If you are wondering how to select an ERP solution, it helps to have a breakdown of what tasks are involved. The process can be complex, so we condensed all major components of the ERP Selection Process into simple milestones to help you plan your project. (We also provided some guideposts to the hazards that can spoil an ERP selection, so you know what not to do.)
The next step is to determine what your shortlist of applications should include. This is vital to ensure you choose the best ERP software. There are many variables to consider when picking your software shortlist, with different ERP solutions that are best suited to different needs. We categorize the field of vendors into four tiers:
Tier 1: Software systems that can run the entire business, including CRM, Accounting, Human Resources, Payroll, Manufacturing, Supply Chain Management, etc.
Oracle Cloud, SAP 4/HANA, Infor M3, Workday, Microsoft Dynamics 365 Finance & Supply Chain
Tier 2: ERP that can run a large component of a business, but is not usually robust enough to include components like Human Resources and Payroll.
Microsoft Dynamics 365 Business Central, NetSuite, Epicor Kinetic, Sage X3, Infor CloudSuite Industrial, Acumatica, SAP Business ByDesign, Unit4
Tier 3: ERP that is less robust than Tier 2, and while it may run several parts of the business, like CRM, Accounting, and Inventory, it may not offer other key business functionality like Manufacturing.
Sage Intacct, SAP Business One, Sage 100
Tier 4: Entry-level software that runs one area of the business and is low-cost to acquire and implement. Appropriate for automating processes for a new activity that does not rely on integrations with other major business systems.
QuickBooks, Sage 50 (Peachtree), MYOB, many best-of-breed industry-specific applications, Xero
Knowing the right tier of software will help you confine your list of vendors to the right field. If, for example, you are moving out of Quickbooks with a $50 million/year wholesale distribution and light manufacturing company, you would not want to consider Oracle or SAP in Tier 1. But if you are a $400 million/year professional services firm in need of extensive human resources functionality and accounting, you would want to look at Workday in Tier 1 along with some Tier 2 applications.
You will need to locate a representative for each brand of software. After you reach an inside rep, you will then be routed to someone in your industry or geographic zone. Some software companies will be aggressive at getting back to you, while with others it can take weeks to reach a real person who can meet with you to discuss your opportunity.
Use your requirements document to drive a high-level discussion about functionality, but do not send it to vendors until you have narrowed the field to about 3-4 vendors whom you want to invite to give you a demonstration.
We do not recommend doing demonstrations with more than four vendors unless there is an extenuating circumstance. It is best to find a differentiator to include or exclude vendors with, such as “integrates well with your CRM.” Holding demonstrations with more than four vendors can get confusing for the SMEs, and this is usually an indicator that more work needs to be done in the earlier stages of the ERP selection process.
Without a client-side Project Manager (PM), the key sponsor may need to be full-time on the implementation. While some companies may hire a person specifically to fill this role, most mid-market companies do not have that luxury. Hiring a PM who has done a couple of implementations before can be workable, but for more complex implementations it is better to have a team who can fill a variety of roles. The ideal team will have experience with different vendors and business models, and they should be able to adapt as you need help at various phases of the implementation. A firm provides greater security than a contracted PM who may take vacations or get sick, leaving you exposed at an unpredictable time.
There is a chasm between the tasks the client expects the implementation partner will perform, and what they will actually deliver. We recommend using a firm like ours for client-side project management on a project as risky and expensive as an ERP implementation, so you know what to expect and get the results you deserve.
While a client-side PM will track issues and keep the project plan moving, they will also manage the budget, ensure the vendor is delivering what was promised, schedule your team for training and testing, represent the company’s interests, make sure your team is showing up for training, and manage the risky parts of getting decisions made and tasks completed for data migration, integrations, and customizations.
The biggest “gotcha” in an ERP implementation is the data migration. Most clients are not prepared for the heavy lifting involved in providing their data in a clean format to the implementation partner to load into the test environment. The data transformation will not be done by the partner, and it can be discouraging to find out that you are expected to extract and transform the data yourself. ERP Advisors Group offers data migration technical leads and developers if a client has exhausted their internal resources for data migration.
