| By Alison Diana
ERP Software Selection Critical Components
Since Enterprise Resource Planning (ERP) software pumps the heart of a company's data life-blood, it is vital that businesses expend the necessary time and resources to ensure they select the best-suited product and technology partner to implement and support their investment.
ERP solutions incorporate a centralized database for information from all a company's departments, branches or offices. This data is accessible to authorized users within the organization, giving employees a single, up-to-date view of key information. ERP solutions are broad, and typically encompass financials; distribution; human resources; product life cycle management; customer relationship management (CRM); purchasing; manufacturing; warehouse management, and decision-support.
Since all aspects of a company are affected by and interact with the ERP software, it is critical that IT executives and business managers pool their acumen to design a system that best meets the company's current - and future - needs.
Begin with a Plan—and an RFP
Like any large IT undertaking, an ERP implementation requires buy-in from senior management and a top executive to champion and drive the cause. It's a well known best practice that the top executive sponsor should be a business person, not an IT person, although IT management plays a critical role on the team. All of a company's department heads must support ERP planning, selection and adoption since all departments will be integrated, and any one department can negatively impact the operations for everybody.
It is critical that an ERP software selection be driven by prioritized, weighted and objectively scored criteria. Another best practice is to focus on the most pressing "must have" software requirements, rather than try to assemble, review and score every possible business and software requirement. It's advisable to align the company's business strategies and objectives with the software requirements, as doing so will provide a basis, or identify obstacles, for the company to achieve its goals.
All business processes, software requirements, features sets, application functionality, software automation and business intelligence requirements should be encapsulated in a single document—normally the RFP (Request For Proposal). This provides the basis to effectively compare multiple ERP software products against a finite set of key criteria.
While "nice to have" software features receive less priority, go ahead and document those items and encourage staff to create a wish-list of an ERP solution's capabilities. After all, these individuals will use the new system most. In addition to improving employee engagement and buy-in, these discussions likely will generate ideas and requirements that ERP champions may consider in the decision-making process. And, by addressing potential stumbling blocks in advance, no matter how small, businesses can both avoid surprises, and plan for software customization or training to mitigate pitfalls.
Wise companies listen to many voices, especially in the early planning stages. But ERP software selection projects require a designated leader and accountable team, otherwise chaos - and failure - easily could ensue.
Business Process Improvements
To get the most out of an ERP software implementation, businesses must avoid merely automating or centralizing existing processes. Instead, they should critically evaluate current procedures, deciding what works and what doesn't, and where improvements to business processes can be made before moving further into the ERP software selection process.
Speaking to employees and managers helps dig up bottlenecks, redundant tasks and other time-wasters. This is the opportunity to dramatically improve the ways in which a company does business, cut costs and improve productivity. Resist the temptation to continue business processes simply because that's the way its always been done.
Businesses not only must consider current needs but must look ahead. ERP systems often last a generation or more, so business forecasting is essential. Scalability is also critical. After all, no one wants - or can afford - to frequently revisit ERP implementations. Mapping required ERP capabilities against a company's business plan reduces the risk of short-sightedness, ensuring today's investment pays off well into the future.
Companies also must consider the viability of potential partners. Are the ERP software vendors profitable? How do they continually adapt and advance their technologies? Who are their partners? How do they compare with their main competitors? How have they weathered the most recent economic downturn? What percentage of a vendor's revenue goes into research and development? These are all questions which help assess an ERP vendors viability. Particularly when considering best of breed or new technology ERP systems—such as open source ERP systems, cloud ERP apps or software as a service ERP systems—asking these questions may eliminate some contenders or open the door to new prospective vendors.
On-Site, Hosted or SaaS
Today, businesses have the option of purchasing software to house, run and maintain on-site, selecting a third-party to host a traditional software licensed solution or subscribing to a software as a service ERP system. There is no cookie-cutter approach or standard answer to this decision; rather, it depends on the company's culture, comfort-level, budget and objectives.
Owning ERP software is more expensive up-front, and may force a business to invest in more servers, network capabilities and IT staff. But a company then has greater control over the technology, data, security and availability. With some hosted services and SaaS ERP, businesses pay a pre-set monthly fee and rely on the managed services provider's (MSP) hardware, network and support staff to keep the system up-and-running. However, some firms are leery of ceding data and control to an external company, regardless of an MSP's reputation and strict adherence to its service level agreement (SLA).
ERP software demonstrations, while important, are only the first phase of a thorough reference check. Use the product demos to hone down the list of candidates, then investigate each leading contender by speaking to similar customers.
Request reference accounts that are similar in company size, industry, geography and business objectives—as this is a proven method to accurately determine the viability of each vendor's solution, and flush out issues that should be mitigated before the purchase decision is made. The more business similarities, the more likely these reference customers are to have encountered the types of challenges - and benefits - your company can expect. In a competitive environment, this option should be available, however in the absence be sure to speak to several more current customers to find areas of similarity. In addition to getting feedback on the product itself, it's also important to review the vendor's accessibility and flexibility; the quality of the training and support; the ease of software customization and integration with other products, and conflict resolution. Beyond the product, ask about lessons learned, critical success factors and obstacles or surprises encountered. If a business plans to use a third-party MSP to host its ERP solution, it's important to pose similar questions to prospective service providers.
A Phased Approach
Of course, an ERP implementation cannot be done overnight - or even within a few weeks. The planning phase includes employee feedback, the creation of an ERP leadership team and a schedule. The design phase incorporates the review of current practices and corporate organization, selection of the ERP software, modules and capabilities, and a decision on whether the ERP software should be delivered on-premise or on-demand.
If done well, the ERP software selection process will lay the groundwork for the follow-on implementation. The software selection plan can be extended to the implementation phase, the team can extend the plan and the accompanying documentation, and the revised business processes to be automated by the ERP software.
Investing the up-front time to select the best-suited vendor and software will deliver a return on ERP investment by delivering employee and management buy-in, better fit and alignment with strategic objectives, improved productivity and automation, and an overall boost to the organization's operations.