ERP Selection: How to Find the Suitable ERP System

1. What is an ERP system?
2. Selecting ERP System: A Step-by-Step Guide
3. ERP selection: Hire a consultant or do it yourself?
4. 6 Challenges in ERP Selection
5. What are popular ERP solutions?

In this article, we will show you what to pay attention to when choosing your ERP system.

An ERP system allows you to streamline and manage your daily operations. It serves as the hub of a company and ensures the seamless integration of the most important business functions. Given its importance and complexity, choosing an ERP solution is not a light decision. Not only do you need to find software that meets your business requirements, you should also look for a provider that offers first-class support and, of course, you should not neglect your budget. To support you in your decision, we have put together the most important factors for selecting an ERP system.

What is an ERP system?

Enterprise-Resource-Planning (ERP) is a system of integrated software applications that manage daily business processes. A typical ERP system includes several modules, including:

• Sales
• Marketing
• Human Resources
• Procurement
• Finance
• Supply Chain
• E-Commerce Systems
• Customer Relationship Management
• Project Management
• Production
• IT
• Mechanical Engineering and Plant Construction

The Advantages of ERP Systems are numerous. They have a central database where several departments can share and view business information. They also provide a Single Source of Truth (SSOT) to avoid data duplication and ensure data accuracy. Not only do your employees save time by manually entering and updating data or counting your stocks. The use of ERP systems also helps you plan and allocate resources appropriately and predict future requirements. And since ERP systems automate tedious business processes, the efficiency and productivity of your employees are also improved.

Selecting ERP System: A Step-by-Step Guide

1. Know your goals:

This is one of the most important steps in choosing an ERP software for your business. It requires a thorough inventory of your business and its processes. You should also consider your future plans for diversification or expansion.

Depending on the type of business you run, your goals might look like this:

• Shortening delivery times
• Reducing warehouse costs
• Optimizing inventory
• Adapting the supply chain
• Improving cash flow
• Increasing customer satisfaction

When defining your business goals, it is important that you involve some representatives of your company in the process. This can include your IT staff, department heads, and end users.

2. Determine the business requirements

Choosing an ERP system should not be based on its popularity in the market alone. Instead, focus on your business needs. Why exactly do you need an ERP system? What areas of your business need to be improved? What features are mandatory and which are just nice-to-haves? With this information, you can create a checklist for ERP selection.

3. Develop a data migration strategy

Without high-quality data, your company cannot benefit from the new ERP software. Although you will only migrate the data when introducing the new system, now is the time to start planning.

If you didn't have an ERP system before, your data will need to be distributed across various departments and multiple systems. So you need not only a strategy on how to collect this data. You also need to think about how you can clean it up to remove duplicates. Keep in mind that ERP providers are generally not responsible for organizing and cleaning your data. So it's up to you to ensure the accuracy of the data.

4. Create a longlist of ERP systems

Before you create a list of potential ERP providers, you need selection criteria. These include all factors that you must consider (aside from your business requirements) when purchasing an ERP solution:

Industry experience: Your potential ERP providers should have multiple references from companies comparable to your own. This means that they should be similar in terms of size, transaction volume, and business requirements. Since the providers will not present you with bad references, you should research them thoroughly.

The provider's reputation: Pay attention to reviews from previous customers that relate to the provider's customer service and long-term support. You should also inquire about the financial stability and internal company problems of the service provider. After all, you don't want to invest a large sum of money in a provider on the brink of collapse.

Cost: Focus on ERP systems that are within your price range. It's a waste of time to think about extensive solutions that you can't fully utilize in your business. Also, you should ask the providers about the costs for implementation, maintenance fees, ongoing support, and training costs.

Scalability: Your business is constantly evolving. Therefore, it is important to choose a flexible ERP system that can grow with your business. It should be scalable and adjustable to meet your current and future demands. The system should also be able to integrate your current business solutions.

5. Create a shortlist of potential ERP providers

To turn your longlist into a shortlist, you should arrange talks with the providers. Here, you should communicate your business requirements and your short and long-term goals. You should also bring the providers together with subject matter experts from various departments of your business. If they claim they can fulfill all of your requirements, you should ask how. Can this be done using standard functions? Or does it require extensive configuration or integration of a third party?

6. Arrange ERP demos with your selected providers

To get an impression of what the ERP solutions can really deliver, ERP demos are a good starting point. They give your team a detailed insight into the functions of the ERP system. It also becomes clear whether the tested software can meet your business requirements. If the provider can't meet your expectations, you should strike them off your list.

7. Is your company ready for change?

An ERP project that brings substantial organizational changes (such as new business processes or new software) requires more preparation time. You need to talk to the employees about the benefits of the new system and the reasons for the transition. Inform your employees about the changes relevant to them, which increases their acceptance of the new system. Begin implementing this plan as soon as possible - ideally before you have decided on the final ERP software.

