Now that you’ve decided to invest in an ERP, the next challenge will be to choose the right system. There are multitudes of these products on the market and choosing the correct one for your company is a daunting task….like trying to find a needle in a haystack…of needles!
However, this article should help with that decision. Based on my 20+ years of experience working with ERPs, I have ranked the Top 5 criteria in determining who your ERP provider should be. In reverse order, they are:
#5 – SCALABILITY/FLEXIBILITY
One of your working assumptions must be that your business will grow. Therefore, you need to select a system that can easily grow with it.
The first step in determining the system’s ability to grow is to understand the vendor’s ‘development path’ for its product. You might not need machine learning, EDI, or Robotic Process Automation (RPA) functionality at the moment but you may in the future.
Therefore, does the vendor plan to develop strength in these areas, or any other area where you see a future need? (And if they don’t really have a development roadmap, run far…run fast!)
The paragraph above references what we might call the ‘functional growth’ of your organization, but what about physical growth? If your employee base grows from 50 to 500, will the system be able to grow with it? How much new hardware will this growth demand? What are the licensing impacts of such an increase? As well, is your company considering expanding to new locations? What will be the technological cost of this expansion? These are the kinds of questions you need to ask.
As well, you should realize that just because you are currently anticipating that the solution will be ‘on premise’, this may not always be the case. Therefore, you should ask the vendor how much of a challenge it would be to move to the cloud from on ‘on premise’ architecture (or vice versa). You do not want to be forced to stay with an architecture that no longer meets your needs!
#4 – SUPPORT
Before making an ERP decision, you need to have a very clear understanding of the vendor’s support model. Some questions you must ask any prospective vendor are:
- What options do they have for providing training, both for the initial deployment and for any new functionality that gets developed?
- How many different Service Level Agreement (SLA) options does the vendor have and how dothose levels differ? What are the costs associated with these options? Does their support team operate on the same schedule as your business does?
- How easy will it be for you to get a ‘bug’ fixed, or for you to have a new piece of functionality implemented? (This is especially critical if you are considering a ‘public cloud’ solution, as under that model vendors typically release updates on a very regimented schedule.)
- What opportunities are there for ‘self-service’? For instance, can you manage your own permissions and authorizations? Can you build your own reports? If the vendor has to make every change to your authorization profiles, or build every report for you, this has a very significant cost (both in terms of money and organizational efficiency).
# 3 – VENDOR REPUTATION
Having a positive working relationship with your vendor is worth its weight in gold! Therefore, if you sign with a vendor who has a questionable reputation, you are simply asking for trouble.
As you go through the ERP selection process, most vendors will be happy to provide you with access to ‘reference customers’. (If they are not willing to do so, this is another HUGE warning sign!)
While I feel speaking to customers referred by the vendor is of somewhat limited value (in all likelihood, a vendor will only refer you to their best and happiest customers), you should absolutely take the time to do so. Be sure to ask not only about the functionality of the solution, but also about the way the vendor interacts with them. Are they responsive? If escalation is required, do the customers feel they are being taken seriously? Do they feel they are getting ‘nickled and dimed’ to death (i.e. being charged for seemingly minor requests)?
As well, do not be satisfied with speaking only to reference customers. Do your homework. In today’s age, customers are often only too happy to post about their experiences – good or bad – with a vendor and the vendor’s software.
Finally, if you are working in a very unique industry, you might consider focusing your search on vendors whose solution is tailored to that industry.
# 2 – MEETING YOUR REQUIREMENTS
In a previous blog post, I talked at length (ad nauseum?) about the importance of having well-defined requirements before starting any project. And this is certainly true when it comes to selecting an ERP vendor.
To reiterate what I said in that post, make sure you have not only documented your requirements, but have also categorized them as either ‘must have’ or ‘nice to have’. This will allow you to ask very specific questions about the functionality, especially for the ‘must have’ items. And do not settle for viewing their solution on a PowerPoint slide or in a flow-chart. (When I was just starting my ERP career, and very respected consultant told me “Everything works on white-board.”) Ask them to demonstrate the solution in their system, (or – even better – your system) so that you can see first-hand how things function.
As well, if a vendor tells you that your ‘must have’ is not part of their ‘standard solution’, but that they can build a customization in order to provide it, be careful…you may be making a deal with the devil. In
more cases than I care to remember, customizations have proven to ‘not play well’ with the rest of the solution, and they are a headache to deal with when the time comes to upgrade your system. Therefore, they are to be avoided if at all possible.
Lastly, do not be distracted by the ‘bells and whistles’ a solution might offer. Keep your focus on the MVP (Minimum Viable Product), which is defined as the minimum functionality you will need to have a working solution. Any ‘extras’ will add cost and complexity at a time when ‘simplicity’ should be your watchword.
# 1 – ONE SIZE DOES NOT FIT ALL
When it comes to ERP systems, it is most definitely true that one size does not fit all! The system that can run a multi-billion-dollar, multi-national business is not the best choice for a 100-person operation with $5M in annual revenue.
In my opinion, the most critical criteria for deciding which ERP solution to buy is finding the one that is the right fit for the size of your operation. While big ERP vendors will sometimes tell you that their solution works for smaller customers, and smaller ERP vendors will tell you that their solution works for bigger customers, be very careful. In all likelihood when a smaller business buys a ‘big’ ERP, it comes with built-in functionality that the customer does not need and will not use, but they’re still paying for it. Conversely, if a smaller ERP provider implements their solution at a larger customer, they may need to add customized functionality to meet all the business requirements. (See above for my thoughts on customizations!) You should concentrate on finding your ‘goldilocks’ system.
There are excellent ERP solutions designed specifically for small, medium-sized or larger businesses, and a simple Google search will reveal a host of likely candidates. Therefore, my best advice is ‘stay in your own backyard’, unless there are solid business reasons for not doing so (i.e. a pending merger or acquisition, company spin-off, etc.)
For your reference, here’s a guide to identify into which of the 3 categories your business fits.:
- Small Business: <100 employees; Annual revenue < $10M
- Medium-sized Business: 100 – 500 employees; Annual revenue $10M – $1B
- Large Business: >500 employees; Annual revenue > $1B
SUMMARY
I hope you found this ranking useful, and I’m confident that utilizing the information above will help you find the right ‘needle’ in the haystack…of needles!
