ERP software selection refers to the process of selecting the most ideal ERP system for your business, that has the ability to work as per your needs and goals. The entire process involves several key steps and considerations which, if followed, provide you with the best outcome there is.
In this blog, we will therefore discuss the ERP software selection in detail.
What is an ERP Software?
ERP software may be defined as a set of applications which streamline the entire business and automate its processes. Such software manages business analytics, accounting, supply and marketing automation among others. ERP software selection is the process of selecting the most ideal ERP for your business, that suits its needs.
Another positive part of ERP software is that it ensures compliance with regulatory standards and enhances customer satisfaction, thereby giving you the best experience.
Benefits of an ERP Software
The ERP software selection is important because it provides you with the best single-system solution that integrates all processes across the business. Here are some points for you to understand the importance of ERP software selection:
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. ERP software selection 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 implementation best practices help 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 ERP implementation 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.
ERP Software Selection Process
ERP software selection process involves some key components, which we will discuss further:
a. User Requirements
Know what your users want from the system that you are going to choose. You may do this by collecting feedback from your end users and understanding about the technicalities, they are yet to explore. Try to make an informed choice by consulting experts in the matter and be thorough with it.
b. RFI or RFP?
Another important part of the ERP software selection process is to decide whether you want a request for information (RFI) or a request for proposal (RFP). RFI gives you all the information that you need about the system you are going to select. This is mere high-level pricing information. RFP on the other hand, provides you with detailed cost information.
c. Document of Needs
Now, you need to document the needs of your business as this will help you understand the primary workflow. You can begin by listing the sales process and then, the needs of the inventory management section. This will help you in the ERP software selection and also act as a checklist during implementation.
d. Avoid Using Templates
We suggest that you avoid using templates from an online service as they are very hard to handle, even for vendors. Such documents are quite lengthy as they include every single detail and vendors are not ready to read them. Relying on such templates is a waste of time because you will not be able to understand your actual needs ever.
e. Non-Disclosure Agreement (NDA)
As part of the ERP software selection process, you will have to share the minutest of details with your vendor. This requires a form of trust, bound by legality and an NDA will ensure the same. Sign this agreement with the vendor and sit back and relax.
ERP software selection is similar to buying something new for yourself, as you must analyze your choices meticulously. If you are going, to begin with, the ERP software selection for your business, you should begin by considering some key points.
I. Size of Your Business
The size of your business is a major question because the ERP software that you will be choosing must suit the needs of 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
An ERP software is quite diverse and it must serve the needs of the several departments that you have. Therefore, it is important to understand their needs 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 software selection. Your choice of ERP will be affected by the amount you are willing to spend, which is not heavy on your wallet. So, ensure that you know your expected expenditure. Do not try to overspend and empty all your finances due to the project.
IV. The Ideal Deployment Option
Understand the kind of deployment you are looking for during the ERP software selection. This will again depend on the factors that have been mentioned above. Here is a list of the possible deployment options you may choose from:
- 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.
You must understand what the entire ERP software selection is about, to choose a particular ERP. Ask yourself why one option is better than the other and consider these key criteria:
I. Functionality and Ease of Use
You must always consider these two in ERP software selection. Always try to choose a system that is 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 centralized and integrated or not and choose the system wisely.
II. Vendor Viability
Do not choose any software without knowing about the vendor. If the vendor is not trusted, or is not credible, you should refrain from becoming their partner. You can consider the given set of factors during the ERP software selection:
- 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 ERP software selection, you can take some factors into account.
- Customization: Check whether the ERP software must be customized every 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.
You may take a look at the given factors for a better understanding of costs:
- 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 software selection and two points that will 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 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. Take advantage of the vendor by ensuring that they have expertise in the field and a good reputation. This will make the entire ERP software selection smooth.
Implementation is a crucial criterion for ERP software selection. You may consider the following points to make an informed decision:
- 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.
12 Steps for ERP Software Selection
ERP software integrates various business processes and data into a single, unified system, allowing for better visibility and control over a company’s operations. This can help organizations make more informed decisions, increase productivity, and improve customer satisfaction. Hence ERP Software Selection is the most deciding element in EPR Implementation. Let us understand the 12 steps for ERP Software Selection.
I. Understand the Need for ERP
Begin the ERP software selection 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.
II. IT Strategy
Be clear with your IT strategy by beginning with the deployment. Most businesses prefer an on-premise solution because of their complex processes. However, other factors like geolocation, government regulations and IT staff also play a considerable role. But, cloud-based solutions have their own 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.
III. Select a 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.
IV. Define your Business Requirements
You should understand the needs of your business thoroughly during the ERP software selection. 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 software selection. 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.
VII. Enlist Major ERP Software
This is an important part of the ERP software selection, 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 software selection 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 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.
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. You must set realistic expectations by hiring an ERP consultant, who has experience in this area.
XII. Pause Before Implementation
Once the ERP software selection 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.
Top Three Things to Consider
ERP software selection is a very demanding task and therefore, you need to keep three major things in mind while making the choice. Here is the list:
- Timing: Ask yourself if it is the right time to start the project and if it is not, then when can you start? Generally, you will not find a perfect time to start but periods, when your business workload is not too heavy may be considered ideal.
- Executive support: As a project, the ERP software selection will need executive support and involvement. Even the upper management will have to invest its time in the project for its success.
- Project plan: Ensure that you have a foolproof methodology and project plan, if you want your ERP software selection and implementation to be successful.
In this blog, we have dealt with the ERP software selection by highlighting the key steps, purchasing considerations and criteria for selection. If you follow the above pointers meticulously, your selection will definitely give out positive results. The mantra to a successful ERP software selection is knowing about the needs of your business like the back of your hand.