What are the key considerations for ERP selection? Our company couldn’t function without enterprise resource planning (ERP) software, which is crucial for accomplishing our goals. Our organization places a high priority on selecting the most suitable enterprise resource planning (ERP) solution. I insist that you pick the right one. Remember to incorporate these ERP system selection criteria into your choosing project.
While thinking about the ERP selection criteria and how they may affect each piece, it is important to always keep in mind the company goals.
Top 10 ERP selection criteria:
- Needs of the company
- Backing from higher-ups
- Assistance for users
- Essential functions
- Consolidation with preexisting infrastructure
- Financial plan and assets
- Innovation and potential for growth
- Total investment and return on investment
- Make a decision after considering all of the possibilities
- Required personalization
What are the Key Considerations for ERP Selection?
There are many factors to consider when selecting an ERP system because it will have far-reaching and lengthy effects on your business. Ensuring that your ERP system: However, while the most important needs of any business may vary significantly,
- Performs every essential task for your business; the system facilitates rather than impedes operations.
- Details on the ERP provider’s prior experience working with companies like yours
- Tell us how we can make your ERP system work better for you.
- Would you want to know the price of your ERP system? To implement an ERP, your business must have a realistic budget.
- How well your system works with systems designed for the long haul – A single system that can support your entire firm is preferable than having a hodgepodge of technologies.
- What changes are needed from the software that is pre-installed?
Be sure to consider your unique company challenges and how they relate to each set of criteria as you go through our ERP selection criteria list, which includes answers to these questions.
Key Considerations for ERP Selection #1: business requirements
Create an exhaustive and well-defined list of all the features you need from your ERP. To make this list outstanding, use all available resources. The purchasing manager and the manufacturing team should get together. The counsel of senior management, customers, and suppliers should be carefully considered. Make contact with salespeople and workers who have worked for you before. After you’ve written down every single thought, rank them in order of importance. Reach a consensus on which needs are actually “must have” items. Things that aren’t critical to the company’s operations but that everyone thinks will help advance them to a higher priority. Other than that, everything else is just a “nice to have” item.
Present your prioritized list to the individuals who offered you feedback again. Is there agreement between them and the specified criteria? Does it need updating? Bring a point up from the second level; is there a good reason to do so? We assume without inquiry that this list satisfies all other criteria to the greatest degree possible.
If you utilize an ERP requirements template to break down your key features into their respective functions, you may streamline this process considerably. For instance, instead of merely listing features, our requirements document is interested in understanding how the general ledger automates repetitive transactions. Furthermore, the program’s rules may be used to determine the quantities of GL transactions. For a thorough understanding of a system’s capabilities and how its software may meet your goals, whether through pre-built features, customization, or connection with third parties, this degree of detail is essential.
Key Considerations for ERP Selection #2: upper management support
That may seem like a need that anybody might see coming. People often fail to recognize its importance. Without the support of upper management, no amount of enterprise resource planning (ERP) software can guarantee a project’s success. Just getting a spending permit isn’t enough to show your support. Having upper management take the initiative is a great way to demonstrate their support. Managers might hinder progress when they provide equivocal support for requests for resources from other departments. You should trust that your management completely backs the ERP, even though there may be a short-term cost to using either the current system or the new ERP.
In order for an enterprise resource planning (ERP) project to be successful, you must capture the support of senior management. Get the selection expenses figured out first, and then focus your business case on the company’s goals and how ERP would help them reach them.
Key Considerations for ERP Selection #3: user support
Everyone in the company will be able to utilize the new ERP system. To get their support, make sure that the criteria list includes their wants and needs. Those users, no matter their location, will reap substantial benefits from a successful ERP adoption. It is critical to guarantee those users will receive the required support, including training and equipment, so they can enjoy the ERP’s advantages for both themselves and the business overall. Tell them you’ll be there to lend a hand while they figure out how to change it up. Their unfaltering support is their reward for ensuring the success of your new enterprise resource planning system. Here, you need to make sure that the documentation your clients need is not only readily available but also of sufficient quality to meet their needs.
ERP selection criteria #4: functional requirements
Before you even think about your needs for changes and updates, your company has certain functional requirements. Is it possible to use this ERP to place sales orders for both tangible goods and services? Obviously, it must if that is your company’s product. There are a number of nations in which your company is active. Can you tell me if ERP’s accounting features support working with several currencies and tax systems?
Consider all of the ERP features that aren’t absolutely necessary for your company. Does your distribution company lack the ability to manufacture? If so, would you be able to simply circumvent the work-in-process requirements imposed by the integrated inventory system that is a part of many enterprise resource planning systems?
Your ERP selection criteria should take into account the wants and needs of each department, as different sectors and departments will have very distinct functional requirements. Every division should find that using your ERP is more convenient than more difficult. The integration of your ERP with your suppliers and the ability to trace shipments through the new system are important details that your supply chain must be informed about. Sales are inquiring about ERP’s capability to manage multi-tiered orders and how it will deal with various sales areas. Incorporate all relevant departments within your ERP needs assessment.
Key Considerations for ERP Selection #5: integration with existing systems
If a company is thinking about getting an enterprise resource planning (ERP) system, chances are good that they already have other systems in place that serve their needs just well. Now we need to know how those solutions will work with ERP. Common data items are present nearly all the time. Is it possible for ERP to access and extract data from that other system? How will you ensure that data elements that have been modified independently remain compatible, and will you let the same data to exist? Would it be more beneficial for you to switch to using that ERP data in the other system?
May I inquire about the ERP’s integration capabilities? For infrequent data changes, it should provide simple integration with formats like.csv files. For regular usage, that sort of update is probably too sluggish and inefficient. A more contemporary method of operation is the use of web services and XML files, which enable various systems to swiftly transmit data between themselves.
