10 Golden Rules for Choosing an ERP System
Enterprise resource planning, or ERP, systems are intended to provide data to help employees make better decisions (and make them faster), to make your core business processes more efficient, and to help reduce costs across your organization. As complex as ERP is, solutions have become more user-friendly, and, in the case of hosted ERP offerings, easier to deploy. Still, ERP remains an expensive, time-consuming implementation that requires a lot of planning. Before you can choose a solution, you must consider your organization’s business goals, expectations about the benefits you’ll gain from ERP, and the business processes that will be integrated with the ERP solution. Following these 10 golden rules will help you choose an ERP system for your organization:
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ERP packages are tailored for organizations based on number of employees as well as industry.
Midmarket solutions tend to have more sophisticated capabilities than small-business packages, and enterprise-grade packages are the most complex. It’s important to choose a solution that will support the various functions of your organization, such as accounting or inventory management. Some packages are tightly focused on types of manufacturers, for instance, and will offer modules to support functions you don’t need if you don’t have a factory to manage.
2. Include a Software-as-a-Service solution in your assessments.
The ERP market was slower to adopt SaaS solutions than other types of business software, but it is now a viable alternative to premise-based solutions. SaaS offerings generally have a lower total cost of ownership, are easier to deploy than an on-premise solution, and can be implemented more quickly. On-premise solutions offer certain benefits, too, including greater security and control over your data.
3. Weigh each potential ERP vendor’s strengths and weaknesses.
Find out how many customers they have, what their financials are, and if they have any experience in your industry. Ask about the breadth of the offerings, their roadmaps for their products, and how they can adapt as your company grows. Don’t be afraid to ask tough questions and demand honest answers.
4. Plan for the future.
Choose an ERP solution that can grow with your company. Consider not only the features you need now, but the features you may need six months or a year from now. ERP is a long-term investment. You need a solution that is flexible enough to accommodate evolving business processes and new initiatives in your organization and is scalable enough to include additional users. You should also be able to phase in new ERP functionality as you need it.
5. Assess your existing network.
Whether you choose a premise-based solution or a hosted offering, that ERP software could strain your existing infrastructure. A premise-based solution may need a new server, for instance, that can run the software. A SaaS offering may require more bandwidth than your network currently has. Make sure your infrastructure can handle the ERP solution you choose.
6. Consider each vendor’s other business application offerings.
ERP is often sold alongside customer relationship management (CRM) applications. Decide now if you plan to extend ERP into CRM to narrow your vendor options. For instance, if you choose an Oracle ERP solution, then an Oracle PeopleSoft CRM package will be the obvious choice.
7. Calculate the true total cost of ownership (tCO) of each ERP offering.
Remember, the cost of the software or the monthly SaaS subscription is just the first line item on your list. The true TCO of any ERP solution also includes implementation, customization, and management services, training, additional hardware for an on-premise solution or ramped up bandwidth for a Web-based product, and even additional IT staff.
8. Insist on a thorough demonstration of the ERP solution.
Many companies offer online demos of their products, but they don’t go deep enough. Meet with the vendor and get a hands-on demonstration that allows you to experience the usability of each module of the solution. Include employees from the various departments who’ll use ERP to evaluate how well the solution would support business processes.
9. Consider an ERP consultant.
Considering the scope and cost of an ERP implementation, it’s often a good idea to hire an unbiased ERP consultant who can help you identify your company’s requirements and decide if a particular solution will meet them. It is critical, however, that this consultant be objective, equally knowledgeable about all the solutions on your short list, and have experience with ERP in your industry or for your type of organization.
10. Buy only the modules you need.
ERP packages are sold as suites, but you don’t necessarily have to buy them that way. Instead, you can purchase just the modules (or services) that your organization needs. The modules are integrated as you deploy them, whether that’s in your initial installation or several months down the road.