiting for the vendors to prepare demos for you. In this stage, you will be analyzing your company’s alignment and level of resistance to change among other things. It will help you understand if your company is actually ready for change or not.
You should thereby focus on the scope of change. If your business has a high level of resistance and its scope of change is high, you must be ready to put in a lot of time and resources for successful implementation. This will further help you in drafting a change management plan and developing better communication with all your employees.
XI. Negotiate with ERP Vendors
While the ultimate goal of an ERP vendor is to sell their service at the best price, yours is to get yourself the best deal. Therefore, you have to delve deeper when you negotiate. You must set realistic expectations by hiring an ERP consultant, who has experience in this area.
A good consultant will help you understand your realistic expectations by comprehending your contract terms and comparing other companies with yours. They will conduct in-depth research and determine the total cost of ownership (TCO) to help you negotiate better.
XII. Pause Before Implementation
Once the ERP selection process is almost over, you should stop and understand the entire thing again. Find out whether your employees are comfortable with the new system, analyze the effectiveness of your change management plan and of course, be quick with this stage. You do not have to hurry but you are not supposed to stay paused forever.
After being thorough with everything that has happened over the past few months and evaluating the success of the ERP selection process, you can begin with the ERP implementation at your company and expect great results!
In this blog, we have highlighted the importance of the ERP selection process and described the steps which you must undertake for the successful implementation of your ERP software. You should ensure that you follow the above-mentioned steps and focus on your business requirements. If you take these steps into account with the utmost care, we are sure that your implementation will be positive.
F. Frequently Asked Questions
What are the criteria for selecting vendors in the ERP selection process?
There are several criteria for selecting a vendor to provide you with a solution. You may begin by determining their level of expertise, how well they understand the technicalities and whether they are well-equipped. You should also ask them about the cost structure, support and maintenance as well as future training and upgrades. In the end, customer references may also be desirable.
What should be the first step for selecting a vendor in the ERP selection process?
You should begin by bringing together an internal team of stakeholders, who will help you analyze several business requirements. This will help you in understanding the goals of your project well. You must include top management, project managers, department heads etc in this project team for the ERP selection process.
How is the vendor and ERP selection process done?
This is done by evaluating the available system carefully. Several forms of ERP systems are there for you to use, like cloud-based and on-premise. If you come across a system that meets the needs of your business, you should explore it more by talking to the vendor and asking for demos, if possible.
What is the ERP selection process?
There are several steps involved in the ERP selection process. These include evaluating and establishing business needs as well as goals, drafting a budget and conducting thorough research about which system to choose based on several factors like cost.