Selection criteria for ERP systems refer simply to the basis on which a particular ERP software is selected by a company. When you are about to select an ERP software, it is important to know the basis on which you will rate a system higher than another. A well-defined set of selection criteria for ERP system will make the entire process from ERP selection to its implementation much easier for you.
In this blog, we will, therefore, highlight the selection criteria for ERP system that you need to keep in mind before finalizing an ERP solution.
What is an ERP Software?
ERP stands for enterprise resource planning, and it refers to the process of planning, customizing and deploying your ERP system. It helps you manage the daily activities of your business and your data and provides you 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. You must know the selection criteria for ERP system before making a choice, to avoid any future problems.
Benefits of ERP in a Business
The ERP system 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 selection criteria for ERP system and its implementation:
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 centralized 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 your employees’ overall performance and increase 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: Selection criteria for ERP system 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 better understand your functions, thereby ensuring better results.
e. Return on Investment: While the selection criteria for ERP system 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 Selection Process
The ERP selection process is the procedure by which one selects the ideal ERP system for their business. This might seem like an easy task but to be sure, selecting the best system for you is actually a hard nut to crack. It requires a lot of precision and utmost care. For this purpose, one should try to judge the various options based on a set of selection criteria for ERP system.
The process is time-consuming and demands intensive and extensive collaboration between the entire workforce. You must also have an elaborate set of selection criteria for ERP system in mind. To make things similar, you may consider the various purchasing conditions and selection criteria for ERP system that we will talk about in the subsequent sections.
Purchasing Considerations
When you go out to buy something in the market, you definitely have a set of factors that you consider before finalizing stuff. The same is true of ERP selection. There are certain factors you must consider when it comes to selection criteria for ERP system. We have enlisted four purchasing considerations for your help:
I. Size of your Business
This comes out as major selection criteria for ERP systems because the 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.
Smaller businesses require less staff, departments and a comparatively smaller team for implementation. On the other hand, larger businesses needed more people to work and a more comprehensive database. You may consider these wisely, before making a choice.
II. Needs of Other Departments
An 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.
It would be smart to consult the various department heads of your business to help you out with this. These heads will tell you about the needs of their respective departments and this way you will be able to understand the larger needs of your business.
III. Your Expected Expenditure
You must also draft a budget before beginning with the selection criteria for ERP system. Your choice of ERP will definitely 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.
It is always considered wise to have a budget in mind before beginning the process. However, you must always differentiate between the core goals of your business to understand which system will fit its needs the best. In this way, you will be spending only on those areas which are necessary.
IV. The Ideal Deployment Option
Understand the kind of deployment you are looking for during the selection criteria for ERP system. This will again depend on the factors mentioned above. Here is a list of the possible deployment options for you:
a. On-premise Solution
An on-premise system 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. However, you will not be able to get connected to your system when you are on the go. This may be called the traditional deployment option.
b. Cloud-based Solution
A cloud-based ERP 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. With this at your disposal, you will not have to worry about missing out on stuff when you are not physically present at your desk!
c. Hybrid Solution
A hybrid solution is a mix of the above two options and it makes your information accessible as well as safe. You can access all your data while you are in the office as well as when you are on the go. This can be a good option for those who need a little of both options.
10 Key Selection Criteria for ERP System
Now that you know the purchasing considerations behind the selection, it is important to understand the selection criteria for ERP system. For your aid, we have jotted down 10 criteria that you must keep in mind:
I. Needs of Your Business
Ask yourself what you would like the ERP system to do for you and your business. This will help you understand the intrinsic needs of your business. You may bring together a team of stakeholders, who will gather feedback from each department and make the job easier.
Once you have an idea about the basic needs of your various departments, your internal team can draft a document that will comprise all these requirements in totality. You will then, be able to comprehend how the system you are going to choose will add value to your business.
II. Features of ERP
Each company is different and so their demands will be different too. Having different needs means that you will need an ERP system that has some basic features, which can help your business achieve desired goals. This is a major selection criteria for ERP system.
Generally, a common ERP feature that most companies want is inter-department management and collaboration. You may also look for requirements like an advanced level of business intelligence, data security and report creation. Ensure that the ERP system you choose is compatible with data migration and is easily customizable.
III. Total Cost of Ownership and ROI
The total cost of ownership (TCO) and return on investment (ROI) will depend on the kind of system you deploy. This is also one of the selection criteria for ERP system. If you are planning to install an on-premise solution, you will have to bear the costs of hardware and software.
The majority of the costs like employee training, maintenance and support will also be incurred by you. Therefore, the TCO will be higher in this case whereas, the ROI will be slow.
However, in the case of a cloud-based solution, the vendor will manage everything from employee training to maintenance. This will reduce the TCO and the ROI will become faster. Therefore, a lot of companies prefer the latter over the former.
IV. Integration of System
The ideal ERP system should integrate the various business processes as well as any applications that your business wants to continue using. You should choose a vendor who can do so, as you desire. You should ensure that the vendor preferably enables real-time synchronization to keep the data of your business updated always.
V. Support and Training
The implementation of ERP will need some support initially for better functioning, as part of the selection criteria for ERP system. It will also require a set of trained end-users who will manage all your business work through the system. You should therefore ensure that the vendor provides all the support that you may require. They may charge a monthly fee for this purpose as well.
VI. Implementation
ERP implementation can take anywhere from two months to two years, depending on the type of deployment you choose (on-premise, cloud-based or hybrid). Generally, the fastest kind of ERP implementation is cloud-based. The vendor manages most things related to it and offers you the time to focus on other important parts.
You may implement an ERP system in parts and take care of data migration. This will also require data cleansing on your part as well as training and testing before final deployment. Implementation practices therefore become a part of the selection criteria for ERP system.
VII. Industry Expertise
Mere evaluation of ERP systems will not be enough as one of the selection criteria for ERP system. You need to have an idea about the industry expertise of the vendor you are going to sign a deal with. Choose a vendor who has a good reputation in the market and is known for successful ERP implementation.
You may also get references from other users in the industry to verify the vendor’s credentials. Do not forget to check the financial viability of the vendor and whether they will live up to their promises or not. These pointers are very important in ensuring that you get the ideal ERP system.
VIII. Technology
Advanced technology is one of the most important selection criteria for ERP system that you should take care of. Ensure that the system you choose offers features like machine learning, artificial intelligence and other advanced stuff. Such a system should be able to provide a detailed analysis of all your business processes and ensure enabled personalization.
Certain other features may include Internet of Things devices, blockchain and augmented reality (AR). It is ideal to ask the vendor to provide you with such modern technology to prevent yourself from lagging behind. These will make the working of ERP software smoother and more efficient.
IX. Product Roadmap
With the growth of your business, you will also need your ERP to grow. You cannot just keep working with the old system that you once used, for your initial requirements. You should therefore, ensure whether the vendor will keep improving the system as and when required or not. This is one of the ideal selection criteria for ERP system, which you must take into account.
X. Customization
Whether you need to customize the ERP system or not will depend on how complex your entire business is. You might also need to customize as and when your business grows. Customizations will be essential in guiding the kind of cloud deployment chosen as single tenant or multi-tenant.
A single-tenant deployment allows you to have more customizations as it works for only one company. The multi-tenant on the other hand, is a shared deployment and remains rigid when it comes to customizations. This is a great selection criteria for ERP system.
Conclusion
We have clearly laid out the 10 key selection criteria for ERP system which you must keep in mind when you are about to select a particular system for yourself. It is crucial to understand each of these to ensure a smooth process of selection and implementation at your company. We hope that the above information proves valuable to you and your business.
