Enterprise Resource Planning (ERP) software provides integrated management of core business processes. These processes may vary somewhat based on the industry (for example, a manufacturer may have some core processes that a retailer does not), but the main purpose of an ERP solution is always to integrate core business functions and automate routine transactions. Financials, human resources, sales management, purchasing management, inventory, and more are among the functional areas always found in ERP software.
It’s not an exaggeration to suggest that an ERP system will be the most important piece of software your business owns. The success and failure of a business can come down to how well it selects, implements and works with the chosen ERP solution.
Unfortunately, many businesses end up failing to utilize their ERP software properly. Often, the problem originates in the selection process, where a business chooses a software solution that is not well-matched to their requirements. This sets them up for failure before they even begin implementing the software.
Even within the same industry, different businesses have differing processes and unique requirements. One size does not fil all when it comes to ERP solutions, so each business must evaluate its particular requirements before choosing an ERP solution. Beyond the particular functions and features that any ERP under consideration must offer, it’s also necessary to consider factors such as configurability, business viability, collaboration, implementation, deployment alternatives, possible upgrades, and disruptive innovation management.
All these aspects should be driving your evaluation process and eventual choice of an ERP solution for your business.
Challenges & Pitfalls
Going into the process of choosing an ERP system, it’s crucial to have an awareness of some of the common issues and pitfalls you may encounter along the way. The good news is that many businesses have implemented ERP software, so we can learn from both the successes and especially the failures. There’s no need to repeat the mistakes of the past.
One of the most common problems a business is prone to run into when selecting ERP software is not fully and clearly defining the function and features that the business requires from an ERP system. A good ERP solution is one with functions and features that fit perfectly with what your specific business requires and is trying to accomplish, both on a daily basis and over a long term strategy. There is a dizzying range of features and functionality within the ERP system options on the market. These options are tailored to handle any conceivable business operation, and you need to determine what features fit your needs.
Another common issue is not going into the ERP selection process with a clear understanding of your budgetary requirements. An especially common error is to fail to account for maintenance costs. If you expect the entirety of the cost of an ERP solution to be initial purchase and installation, you’re going to go way over budget trying to maintain it over time.
In the digital age, nearly every business is using software of some kind to manage their business. This legacy software is either going to be phased out, or, in some cases, must be integrated within the new ERP solution. Do you have a plan for managing this transition?
Yet another consideration when choosing ERP software is evaluating the vendor from whom you’ll be purchasing the software. In general, your preference should be for vendors who have a track record of success within your specific industry. Just like any other potential business partner, you want an ERP vendor who understands the challenges and unique aspects of your industry. Additionally, a good vendor should be able to provide demos that give you a clear idea of exactly what you’ll be installing.
Finally, a mistake a number of businesses make is not appropriately setting up a team within their workforce to take leadership and control of the ERP system. This is especially critical when it comes to installing the system and shepherding the business through the early days post-installation. You’ll want the heads of all your departments fully on board, as well as designated “super users” who know the system intimately.
Selection Factors to Consider
Now that we’ve covered some of the areas in which a business can struggle or fail when choosing an ERP solution, it’s necessary to examine some of the key factors that ought to be considered when making your selection.
An important consideration in modern business is whether your potential ERP solution is compatible with the current generation of workers. Does this ERP system have features aligned with the contemporary workforce? It’s likely this will come down to a well-designed user experience (UX) that your employees will find easy to use and largely intuitive. Most workers today also expect mobility, so that may be another important consideration when selecting an ERP.
One of the most fundamental considerations when evaluating ERP solutions comes down to cost and ease of maintenance. Is this software package affordable, and does it promise to be simple and hassle-free to maintain over time?
Unless the ERP solution’s out-of-the-box feature suite happens to perfectly match your business needs, some configuration or customization will be another important factor. How much latitude are you given to choose the features you require?
In an ideal world, you want an ERP solution that takes the form of a single-instance, global application. Can your potential ERP system be implemented in this fashion? Going along with that, are you able to upgrade your software if you so choose in a non-disruptive way? In other words, is any upgrade in the future likely to cause as much pain and re-learning as the initial installation?
On the subject of upgrade potential: how well will the potential ERP system adapt to fit the changing needs of your business? If your business grows significantly or the requirements change, will the ERP solution be able to grow along with you?
Another important factor is the ERP software’s method of deployment – whether the ERP system is based in the cloud or on-premise. It’s possible that your specific business requires an on-premise system, but cloud-based ERP solutions are increasingly becoming the preferred (or only) option.
An ERP system purchase is a significant capital expense, and you should be viewed as an important customer for any vendor. Will that vendor allow you to have some influence over product development over time? Along the same lines, what is the state of your potential vendor’s R&D? How does R&D integrate with their development process?
Finally, you should ask the potential vendor to provide references, preferably from clients in your industry. Make it a point to contact those references and ask detailed questions about how well their expectation were met, how their implementation went, how responsive and helpful they find the vendor to be, and so forth. Use the opportunity of speaking with customers of the same ERP solution you are considering to determine whether their past experiences seem to indicate that the ERP system will need to a good fit for you.
To sum it up, selecting an ERP software solution requires following a careful and methodical process. You’ll need to consider factors including functionality and features, price, customizability and ease of implementation and maintenance, as well as the form of deployment of the software. While doing so, you’ll also need to evaluate the software vendor to make sure they seem able to deliver on what they promise.
The good news is that, even if all of the above seems potentially overwhelming, there are independent companies who specialize in helping businesses select the proper ERP solutions, such as Technology Evaluation Centers. In addition, you can find online systems designed to aid in the selection of ERP software.