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How to Choose an ERP in 11 Steps

How to Choose an ERP in 11 Steps

August 18, 2017

Young bearded Caucasian manager sitting in office in stress and having trouble while working at laptop



UK Expert: Tim Hooper, UK Sales and Marketing Director

So it’s been agreed in your organisation – you need a new ERP system, but you’re not sure where to start? I’m sure you’ve heard many a cautionary tale, where seemingly healthy businesses literally belly-flop onto the wrong system. Simplistic claims are abound, it’s hard to discern the truth. You’re not sure who to ask the most basic questions to.  You’re no-doubt wondering:

  • What is a cloud solution?
  • What are the reasons for favouring cloud over on-premise?
  • Where does hybrid ERP fit into the bigger picture?

Our team of UK experts recommend this 11 step guide to aid your decision journey. These steps come tried and tested. We hope you find them useful.

1. Don’t base decisions on blind faith

  • There is hype: Before you start searching, formalising and searching and before anything else, resolve one thing: that you will not buy an ERP system sight unseen. Many organisations purchase ERP systems on the basis of prototype features and appealing presentations, only to find that what they get is vastly different from what the provider showed them. Make sure that what you see in the demo is what you get after signing. Don’t take sales claims at face value; words like ‘cloud,’ ‘hybrid,’ and ‘on-premise’ can stretch to fit many meanings.
  • See the bigger picture: Unfortunately many firms make an ERP selection on the sole basis of their current standing. Yes keep one eye on the here and now, but at the same time, fix another on where you want to be. Consider how far you are willing to go for greater automation or a streamlined workflow. Factor ambitions for growth into steps two and three.
  • Do a cost analysis: Many ERP buyers fail to account for the magnitude of costs and cost differences in the ERP market. If you choose an on-premise or hybrid ERP, you will pay for hardware, for a license (now and with each upgrade), maintenance, consulting, and all staff and equipment required to host and secure the software. Depending on your provider, you will likely have to pay for additional and costly customisation. By contrast, Cloud ERP typically involves a one-off implementation cost and an ongoing software-as-a-service (SaaS) subscription fee.
  • Market share is not a deciding factor: Even amid accelerating cloud migration, the largest market leaders remain on-premise providers who can, for now at least, rely on existing customers and initial brand recognition. Adopting SAP or Oracle strikes many risk-averse CFOs as a safe bet. But this fixation on job security can have devastating impacts for companies and non-profits ill-suited to the burdens, costs, taxing implementation, and almost immediate obsolescence of an on-premise solution. The right ERP system should present a value proposal so compelling that its implementation will ensure both the organisation’s future and the job security of its champions. Balance considerations of market share with customer retention rates, long-term growth, functional advantages, pricing schedule, and ease of upgrade.

2. Reach consensus on your pain points

Even if the entire C-Suite cannot agree on the nature of an organisation’s problems, they should at least agree the problems exist. If nobody else sees anything wrong, you will face a long uphill battle to successful purchase. Ask questions like What is holding us back? Are our employees less productive as a result of our current system? Could automation cut costs or streamline processes? Do we rely on manual processes and spreadsheets? Where do we observe inefficiencies? It is imperative to have this conversation before formalising, let alone conducting, an ERP search. Do not prioritise software with vendors; discuss your needs first, then determine the software that satisfies them.

3. Codify a structured process and selection criteria

To a large extent, this will depend on the strength of the consensus you secured in step two. If your C-Suite remains resistant to the concept of a new ERP system, you might consider a more informal and self-directed ERP search process. If, on the other hand, you feel the entirety of your C-Suite behind you, then you can safely establish a formal process. Based on our experience with customers, we strongly suggest formalising your search if at all possible. Companies with structured searches out-perform those who leave the process informal.

By structuring your process, we mean something like the following…First, based on the pain-points you affirmed in step 2, gather and document your organisation’s requirements. In order to maximise objectivity, confirm criteria, establish a scoring system, and reach agreement on formats for demos and sales presentations. Involve as many relevant stakeholders and involved parties as feasible. However, take care lest you grant undue influence to a single individual or group.

Second, draw on existing leaders and recognised SMEs to form a selection committee. Aim to include delegates from all affected divisions – from C-Suite to sales, finance and technology, marketing and operations; recognising that more effective representation enriches both the quality of the process and the consensus behind its result.