8. Negotiate with the ERP providers

As with any negotiation, providers usually start by offering the software at their list price and then reducing that price. So you shouldn't shy away from pushing the price below the first offer. They are usually flexible in pricing their software because they have other sources of income - be it through ongoing maintenance, professional services, or training.

Also, you should pay attention to contract terms such as payment terms (especially if you don't want to pay everything in advance). If you don't need it, you also shouldn't buy too many licenses, even if it's a one-time offer. Remember that you can always buy licenses over time. However, it's almost impossible to reduce the number of licenses once you've committed to them.

ERP selection: Hire a consultant or do it yourself?

Even if it looks like you're just buying software for your business, choosing an ERP system is a big challenge. It encompasses many processes and takes into account various aspects of your business. To ensure that you don't commit to something you'll later regret, you can hire external consultants.

Not only do they save you time in choosing your ERP system. They can also assess the various strengths and weaknesses in your organizational structure and provide suggestions for a smooth ERP implementation. Since they have no relationship with the company and are not influenced by the executives, their views are objective and unbiased.

Apart from their objectivity, external consultants work with a variety of clients. This means that they have a high level of experience when it comes to selecting a suitable ERP system. They also know the various technological trends that could influence the implementation of an ERP system.

Coming to the flip side of the coin. External consultants can eat a lot into the budget - especially for large companies with complex business processes. Moreover, while they are objective in assessing your company, they may be biased towards certain ERP providers. So it can happen that they recommend a product to you that doesn't really fit your needs. Therefore, you should also keep an open eye when choosing the ERP providers.

Alternatively, of course, you can conduct your own ERP search with your internal team. This is particularly advantageous if you are already familiar with ERPs and your business operations are not too complicated. In this way, you can save money and retain full control over your ERP project.

6 Challenges in ERP Selection

1. Navigating the ERP software market

The demand for automation and precise data has led to an increasing number of ERP providers. For companies new to the field, going through hundreds of ERP softwares can quickly become overwhelming. Does one opt for an ERP provider that has been around for decades, or one that offers affordable options?

In addition, one can easily be dazzled by systems that contain new technologies like AI, Internet of Things, and Predictive Analytics for ERP Systems. As modern and innovative as they may be, you should never lose sight of your business requirements. Make a list of your functional and technical requirements and use this as a guide to narrow down the ERP options. Moreover, you should focus on ERP solutions that are specifically developed for your industry or business model.

2. Unclear as to the functions

ERP software vendors are experts at making their platforms look as attractive as possible. So, they often show off system features they know will catch your interest. What they don't always tell you - some of these features are "coming soon" and are not yet available. This isn't necessarily a problem as long as you know the exact release schedule.

On top of that, it's also important to understand which features are ready to go and which need third-party add-ons. These details are often glossed over when it comes to winning buyers. If you don't ask the providers specific questions, you're left with guessing, which can cost you additional time and resources.

3. Stay within budget and deadlines

Selecting and implementing an ERP system is not as simple as buying a piece of software and integrating it into your IT architecture. Most of these projects extend over at least a year and rarely stay within budget. Because they're so complex, it's also difficult to accurately calculate the resources and time required.

To mitigate the unpredictability, you need to be flexible and thorough in the planning phase. Make sure to involve the users in the ERP selection process. This ensures that your system is tailored to their specific needs and avoids subsequent expenditures for modifications.

4. Getting the whole team to agree

A new ERP system brings changes - affecting both the business processes and the working methods of the employees. Here, resistance often arises because the employees are not clear how the new system will simplify their work. Instead, they're often left with the belief that it's a top-down decision that's being forced upon them.

To avoid these issues, you should make change management a key part of the ERP project. Encourage open discussions, listen to what the employees have to say, and pay heed to their concerns.

5. Negotiate to get the best deal

From confusing jargon to software demos – the representatives of the providers are trained to sell you their ERP software. As soon as the conversation begins, they tend to take control and make sure you know all the functions and extras of their ERP solution.

Instead of buying all modules and functions at once, you should start with those you need most urgently. If you need additional modules at a later date, you can implement them anytime. Also, you should discuss the details of the statement of work (SoW) for the implementation with the provider. Don't sign the contract if any of the following points are unclear or missing:

• Project Services
• Roles and Responsibilities
• Details about change management measures

6. Make an unbiased decision

For instance, you might be tempted to opt for a software provider like SAP or Oracle just because it has a big name. Alternatively, you might be impressed with a system that your competition uses with great success. Whatever the reason for your bias - if you don't let the facts guide your decision, this could lead to failure.

Ultimately, you need an ERP platform that is specifically tailored to your company's needs. This could be a provider you've never heard of. But as long as it matches your company and has good references and many years of experience in the industry, there's no reason why you shouldn't opt for it.

What are popular ERP solutions?

Here are some of the most well-known ERP systems, which are currently available on the market:

Billbee

microtech büro+

weclapp

SAP S/4HANA Cloud, public edition

DreamRobot

Sage 100

Xentral ERP

JTL

Microsoft Dynamics 365 Business Central

SAP Business One