It needs to be mentioned that the cost of a project manager and/or data migration team should be factored into the total cost before you go to the executive sponsor for sign-off on the software purchase. While unexpected fees can exceed your budget, the value should be considered as part of the total cost of ownership before you make your final purchase.
Each software company has its own list of SKUs (short for “stock-keeping unit”) on the estimate form, and it is important to make sure you understand what each item is on your estimate form so there isn’t disappointment later. For instance, if you need multi-company consolidations, that is a different SKU than if you do not have multiple entities. Perhaps you do not need the CRM component: make sure you don’t pay for CRM if you absolutely do not need it. Some of our clients have extremely heavy transaction volume; check to see if you need a dedicated server for on-premises solutions, or a single tenant or private cloud deployment for SaaS ERPs. Others would prefer to forego premium support and rely on their implementation partner, so check what the Premium Support SKU actually includes or excludes.
Make sure you understand the length of the term you are contracting for. If the estimate form says 12 months, that means they can raise the price when it is time to renew at the end of the first year. Some companies might not even be live with their ERP within the first year, and it can be a bitter pill to swallow when you have to renew software that you have not even used.
Whenever possible, buy the software that you will need now and in the immediate future. If there are modules you will not need right away, but will need soon, you can use this as leverage to get a better discount on the entire deal by purchasing them upfront. The less software you buy, the less of a discount you can get on the overall package. Then, when you need more user licenses or new modules later on, you will have the lower discount rate you negotiated at the outset. It depends on your tolerance for cost: do you want a better discount over the long term, or do you want to spend less money at first with less of a discount on future purchases?
Contract negotiation is the final hurdle, and it can be a long haul. Even as the end is in sight, and you are anxious to start your implementation, a Subscription Service Agreement (SSA) can get hung up with your legal counsel. Take into consideration the length of time your procurement team will want to spend with the contracts, the red tape you may need to navigate, and the timing of presenting contracts at a board meeting for approval. We have seen immutable software contract parameters nearly kill an entire deal — and have also helped navigate untenable terms and conditions to find an acceptable compromise.
If you are a CFO who is tasked with conducting an ERP selection or upgrade process for your company or organization, you may be wondering what the checklist should look like for the best ERP solution.
We surveyed the selections we have conducted over the last several years and have compiled some of the most common requirements that CFOs have for their new software. Consider including these specific criteria for your own initiative. If you are unsure if these criteria are right for you, then compile a list of what is wrong with your current system, and from there you can derive the criteria you are looking for.
This is not an exhaustive list. But the format and detail should give you pause for thought across other areas of your business, such as manufacturing, customer support, or project management. And it will help you check for business blind spots.
Once you have created the ERP Solutions Checklist, it is time to pick the right software solution for your ERP selection. There are many “dos” and “don’ts” when it comes to selecting ERP solutions. Create your own checklist before you talk to the vendors, and make sure you are driving the discussion — rather than the other way around.
Criteria: a principle or standard by which something may be judged or decided.
We use six software selection criteria to validate the finalist at the end of an ERP selection. An objective software selection process should provide enough data to evaluate the most important ERP software selection criteria by the time you are ready to choose your finalist. Note that you cannot begin the selection with these criteria — you won’t have enough information. We recommend compiling your evaluation to assist your final “bake-off” to determine your finalist.
Our ERP software selection consultants use these criteria, regardless of industry, size, geography, type of software being selected, user counts, or software footprint. We start by creating a heat map to compare the criteria and sub-criteria for each vendor. Navigating the less obvious criteria illustrates why it could be valuable to your process to hire an ERP selection consultant.
Assess the key functional areas of the software. If you are merely selecting a financials application, score each of the finalists for core accounting functionality. Assess if the software is easy to understand, as well as the overall look, feel, and user experience. This is probably the most important criterion for an ERP software selection because, without good usability and functionality, the rest becomes irrelevant to the end user who will be stuck implementing and owning the system.