Electronic data interfaces, or EDIs, allow many businesses to exchange information with one another. Make sure your ERP can accommodate this requirement if it arises.
Key Considerations for ERP Selection #6: budget and resources
What is the budget for an enterprise resource planning system? A stringent selection criteria is required when one’s resources are limited to ten dollars. A long-term consideration, ERP selection is—according to a 2021 Software Path report—an average of $9,000 per user of the system. This is a substantial investment. With most ERP systems expected to be in operation for 10 years or more, there is a financial consideration for infrastructure-related and ERP-related continuous maintenance and support. Decisions made now will have a lasting impact on future spending plans.
For the sake of choosing and implementing ERP, who will actually put in the effort? Although full-time resources are ideal, many companies will prefer to hire part-time workers. Before those resources can dedicate time to ERP, you must decide who will do the essential tasks that they currently do.
Even though your ERP budget may change depending on the size of your company, the most recent ERP study from Software Path averaged the cost per user across a range of sizes by compiling budget data from hundreds of ERP projects. The expected budget per user was often greater in the healthcare business, according to their ERP project report.
To identify the proper ERP software, you need consider requirements, resources, industry, and company size.
Key Considerations for ERP Selection #7: technology and future scalability
Both the software and hardware components of your enterprise resource planning (ERP) system are affected by these issues. We anticipate that both fields will continue to see growth and progress. Neither of them should be using technology that is too old, but we also don’t want them to be at the cutting edge of technology. Concurrently, we are looking for an ERP vendor that has proven itself capable of staying ahead of technological trends and who will continue to do so when we purchase their software.
Key Considerations for ERP Selection #8: total cost of ownership and ROI
You need to tally up all the extra expenses that will crop up because of this ERP. The first outlay will consist of the buying price plus a small fee for first consultation. Your networks and servers may use some upgrades right now. As your staff implements ERP, you should expect to incur costs for training and temporary workers. As long as you keep using the ERP, you’ll have to pay for support and maintenance.
Improvements in the cost to do work will also be beneficial to you. As a result of offering clients services and products that were previously impossible before using this ERP, you may observe an increase in income.
You can figure out your return on investment by spreading out the expenses and rewards across time. In order to justify an investment, the majority of companies set a minimum acceptable rate of return. Verify if this ERP meets the return on investment (ROI) goal of your company.
Key Considerations for ERP Selection #9: evaluate and select options
Nowadays, there are alternatives to the conventional enterprise resource planning (ERP) system that relies on an in-house IT department and an on-premises server. An ERP that is cloud-based and built on a SaaS platform is a popular choice among many companies. The software and most maintenance needs are included in the monthly “rental” payments, which lower the original expenditure.
A hybrid solution is available, in which case your company would own the ERP software but use shared servers to run it on the cloud.
These days, open source software is being used to build many ERP systems. These groups gain as the software is either free or relatively inexpensive to purchase. A t this time with open-source, you have access to the source code and may make whatever changes you want. Everywhere you look, users are updating open source ERP and fixing flaws. Everyone can start taking use of such enhancements right once; there’s no need to wait for a development firm to release a new version.
If any of these possibilities cause you distress, your decision will reveal the most important criterion for your ERP system.
Key Considerations for ERP Selection #10: necessary customization
A flawless ERP system will never necessitate changes. Considering that none of them will be flawless, the ability to personalize will play a role in the choosing process. Find out from your staff what kind of customization is required and if it’s really necessary. Modern enterprise resource planning (ERP) systems incorporate feedback from thousands of users. Is there a way your company stands apart from all the others in the world? Very unlikely. customization is not a selection criterion if your required customization can be readily accomplished with an existing ERP. While the ability to postpone customization while utilizing a current ERP and assess it at a later time is a criterion, the capacity to deploy such customization at a later time is more important.
However, while evaluating ERP systems, keep in mind how easy and efficient it will be to implement your desired modification. Then, is the programming language you need available to your developers? Is there a job market for developers with that skill set?
Will your ERP system be able to accommodate the changes? Are additional validation approaches, such as business objects, available to you to guarantee ERP component compatibility? Will other parts of ERP be effected when you implement your changes?
You may narrow down your options for enterprise resource planning (ERP) systems by considering which ones provide better solutions to your issues.
Bonus: ERP software selection checklist
In addition to make sure everything goes according to plan throughout your ERP selection process by using this thorough checklist. You can tailor it to your company’s requirements, but we hope this serves as a solid foundation. Feel free to use our checklist as a starting point for your ERP selection process.
Selection Team tasks
- Choosing a project manager
- Gathering your team of candidates
- Finding a sponsor at the C-suite level
Requirements gathering
- Drawing out a schematic of your present company procedures
- Defining critical issues facing the company
- Discuss the problems with each division with them.
System specification
- The number of users that need access
- Which web host would you recommend?
- Can you tell me the language and money needs?
Vendor services
- Who can help you the most?
- Is it necessary to hire a third-party project management team?
- In your old systems, which data sets are most important?
ROI forecast
- Find out how long it will take to pay for the whole thing.
- Formalize reporting on return on investment projections
- Draw up a strategy for handling change
Vendor shortlisting
- Find out what enterprise resource planning systems your competitors use.
- Establish a preliminary roster
- Generate a request for proposal
Selecting an ERP
- Assemble your squad of candidates
- Look over the replies to the RFQ
- Reach a consensus on a purchase
Finally, whole ERP selection checklist includes 60 stages that you should follow when picking right ERP, although the above checklist is a highly condensed version of it.
After reading this, you should be able to answer all of the questions regarding ERP selection criteria and also make informed decisions that will benefit your company both now and in the future.
