Five key areas to consider when selecting ERP software
October 15, 2010 2 Comments
There are five key areas to consider when selecting ERP software:
(1) Functional Fit
How well does the ERP software fit with (a) current business requirements and (b) future business requirements? Too often I see vendor responses and demonstrations spend too much time on “core” functionality and not enough time on the unique and strategic requirements of customers. These are the requirements that generate a competitive advantage to customers.
(2) Technical Fit
Two key activities need to be performed: (1) internal technical assessment and (2) external technical assessment with each vendor. The internal technical assessment consists of identifying the current state of the customer’s IT environment: in terms of hardware, software, FTEs, and skills. The external technical assessment consists of identifying the technology requirements of the vendor’s ERP software in terms of hardware, software, FTEs, and skills. You then perform a comparison (fit/gap) to identify the technical requirements for the customers to move to the vendor’s ERP solution. Quantifying the technical gap is very important in calculating the financial fit.
(3) Organizational Fit
This area is typically overlooked and underestimated. It is important to understand how the customer’s organization must change to effective support the new ERP solution. Many customers know that they must change, however few understand how and the amount of change that is required.
(4) Implementation Partner
This is by far the area that will have the greatest impact on your success with any ERP software. You can select the ERP software with the best fit but if you cannot implement the ERP software then what is the point! This area is so important you should have a separate selection process for the implementation partner (separate RFIs, RFP, Evaluation). Following are the key questions you should address with potential implementation partners:
- Revenue, # of consultants dedicated to ERP software vendor
- Industry Focus
- Target Customer Focus (Up-market, SMB)
- Software Product Knowledge
- Certifications (Software, Industry)
- Type of Consulting Services (implementation, upgrade, training, process improvement, installation, technical services) – how well can they support the entire ERP lifecycle
- Implementation References similar to you
- Recent News
- Thought Leadership (publications, presentations)
- Partnership status with Vendor (# of years, level)
- Vendor recommendation
(5) Financial Fit
What is the total cost of ownership across the expected lifecycle of the ERP solution – including installation, training, implementation, maintenance, upgrades, hardware, ERP software, 3rd part software, process improvements? It’s important to set the expectation that the proposed gains will not be realized in the initial implementation but over the expected life of the ERP solution. The end result of the financial fit is the business case. As with any business case there will be assumptions, constraints, and estimation accuracy (ex. Order of Magnitude) so please ensure that you clearly specify this information along with the value proposition.
ERP software selection is an important step in your goal of implementation a new business solution. I hope that the information will assist you in being successful.