Compare your finalists with regard to the flexibility of integration tools and APIs, the development platform, and the data center infrastructure. Look for differentiators with the requirements for your particular selection. For instance, if it is mandatory for the new ERP to integrate with your existing CRM or product lifecycle management, how does the API and toolset rate for each vendor?
If you need more than “out-of-the-box” functionality, will you have access to developer tools for custom workflows or scripts as you grow bigger and more complex as an organization? Or is the platform closed off to access, necessitating that you always contact the software publisher directly?
Finally, does your company have criteria for data center locations? This is especially important for global companies. Consider if maintenance windows interfere with the company’s normal business hours in vastly different time zones or if there are varying Global Data Privacy Regulations,, especially if you are operating in countries like Canada or within the European Union.
Some ERP selection teams may focus too heavily on price, too early on. This can be a mistake — you cannot determine the price until you know what modules, integrations, customizations, or third-party solutions you will need.
High-level pricing, in the beginning, should help include or exclude applications that are too small or too big. Some apps have a minimum implementation cost of $1 million. If that is out of your budget, eliminate them in the beginning. But if you eliminate based on cost too early, you may lose out on a great option.
We have seen some vendors estimate software costs accurately while others underestimate the cost, helping them to stay in the race longer. We know how to spot oddball high-level cost estimates and will prevent our client from eliminating a viable partner too soon.
By the time you are selecting your finalist, cost becomes a big differentiator; however, use it as one of several criteria, not the ONLY criteria. With final contracts in hand, compare recurring software costs, implementation costs, and 3-year costs. You will need to balance the decision to go with a more robust, expensive solution that will grow with your company against a purchase that is more affordable today.
It is drastically more costly to implement the cheaper solution now if you end up needing the bigger application in just a couple more years. And it is also more expensive to pay for a second implementation resulting in a second major disruption.
We look at factors like the software vendor’s customer base, revenue, and size, as well as the software’s long-term functionality fit. There are no benchmarks for any of these sub-criteria but when you compare your finalists to each other, the best-fit vendor becomes more obvious. If you were comparing a small industry-specific best-of-breed software company whose revenue is under $10 million/year with a Tier 2 application boasting thousands of customers and hundreds of millions/year in revenue, it is probably a safer bet to go with the bigger, more viable company.
While it can be tempting to select a smaller firm that has great industry-specific feature functionality, what if the smaller company stops investing in its technology, gets acquired, or goes out of business? It can leave you with no support, or a product that gets sun-set.
Some of the sub-criteria we consider for implementation resources include the level of engagement, how well they understand the client’s requirements, and what kind of executive support the client will get.
A partner or entrepreneurial company usually shows well because you have senior people engaged in the sales process who will help drive the implementation. But some clients feel more secure having the software publisher’s bench of resources at their disposal.
Getting a feel for how well the implementation resources understand your unique requirements, especially any customizations or integrations, should be a key differentiator as you are coming down the home stretch of your selection.
Noting how engaged the resources have been, how interested they are, or how easy it has been to reach them, counts. A more eager team bodes well for the transition from sales to delivery. A disconnected, detached, or disinterested team probably won’t translate into your desired implementation experience once you sign on the dotted line.
Sales teams are eager for you to be happy with your final outcome because they want you as a reference. A good connection with your salesperson can pay off during a rough implementation because they will help go to bat for you with management.
The final criterion is your own gut feeling! While it is entirely subjective, this small part of the magic of ERP consulting should factor into your final evaluation. It would be a mistake to ONLY rely on your gut feeling but don’t ignore it as one of many legitimate ERP software selection criteria.
There are thousands of options for software, and just as many vendors to choose from. While we do provide an ERP selection checklist, it’s important to know that it’s nearly impossible for one person to pull off a successful selection by themselves — especially if they’ve never done it before.
We have developed what we call our Total Certainty Selection Process to ensure that our clients have complete conviction that they have chosen the right software and the right implementation partner.
We start by asking our clients what problems they are trying to solve with software, and then we determine if those problems can actually be solved with a new software application. In the event that a new ERP could actually make things worse, we will never recommend an unnecessary ERP system upgrade.
