Criteria for Selecting the Right ERP Vendor

It can be overwhelming to prepare for a ERP selection, especially if you have never undergone a digital transformation before. Many are stumped during the vendor evaluation process when, according to the salespeople, every vendor seems to be able to do it all on the surface. So how do you differentiate between the vendors? What criteria can you use to see which is truly the right fit for your company?

The needs assessment may turn up obstacles or organizational issues that cannot be solved by software. These factors could influence the direction of the project, or if it happens at all. If the business is not prepared or ill-equipped to undergo such a change, it is better to wait.

Once the business’s capacity for change has been identified, project sponsors alongside departmental Subject Matter Experts (SMEs) should outline and document their requirements across all areas with improvement opportunities. This may include:

Your needs across each of these categories will drive the entire basis for your software selection. It will also allow you to identify scope for the project, ultimately determining which systems need to be replaced.

Other important internal key metrics or information you should document for the business are: 

• Industry
• Key products and/or services
• Sales model
• Annual revenue
• Number of employees
• Current technology stack
  • Which systems are being replaced?
  • Which systems will remain the same?
• Systems to be integrated with the new ERP
• Number of locations, including:
  • Stores
  • Plants
  • Warehouses
  • Distributioncenters
  • Etc.
• Geographicalfactors
  • Locations
  • Languages
  • Localizations
  • Currencies
• Atypical or industry-specific requirements (e.g., FDA validations, ITAR)

Initial Software Vendor Vetting Criteria

Once you have documented your internal software requirements, as well as crucial company details, you can begin approaching software vendors. In your initial interaction, you will need to establish your baseline for evaluating software vendors. 

To start, ask them questions about their company. This includes how many years they have been in business and how many employees they have. Additionally, this is where you should determine the vendor’s core product or service focuses. While you will dig much deeper into software functionality later in the process, this is the time to eliminate vendors who absolutely do not meet your highest-level needs. Asking the vendor to provide an overview of their products and services will give you a better idea of how focused they are in your industry. If they only dabble in ERP or in your industry, they might not be the right vendor for you!
If they pass the first round of questions, you can begin to go deeper. Here you will ask:

• What is the name of the application(s) you would recommend?
• How many customers do they currently have?
• How is the application priced?
• What are my deployment options?
• How many customers do you have in our industry?

These questions will give you a fuller picture of the vendor’s experience, as well as give a better idea of how involved they will be in your project. 

Organizing Your ERP Requirements

Once you have narrowed your options into a vendor shortlist, you can begin vet the vendor short list based on the requirements you documented. You may be familiar with a Request for Proposal (RFP) process. However, at ERP Advisors Group, we typically streamline the approach with a Request for Information (RFI) when we help our clients with software selection.

The RFI should list out each core requirement by department. We recommend creating an exclusion-based RFI, where the vendor focuses on what they cannot do based on your requirements versus what they can do. This empowers the vendor to identify areas where the product won’t be a good fit or where third-party solutions will be required, instead of excessively outline all applicable features. RFI’s will lay the groundwork for demos where key stakeholders will leverage vendor scorecards to further evaluate the solution. You may want to consider bringing in an expert consultant (like those at ERP Advisors Group) to run this process for you.

Vendor scorecards organize the demonstration process with an outline of functionality requirements and a standard for scoring those solutions. This is best accomplished through scale-based scoring. Questions can include:

• How easy is the system to use?
• How effectively does the system meet your specific accounting requirements?
  • i.e., accrual accounting, revenue recognition, grant management, etc.)
• How well does the system meeting your (industry specific) requirements?
  • i.e., project management, document management, inventory management, FP&A, etc.)

Be sure to include each specific need as its own question for rating to ensure every need is considered and reviewed. By using this system, you have a standard for comparing each solution by category, side-by-side.

Remember, every business is unique and will have different criteria for evaluating software solutions, which is why the needs assessment is crucial for outlining those needs before ever interacting with an ERP vendor. Download ERP Advisors Group’s checklist for interacting with software vendors to help get your ERP project started.

Other ERP Criteria Beyond Software Functionality

Beyond software functionality, there is much more that goes into selecting the right vendor to reach your ERP goals. You need to understand the service you can expect from the partner as well as their approach.

Make sure you know how experienced they are in working with clients in your industry. Do they have references for clients of comparable size in your industry who could serve as a reference? Do they have international experience if that is relevant for your business? These questions could make a difference when it comes down to selecting between two or three top solutions.

Additionally, ask about their approach to implementation. More specifically, when will they introduce you to their implementation resources? You want to meet the consultants who will be working with you on the set up of the system, not just the sales team who will demo and help set up contracts. You may or may not work well with the implementation resources, and if not, they probably are not the right company for you.

At the end of the day, you should trust your gut. If a vendor or a product doesn’t feel right, don’t move forward. As the expert for your business, you know what will work and what won’t.

Conclusion

Vendor selection can be challenging, and each project brings unique obstacles and approaches that cannot be minimized into a single, cookie-cutter blueprint for success. As independent ERP consultants, we can help you navigate this process and select the right ERP for your business. For tips and personalized resources, reach out to schedule a free consultation with one of our experts!