Selecting the right Enterprise Resource Planning (ERP) system for your business is mission critical. You need to select ERP software that is capable of effectively managing your business processes, handling your accounting processes, and supporting your data requirements. And, because most companies run their ERP software for 10 to 20 years, it is vital that you assess the software’s ability to meet your short-term needs and your future needs.
Choosing ERP software that offers the right balance of functionality, user experience, technology, and value is challenging. A suboptimal decision could limit your business’ ability to recover strategic technology benefits. Even worse, it could result in a costly implementation failure.
Fortunately, you can apply tried-and-true methodologies to successfully manage an ERP selection project.
Over Pemeco Consulting’s 40-year history, we have helped clients evaluate, select, and implement more than 140 different technology solutions. We lead 40 ERP selection projects annually for high-growth startups, mid-sized companies, and multinational enterprises. Our experience has taught us that success in ERP implementation starts with making the right ERP selection decision.
The first point to note is that the choosing the right ERP software involves far more than an assessment of software features and functions. Yes, it is critical that the software is capable of supporting your order entry, invoicing, and other functions. However, an effective decision calls for a deeper and broader analysis. One that considers user friendliness, whether the software will be around for the long-term, and whether the underlying technology can withstand the test of time.
For our clients, we group and categorize these various ERP selection and decision-making requirements into what we call Pemeco’s 8 Dimensions of Vendor Fit. By structuring your ERP software due diligence, you’ll be well positioned to evaluate various ERP offerings against one another and against your own business requirements.
ERP Evaluation Criteria: The 8 Dimensions of Vendor Fit
There is no one-size-fits-all approach to evaluating ERP vendors; it must be done within the context of your organization’s specific business and technical requirements.
The key is to use an evaluation methodology that covers your company’s needs across the 8 Dimensions of Vendor Fit. Each of these dimensions, as described below, is a category of multiple requirements that the decision-making body should analyze.
1. Vendor viability and stability
Examine the vendor’s financial strength and analyze any corporate risks or concerns related to solvency, merger or acquisition activity, executive stability, and clarity of vision. Conduct a financial review by analyzing vendor financial statements and credit agency rating reports.
2. Software development roadmap
Ideally, your ERP vendor should address both your current and future requirements. Do they support markets that you are expanding to or new business models? Is their technology roadmap aligned with your own innovation plans? Assess the vendor’s research and development (R&D) investments and product development roadmap relative to your company’s plans.
The purpose of this dimension of analysis is to assess how well the system can support your business’ administrative and operational functional needs. How well does the software support your business process and data requirements? Can it support your sales pricing models? Your inventory management processes? Your revenue recognition accounting needs?
It is important to assess the underlying technology. Is the system well-developed to minimize bugs and performance issues? Can functionality be extended to deliver last-mile enhancements? How well can the system be interfaced or integrated to other systems? In summary, you should assess a multitude of technical aspects relative to development, performance, workflow and automation, privacy, security, integration, disaster recovery, and provisioning and infrastructure needs.
An ERP system is only as good as the available talent. How easy is it to acquire the talent you need to support implementation and internal staffing? How accessible are training and support?
6. User Experience
Even when all other criteria are met, the User Experience can make or break the successful adoption of a new ERP system. Will users be able to easily navigate the system? Access help? You should separately define criteria related to the user interface, navigation, help features, personalization, dashboards, analytics, search, and other self-service capabilities.
7. Total cost of ownership (TCO) and return on investment (ROI)
Ultimately, a new ERP system needs to deliver business value. Business value is quantified through a modelling of costs and benefits through TCO and ROI analyses. Too often, companies understate the costs by (a) taking low-balled vendor proposals at face-value, and (b) ignoring various internal and incidental technology costs. Download a copy of our Ultimate ERP Selection Guide to learn how to develop a full and realistic TCO and ROI analysis.
It is worth restating: ERP software is only as good as its implementation. Create an analysis of the implementation methodologies, identify gaps (which tend to pervade standard vendor methodologies), and assess the availability of implementation accelerators and best-practices that could generate efficiencies.
Ultimately, making the right ERP decision – and owning that decision – is a critical first step on the path to ERP success. By employing a structured, organized, and comprehensive due diligence methodology around the 8 Dimensions of Vendor Fit, you will have the confidence to trust the process and the resulting decision.
Would you like no-obligation, expert advice on the 8 Dimensions of Vendor Fit or on your ERP selection project? Contact Pemeco consulting today.