4. Take stock of technological processes (inside and out)

The ERP market of today shares precious little with the markets of five or ten years ago. If your search criteria include items like long-lasting, durable, or a sound investment, then you should take the time to comprehend emergent technologies and how they will impact your business. For instance, on-premise and hybrid systems demand cost-intensive customisations to fold their software around your business’s needs.

Technological leaps now allow many cloud providers to configure a single software instance to the needs of multiple tenants. An inventory of your organisation in light of technological advances will in turn cast light on every subsequent stage of the search process. If you plan to expand in size, know how scalable technologies have factored into the ERP market.

5. Decide which platform ‘makes sense’

Today’s ERP market is highly nuanced, which means that words like ‘Cloud’ and ‘On-Premise’, while valuable, can be misleading. In the wide space between Cloud and On-Premise lie numerous hybrid solutions, attempts to streamline on and off-premise technology.

‘Cloud’ itself fans out into a spectrum of meanings, from private to public and partial to full. Many on-premise providers have attempted to pass off minimally hybrid solutions as cloud, while some cloud providers sneaked in offline modules and software licenses.

Remember cost. For the software ownership an on-premise provider provides, you will end up paying far more than the rep’s quoted price: for customisation, maintenance, consulting, training of your staff, and tech hiring, just to name a few. You will also own the bugs and problems in the provider’s software. And every upgrade will bring with it new licensing and customisation costs.

6. Do your research on potential providers

Devote considerable time to identifying and comparing providers on your platform. Search for warranted claims and compile contrasts between prices, customer retention rates, features, and update schedules. Watch for pretence and surreptitious platform mixing. Find out whether the provider charges licensing fees for individual modules or new versions.

How long will your organisation be fully or partially handicapped during system implementation? Sales representatives should express eagerness to give system demos and details. If they don’t, don’t bother. This stage is your chance to question anything and everyone: how much will we save? How soon? Will the marginal shift in revenues and operating costs defray our investment? Which provider offers a true competitive advantage?

7. Create a longlist

Take all the providers that meet your rough criteria and organise them into a longlist of between 15 and 30. Aim here for quantity before quality. If a solution lives on the platform you prefer, and if no red flags have so far presented themselves, include it.

8. Use a selection committee

Take this opportunity to return to whatever selection committee you identified in step 2 (the C-Suite, a predefined project group, or management team for example). Once you have a shortlist, and have double-checked and eliminated further options, present your findings to a selection committee. As you move from longlist and shortlist towards your final choice, make certain that each committee member understands and complies with this tapering process.  New search criteria should never pop up in the longlist, and by the top 3, you should have long since finished your initial list of possible providers.

9. Collaborate to create a shortlist

By now you should have selected a platform, familiarised yourself with the jargon, engaged a committee, and compiled a longlist of potential providers. For your next step, tighten your grip on the process of elimination. Draw the criteria for deletion from your written requirements. Frequently consult the documents you created in Steps 2 and 3. Engage with your committee on producing a shortlist of ten options. The more you can eliminate here, the less time the final decision stages will need. Schedule sales demos and product presentations as often as necessary.

10. Choose from ‘the top 3’

Compress your shortlist to three providers. Review your criteria, embrace lively dialogue among the members of your search committee and draw discussion down to a final choice. Recognise that at this stage, dynamism, intensity, and even healthy conflict all indicate high levels of personal investment and commitment to the process.

11. Stay sharp!

Even after you have selected an ERP provider, remain alert. In a highly marketed industry, vagaries like ‘hybrid’ and ‘cloud’ can fool any but the sharpest observers. By this point, you hopefully will have already considered factors like updating and implementation downtime. However, always remember that it’s never a done deal until the ink dries on the page.

As you work through these 11 steps, take care to balance your approach between the extreme ends of the spectrum; (self-defeating) rigidity on the one hand and loose (chaotic) processes on the other. You might find the perfect system in step 8 or need to add a selection criterion in step 5. Don’t suppress these developments. Do your best to make each stage as comprehensive as possible, no matter how long it takes.

Rushing through the selection process is a sure path to conflicting indecision or outright chaos.  4 to 6 months might work for one company, while a different industry or tax filing status might require 6 to 8, or even 8 to 12.

Whatever ERP your organisation chooses, this system needs to last for years to come. Take the time to do it properly.

Learn more about Xledger, the most automated ERP solution on the market.

For any questions regarding ERP or to request a no fee no obligation consultation please email or ring our team of experts on 0117 3291050.

 


This blog was written in collaboration with Xledger USA.

 


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