Choosing an ERP solution is (almost) like a catholic wedding. It is one of the most important decision with long lasting implications, up to making the difference between a growing business and an enslaved business * Here are my main points to discuss with your strategic consultant when matching the best solution for your business.
In my last Blog post I explained what is an ERP system and why consider it for your business. Now it’s time to consider the selection process of an ERP solution.
I cannot emphasize enough: selecting an ERP solution is a critical decision with many considerations at play. Consult an experienced, independent advisor to match the best options available to your specific business.
In 1972 SAP introduced the first packaged business software (for financial departments of organizations). Naturally, what evolved to become ERP software, was affordable to large corporations only. With time, however, the ERP software market have matured as new technologies emerged, business models were offered and ERP vendors came and go. SAP, by the way, is still around and leading the ERP market globally.
Today, ERP is considered a standard for medium to large sized organizations, and highly popular among small businesses as well. However, as we’ll see in the fourth post in this ERP Explained series, it is still one of the most challenging and resource-intensive projects an organization can face, let alone the financial burden in purchasing and implementing it. The main reason is the fact that an ERP project disrupts the comfort zone of individuals and whole teams, raising fears of unknown, and fears, as we know, are a bad companion when making decisions.
Approaching the challenge
The first milestone is the understanding that a standard, packaged application, is the best bet for your business. This, by the way, is true even if you’re a small business with 5 employees writing $200,000 in annual revenues.
The realization that investing in a standard, encompassing information system is a worthwhile investment is important, albeit most business owners fail to realize that. The transition from a mom-and-pop business to a scalable business will greatly benefit from having the mentality, mindset and experience of a solid ERP platform (and there are affordable ERP solutions for small businesses).
The next thing to realize is that you are taking a risk if you’re heading to select an ERP solution on your own. The larger and more complex your business is – the greater the risk. The amount of moving parts here is enormous. Missing a single critical question may turn out very expensive down the road.
The first phase will be a thorough business requirements analysis, in light of your business industry, growth plan, structure, culture, policies and processes.
What to consider
Once that business analysis document is in place, several key questions needs to be discussed (this list is mostly relevant for growing and large organizations, less for small businesses):
- Consumption model: are we buying an on-premise solution, or subscribing to a cloud service? Are we investing capital in purchasing an expensive solution, or are we expending on a monthly service?
- Special constraints: Are we looking for local solutions, global solution or both? Do we have any special localization or language constraints?
- Attention focus areas: What are our core business processes for which we need a good fit? If our human resources and sales processes are standard, we don’t want to invest too much on these areas. If we have a unique procurement process that is giving us an edge, we want to carefully see how this process is met with any considered solution
- Regulatory constraints: Is our industry subject to any regulatory or legal constraints? What are the possible changes we can expect in the future?
- Anticipated market changes: Is our market facing some changes? Can we spot novel opportunities for us to embrace and adapt to?
- Technology trends: How does the ERP market look like? How flexible and new are the offered platforms? What are the new trends to anticipate? Do we have technology knowledge and skills we invested in and want to exploit?
The Selection Process
You consultant will lay out a selection process. Typically, you can expect the following:
- Business analysis. This is a thorough understanding of your business, growth plans, industry characteristics, business processes, organizational structure, culture, current IT situation & skillset, financial health and forecast and business goals. This analysis is the basis for the next step.
- Market research. Now is the time to explore what the market has to offer that seems a good fit.
- Request for Information (RFI). The RFI is a document your consultant sends out to potentially relevant vendors identified in the previous step. This document presents your business requirements and other terms and conditions, asking for those who see themselves relevant to submit their answers.
- Demo day. Following a Q&A period with the vendors, you will have a short list of vendors to look into. In a demo day (or days) the vendors demonstrate how their solution serves your business requirements. This could be a 3-hour session with each vendor, in which key leaders representing all business areas in your organization are present.
- Request for Proposal (RFP). Those vendors deemed relevant are requested to send their proposals.
- Recommendations and Selection. Your consultant will write a summary document offering recommendations on the best possible and best paths available for you.
In closing, I will repeat that an organizational and business transformation project involving an ERP software is one of the most crucial and impactful process your business will see. Missing the ball on this one may mean high expenses with limited growth, or even a down fall. Start early on, consult an independent, experienced professional and exercise due diligence in the selection process.
In my next post, I will present some of the main challenges in implementing an ERP solution, next to the bold benefits you can expect – stay tuned!
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