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Choosing the wrong software can have disastrous consequences. That's why establishing the right vendor evaluation criteria before the ERP selection process is key to success.
With so much of the business relying on a company's ERP system, choosing the wrong software can have devastating consequences on the business and result in failed implementations. Other results can include losing support for a product within only a few years, cost overruns and company disruptions due to difficulties implementing or using the system. In a worst-case scenario, the ERP system might not even be implemented, resulting in litigation.
Business objectives are difficult, if not impossible, to achieve if an ERP system is not a match for a company. Going into the selection process with clear ERP vendor evaluation criteria is an important means of avoiding these consequences.
CIOs, executives and IT leadership should compile ERP vendor selection criteria well before bringing in vendors, said Paul Rosner, owner of Lin Productivity LLC, a technology advisory company in Houston. The process should include putting together an internal team to discuss future business outcomes. The team should also loop in senior management so they will hopefully be champions of the initiative.
"If you don't have these discussions upfront, you'll miss what is going on today and tomorrow in your requirements," Rosner said. "You'll have a detailed checklist, but it will be brittle."
Stakeholders should only consider ERP vendor selection criteria after the cross-functional team has identified desired outcomes, the current state of the organization and the future state.
Here are some of the most important criteria to keep in mind.
1. Functional fit
ERP systems aren't a one-size-fits-all proposition, so consider required business functions. For example, a global organization that requires multiple currencies and languages will need different features than a smaller, single-location company.
A company's IT and business leaders should look at how the ERP system handles financial consolidation if that's a business priority, said Marc Caruso, chief architect at Syntax, an ERP services provider in Montreal. Reporting and dashboarding capabilities are also worth investigating.
2. Systems integration
ERP software will inevitably need to connect with third-party systems, so IT should make sure they're considering those systems in their discussions.
IT should inventory any system that will need to push or pull data from the ERP software, Rosner said. Ideally, this would happen early in the evaluation process.
IT will also need to understand that you may need additional platforms.
Most SaaS ERP products will have web APIs that can enable easier integration, Caruso said, but organizations will likely need a solid middleware platform for integration and mature processes for Agile development and continuous integration/continuous delivery.
"A majority of organizations still have legacy on-premises applications, so the solution also needs to work with those technologies," he said.
3. Process coverage
Process coverage is another important consideration.
CIOs and their teams should evaluate whether they will need separate applications for security, reporting or mobility, Rosner said. This includes the middleware needed for these apps. Other topics to consider include the impact an ERP system will have on the network and infrastructure, as well as how data will flow between systems.
For example, a company with multiple product catalogs and multiple manufacturing facilities should make sure that the catalogs have common naming conventions so each catalog is a cohesive and accurate representation of each facility.
4. Vendor technology
The ERP buying team should evaluate whether the vendor's technology is the right fit for them.
When Excel Connection was considering ECI M1, the company looked at whether the product used .NET technology, SQL and Crystal Reports, said Colleen Weber, business manager at Excel Connection, a manufacturer in Milwaukee. The company ended up choosing ECI M1 because modernized older systems still had cumbersome technology that would have required programmers to add fields for reporting or other small tasks.
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5. Customization options
Another criterion for consideration is the ERP software's customizability and how much customization a business might need.
Excel Connection needed to be able to customize reports, so the company looked for software with that capability, Weber said.
6. Vendor roadmaps
A vendor's software plans are another important aspect of the ERP selection list.
Companies should look at a vendor's roadmap, which should include release plans and dates for new features and enhancements.
7. Implementation and maintenance costs
Keeping ERP costs in mind is crucial, and the buying team can easily overlook some figures.
While software cost is important, vendors may underestimate how program management and change management will affect ERP implementation final numbers, said Len Riley, commercial advisory practice leader at UpperEdge, an IT sourcing and negotiation services provider in Boston. Even systems integrators may give an estimate for the implementation that misses required internal resources. Costs could spiral out of control.
8. Vendor support
The amount of support a vendor will provide is extremely important to consider.
"The support is critical," said Dave Luter, senior consultant at business consultancy Netlogx, which is located in Indianapolis.
Buying teams should examine whether the support is completely phone-based and whether there's local support, he said. Teams should also look at technician experience level and the existence of a customer council. Participating in a customer council could give a company the chance to shape the product roadmap.
Companies should also consider how their own employees learn best.
Businesses should investigate the type of education and training provided, Luter said. Many companies upload training videos, but companies may need to supplement them with classroom or hands-on training if videos aren't enough.