The consensus is that ERP software selection is an overwhelming task. So much so, that compared to the many other decisions that businesses make for improvement and growth, the complication surrounding ERP selection tends to rise to the top.
An Internet search will produce many articles backing up the struggle involved in an ERP search, but understanding where the difficulty comes from is not as frequently discussed. By breaking down why ERP selection is such an onerous task, we can better navigate and neutralize factors that can paralyze decision-making ability.
Here are our top-6 reasons why ERP software selection is so complex:
- Large number of solutions to choose from.
There are literally hundreds of ERP software packages to choose from – but not all will be suitable for your company. Elimination based on your vertical industry, company size, budget, and process complexity will quickly reveal a shortlist that is manageable.
Need help? Independent organizations specializing in ERP software selection can help pinpoint software that fits your business and process requirements. Watch for firms that are truly independent with no associated software sales; for example, Technology Evaluation Center or 180 Systems are both independent evaluators.
- Large number of ERP implementation partners to choose from.
For every ERP software there can be any number of partners that are qualified to perform an implementation. Investigate partners that are ERP vendor certified, have experience in your industry, are local to your operations, have a strong positive reputation in the industry and are focused.
ERP implementation partners that promote services for a large list of vertical industries or several software products should be avoided. Partners that specialize in a limited software and vertical industry base are the true experts. These focused consulting teams live and breathe the applications and industries that they serve, providing real added value through unparalleled knowledge to clients.
Some will say that selection of a strong ERP implementation partner is actually more critical than the software itself. We agree – good software that is implemented poorly can lead to the downfall of a project; whereas, average software implemented by a strong team can still provide success. As an added tip, look for a partner with similar corporate culture to your own business. A close working relationship requires a good cultural fit to boost collaboration and communication.
Need help? Consult with the software vendor for their recommendations for the best suited partner to fit your needs. They will have firsthand knowledge of the client industries that they most often service and know their strengths and weaknesses.
- Large investment, both in time and dollars.
The price tag associated with an ERP implementation puts pressure on the selection process. High cost in both resource effort and dollar value make it one of the largest investments a company will make. Our advice, do the best to estimate payback in terms of ROI, and create a realistic budget that is both affordable and provides the software functionality and services required. Clearly understanding what your investment will be is preferred to a budget overrun.
Not sure how much to budget? When calculating implementation cost, professional services from a reputable partner will typically cost 1.5 to 3 times the cost of the software, with variance based on the complexity of the implementation.
Watch for traps–
- Keep our professional services cost estimation (1.5 to 3 times software cost) in mind when evaluating professional services. Many vendors will underquote to keep the price tag competitive, hanging ERP Project Managers out to dry with executives when the budget is drastically exceeded.
- Only pay for what you need – don’t get sold on an oversized application that will incur equally oversized implementation costs due to the increased complexity. This includes the ‘package’ deal, where all functionality is included for a single price – unless you intend to use over 75% of the included functionality you are undoubtedly paying for what you don’t need.
- Unrealistically low software services quotes may not cover all the requirements of the ERP implementation. For example, some partners exclude training in quotations suggesting that it is an ‘extra’. With user adoption a critical success factor of the project, training is nothing less than a necessity.
- Many voices, differing opinions.
The ERP selected will be in use across your organization, giving everyone a stake – and an opinion – regarding the selection. Throughout the selection process many will offer advice, have experience with varied software, have a preference due to past work experience – and some may even put their department’s requirements ahead of the company’s.
This is not meant to deter input, on the contrary the magnitude of an ERP project requires input from many to ensure the correct selection is made. The intent is to stress the responsibility of the ERP Project Manager in filtering and sorting through this messaging to pick out relevant information that will help in selecting a suitable ERP that will work successfully for everyone.
Ask for more – when given feedback about potential ERP candidates don’t settle for simple opinions, request constructive feedback for relevant processes that includes measured improvements and process efficiencies. Compile these notes for discussion with vendors and partners.
- Impacts the entire organization.
An ERP implementation will have impact across an entire organization; throughout the implementation everyone and every process will be affected. The knowledge of the impending upheaval weighs heavily on ERP Project Managers in the selection process. Sharing project plans and regular ERP updates helps to lessen the blow across corporate teams.
Stay in control – When selecting an ERP implementation partner, the project methodology should be discussed. A strong ERP implementation methodology should maintain control, mitigate risk and keep timelines, scope and budgets on-track. Essentially, the tighter the project, the more manageable the impact will be on the organization.
- Encompasses a wide and complex variety of functions, processes and analytics.
The most daunting of our list; determining whether an ERP can pass the test to provide all functions, processes and analytics that a business requires. There are two schools of thought on this topic:
- The first is to create a Request for Quotation (RFQ) that details a complete listing of all requirements to ensure that the selected ERP can handle every expected task. Realistic? Hardly. This is where the paralysis comes in place. It would take volumes to create such a detailed listing and with so much to cover (every department, every process), would anyone really feel that the list is complete? And, what about future growth and development?
- The second approach is what we feel is more realistic. Identify the unique processes of the business, typically those that provide a competitive advantage. Include those unique processes and other special requirements in your RFQ. In later stages of the selection, discussions with potential vendors should include specifics on how these processes will be handled, any customizations that are required and the estimated costs and timelines that are associated with any outside of the box functionality.
The point is, all ERP software can handle basic accounting, purchasing, sales and inventory functions – so why place effort on confirming that the software can invoice, cut a sales order or purchase order or handle a simple inventory pick process? Put your effort into the bigger picture – for example, in the case of inventory and warehouse, is the software compatible with Voice Warehouse technology that can offer efficiencies that lower costs and provide a competitive advantage.
Software demonstrations and proofs of concept can also reveal functional capability of the software. Be watchful as sales demonstrations are often rehearsed and can exaggerate fit with your requirements. When in doubt, ask the vendor for references in your industry that you can visit to discuss fit with the software, obtain feedback about the services provider and benefit from lessons learned from their ERP implementation.
Build for the future – An ERP solution can be with a company for upwards of 7 to 10 years. Make sure that the software contains the functionality required for near-term process improvements – and also verify that an exciting software roadmap exists with realistic functionality advancements that support current industry and software trends well into the future. Verifying future software development will safeguard your investment, and will also justify the annual maintenance costs that are typically 20% of the original software investment.
Breaking down the complexity of ERP selection can help ease the decision-making process by understanding the challenges, building confidence to navigate through the challenges and risks, and overall accelerating the selection process to move into the next phase of the project; ERP implementation. This list provides a few tips, but every ERP selection and every company is unique, so the challenges we presented may only be a portion of what you are facing. Awareness is key, know what you are up against and use the information to guide you through the ERP selection process.