We look at a client’s strategy, people, business processes, and technology to identify what pain points and limitations to growth they are trying to solve with software. We consider the benefits against the costs of various apps in the market in order to provide our final recommendations.
A lot of times software vendors will only show you what they want you to see. Because there are so many apps out there, it can be difficult to know if a particular application will actually meet your needs — or if the software company is revising your needs to meet their capabilities.
Do not go out and start contacting software vendors if you do not know your requirements. At least establish a baseline set of essential requisites, because you can easily get sidetracked by the flash and pizazz of an expert salesperson. You may even be looking in the wrong vertical for software. Furthermore, if you talk to 20 or 30 software vendors, you will inevitably end up with an influx of salespeople calling you to try to get you to look at their software.
It is best to pre-vet vendors to get a short list together of three to five options. This is a specialty of what we do at ERP Advisors Group — we vet the vendors just as much as we vet the software.
Getting the relationship right with the implementation partner is an important part of the process. You should not move forward with selecting a software package until you know with certainty that you have the right partner.
Often times you can have the right software, and it can meet all of your needs, but the implementation partner or the vendor selling it is not a good fit. When you ask them questions about how they are going to resolve something, they should be able to come up with an answer.
Conversely, it is unfortunate when you find the right implementation partner, but the software package they want you to implement is the wrong package. So getting the relationship right with the vendor and the partner is an important part of the mix. You shouldn’t move forward with selecting an ERP until both sides of the equation are resolved.
When you’re sitting through a software demonstration, don’t let the vendor or implementation partner spend excessive time on a PowerPoint presentation. You need to see the software in action. Just like you would not buy a car without taking it for a test drive, you need to actually observe whether the ERP system can do what you need it to.
At ERP Advisors Group, we help clients during the software demos by making sure the vendor actually demonstrates the functionality of the ERP itself. Not just dashboards either, but processes, such as showing how the software performs transactions, for example.
It takes a lot of work to pull off a successful ERP selection but real help is available, and the barriers to finding the software you need are nothing compared to what they used to be. You can find the solutions you are looking for, and if you need further assistance, we are always available to help.
Finding the right ERP software for your business takes research and strategy, two things that ERP Advisors Group can help you with before committing to a vendor and implementing the solution. Here are ERP Advisors Group's tips for having a great software demonstration:
Conduct a Mini ERP System Demo With Your Potential Choices
Start with your list of four vendors and ask for a short demonstration of their ERP software to get an idea of what they have to offer and how it translates into a customer experience. It's essentially an opportunity for you to shop around and get a high-level feel for their user experience.
Since these should be short and sweet ERP software demos, make sure to dedicate your time focused on your specific wants and needs to get an understanding of what each vendor has to offer your business. Make sure to involve your team members who will utilize the system the most so they can help you narrow your choices down to two final contenders. Involving your SMEs is part of the Change Management process. You are enlisting their support for the eventual finalist by getting their input on what will work best for your company.
Get your SMEs to fill out their scorecards. Tabulate them so you have objective criteria for advancing the best two beyond just "gut feel." Make the scorecard easy to fill out, like a scale of 1-5 for each functional area they saw.
Narrow Down Your Options for Final ERP Demos
With two finalists named out, schedule a full-day demonstration of their ERP software from end to end. Schedule a day for each vendor to showcase what they can offer you, and make sure to bring the vendor on-site to your company. Talk to your team members and make sure they understand how important engagement is during these final ERP demos. Vendors will want to do detailed discovery with some of your SMEs to be as prepared as they can to give you a good walkthrough of their application as it relates to your requirements. At this point in the selection process, it is worth your team's time to spend with each vendor because now you have narrowed the field to the two most viable solutions.
Between scheduling ERP software demos, gathering your notes and assessing your options, and discussing technology considerations and pricing, you might get overwhelmed by the ERP software selection process. Don't tackle this task alone - work with ERP Advisors Group instead. We have a white-glove process that takes care of every detail. Your team merely needs to show up for demos and fill out their scorecards. We will take care of everything else!
Ready to get started? Contact us today to schedule your consultation.