Choosing your next enterprise resource planning (ERP) software system is a challenging decision. Poorly planned, unstructured selections of an ERP system will almost certainly result in significant extra costs and disruptions to business operations.
In many cases, businesses evaluate ERP systems based on their market reputation, a referral from a friend, or a colleague’s prior experience with an ERP system. However, what frequently occurs is insufficient requirements gathering, generic vendor demos, an overemphasis on total costs, employee bias, attempted self-implementation, and an ERP vendor’s misinterpretation of requirements.
Many of us have encountered at least one or more of these situations, and the financial and business reputation can be enormous, significantly decreasing the likelihood of a successful ERP software pick. The need to follow an organized approach will dramatically improve your chances of success – the following are some points to consider:
1. Conduct a review and analysis of business processes
Avoiding significant problems while selecting ERP software demands a disciplined strategy. The first and most critical activity that a business must complete is a Business Process Review and a Needs Assessment. By utilizing these two approaches, either internally or via external resources, you may identify the precise business and end-user requirements and ascertain the impact of the business process. You’ll discover ways to improve efficiency, lower overhead expenses, and gather warnings and reporting requirements at critical phases of the business workflow. By explicitly outlining your business processes and system needs, you can share them with the vendor, who can then deliver a solution presentation tailored to your business, rather than a generic demonstration of their software.
By doing a comprehensive requirements assessment, you will be able to evaluate the financial impact of each business process in order to identify your organization’s hard and soft expenses. When selecting new ERP software, calculating the return on investment (ROI) will be considerably easier if you include the amount of labour required to remedy inefficiencies and gaps in your present system.
2. Conduct an evaluation of the ERP technology platforms that are supported
Due to the variety of technology platform alternatives – on-premise, cloud, and managed services – choosing the right one should be one of the first steps in the decision-making process. While technology platforms are an integral aspect of any ERP software, each solution has distinct advantages and disadvantages. As an example, cloud-based ERP systems have gained acceptance across all business models, but cloud solutions still account for a very small portion of overall ERP systems sold in North America. On-premise refers to the traditional technique of purchasing an ERP system for installation on company-owned servers. As a result, establishing the platform is a key first step in developing your requirements.
3. Comprehending Total Cost of Ownership (TCO)
While organizations typically expect to keep their ERP solutions for a 5–7-year timeframe, in fact, a large portion of companies use it for a lot longer and generally only investigate replacements when the business model has changed significantly, or their existing platform is failing. As such, understanding the Total Cost of Ownership (TCO) is critical when making a selection. While it is not uncommon to focus on the first year of investment given the impact of the system on the business, looking at the initial investment plus subsequent support costs over a five, seven, or ten-year period provides a more accurate picture of the total cost of a new ERP system. Many of the leading ERP software vendors offer a subscription-based pricing model. Although the entire initial investment is significantly less, the total future costs can become significantly larger. With a subscription price plan, you must calculate the total cost of ownership over a multi-year timeframe when comparing alternative pricing models, such as leasing.
4. Determine the new system's potential commercial benefits.
The potential business benefits of a new ERP system should be assessed from a qualitative and financial perspective. The benefit can be determined by conducting an assessment of the business’s critical functional areas to identify the impact on all stakeholders, including customers, vendors, and workers. While many business owners believe they have an intuitive sense of the influence on all stakeholders, a requirements analysis should be conducted to assess and confirm the expenditure required to optimize a return.
5. Figure out what this means for your staff
It is critical to understand the impact to the company’s employees of implementing a new ERP system, particularly if they are not involved in decision-making. Your employees have a thorough understanding of the requirements necessary to assist them in performing their day-to-day job responsibilities so including key members in the selection process will very likely assist in achieving the commitment necessary to achieve success during the implementation process.
The Litcom Approach
Litcom provides independent advice and assistance. We have helped our clients in evaluating and selecting enterprise-wide business systems, as well as solutions for specific industry verticals, best-of-breed software applications and the hardware and network infrastructure required to support their business. We start by defining our clients’ unique business and technical requirements. In gathering requirements, we not only look at the way you do business at present but also help you see possibilities of process improvement with the assistance of our experienced professionals. To see how Litcom can assist you with your organization’s vendor selection process, please contact us at: firstname.lastname@example.org.