The ERP industry has reached a level of maturity, presenting a wide variety of software options and suppliers. Since an ERP system is a significant commitment that cannot be casually replaced, selecting the right one is crucial. While knowledgeable ERP consultants can assist in navigating the selection process, it is essential for the organization to actively participate in making the final decision.
ERP selection is a structured evaluation of multiple ERP platforms to decide on the best-fitting option for a company. A well-chosen ERP will bring the company multiple benefits, including integrated business processes, business workflow standardization, and enhanced productivity.
In this guide, we cover all aspects of ERP selection to help you make a sound choice and ensure successful ERP adoption.
A 7-step ERP selection guide
To help you choose an ERP solution that will bring maximum benefit to your organization, we’ve compiled this guide that walks you through every step of the selection process.
Step 1. Build an ERP selection team
An ERP selection team comprises employees from various departments, business units, and locations, including department managers, team leads, subject matter experts, shareholders, and partners. Their objective is to support the ERP project team by defining software requirements and participating in ERP software vendor demonstrations. Selection of experts should be merit-based, focusing on competence rather than job titles, and they should be encouraged to express their views freely, even if those views are contrary to popular opinion. It is also crucial to have team members who are well-acquainted with the company's current processes and who will be regular users of the ERP system.
Should your company lack the necessary expertise, engaging a professional consultant for ERP selection is a viable option.
Note: When feasible, promoting broader discussions among employees and stakeholders can be beneficial. Alternatively, entrusting this task to a select group of stakeholders capable of building consensus swiftly and advocating for change can be effective.
Step 2. Create a plan
The process of selecting an ERP system can take anywhere from a few weeks to several months, and having a clear plan can help prevent unnecessary delays. At this stage, a company must decide on:
- The overall scope of the ERP solution, including which business processes and workflows it should address
- Critical integrations with existing systems
- Key limitations (budget, timelines, IT skills) that may impact ERP selection and implementation
- Criteria for evaluating potential solutions
- A timeline for making the final decision
Step 3. Determine and document clear ERP objectives and requirements
Understanding end-users, their needs, objectives, and expectations, as well as their unique business process solutions, is crucial. This knowledge allows companies to define their overarching vision and objectives.
During the requirements gathering phase, it's important to concentrate on the 'what' and 'why' rather than the 'how'. This approach prevents the preconceived notions of end-users from shaping the software requirements. To gather this information, one should conduct interviews, workshops, Q&A sessions, and review existing policies and practices. This helps identify:
- Inefficiencies in business processes
- Breakdowns and bottlenecks in workflows
- Objectives for ERP implementation
- Essential ERP requirements
- Expectations of ERP success
- Concerns and risks associated with ERP implementation
It's important to remember that ERP is a business initiative, not just a technological one. A deep understanding of end-users' needs is essential; otherwise, there's a risk of basing decisions solely on technical features, which could lead to project failure.
The next step is to compile and formalize the requirements into a software requirements document. The gathered requirements can be categorized by priority, such as 'must-have', 'should-have', and 'nice-to-have'. Subsequently, all stakeholders should come together to discuss and agree on the prioritized list of features.
Step 4. Research and Shortlist ERP vendors
Move on to compile a vendor selection list with viable candidates. After assessing ERP vendors against the shortlisted criteria yourself or with the help of experts, you can issue requests for information (RFIs). RFIs should contain your organization’s most important ERP requirements, short- and long-term goals, and a request for high-level pricing information. After receiving vendor responses, you may end up with two or three you’d like to pursue further.
Note: Don’t necessarily aim for tier 1 ERP – not all organizations need such extensive systems. Besides, some advanced tier 2 and tier 3 applications have similarly rich feature sets.
Step 5. Schedule demos & Q&A sessions
Send the selected ERP vendors requests for proposals (RFPs) and personalized demo scripts. Such tailored demos will let your ERP selection team properly evaluate the software's ability to address your business requirements and make a difference for your company’s daily operations.
After the demos, the selection team should discuss them, give them scores, and decide on a second demo if necessary. It’s advisable to also hold Q&A sessions with the vendors - it builds trust and an open culture and helps avoid ambiguity.
Note: Don’t settle for standard sales demos, ask for a personalized presentation.
Step 6. Evaluate features and functionality
When evaluating features and functionalities, it is essential to understand how each aspect can contribute to overall performance, user experience, and long-term success. By examining the unique attributes and capabilities of a product or service, you can make informed decisions about its practicality, efficiency, and value. This critical assessment allows you to identify potential improvements and innovations, ensuring that the chosen solution aligns with your specific needs and goals.
- Essential Modules: Ensure the ERP includes modules crucial to your business, such as finance, HR, supply chain, and CRM.
- Customization: Look for systems that allow customization to suit your specific processes.
- Scalability: Ensure the ERP can grow with your business and adapt to changing needs.
- Intuitive Interface: Opt for an ERP with an easy-to-navigate interface, minimizing the learning curve for users.
- Customization Options: The system should be flexible enough to adapt to your business's unique processes and workflows.
- Compatibility: The ERP should integrate seamlessly with your existing software and tools.
- APIs and Connectors: Check if the ERP offers robust APIs and pre-built connectors for easy integration with third-party applications.
Step 7. Make an informed decision
Now it’s time to evaluate proposals, which cover implementation costs and recurring payments, timeframes and the scope of work, implementation approach and support level. Once the board has made a decision, you are ready to negotiate. Usually, vendor negotiations last several weeks or up to a month, during which you can get a discount depending on the number of licenses you’re purchasing and the agreement term.
The final stage of the ERP software selection process is signing a contract, which covers the provided software and services, costs, mutual obligations, timeline, roles, and responsibilities.