Implementing a new ERP solution is a massive undertaking, capable of consuming a lot of time and resources.
Going through the ERP selection process in isolation can result in an inadequate ERP system that frustrates users and limits the operational capabilities of an organization.
With so many ERP software solutions available, you need a evaluation process and framework that helps you identify the best ERP vendors based upon your industry, your needs and ultimately one that falls within your budget.
Most ERP software sales reps are trained to follow the well worn path of client discovery, product demo, software proposal, and ultimately “closing the deal" and frankly many ERP buyers don’t know any better but when you do this you put yourselves at a disadvantage.
Having a non-biased, vendor agnostic partner come alongside your ERP initiative can make all the difference. And can help you avoid the feeling of buyers remorse or worse a failed ERP implementation.
This guide will walk you through everything you need to know about the ERP software selection process and why having an ERP software selection firm like KnowledgePath in your corner might be as important as choosing the right software vendor.
Why a Formal ERP Selection Process?
Modern ERP systems are highly complex business systems. They contain a vast amount of capabilities and touch practically every aspect of the business.
Furthermore there’s been significant industry consolidation over the past couple of decades, take for example, Oracle acquiring PeopleSoft, JD Edwards and NetSuite.
And Microsoft’s entire lineup of Dynamics ERP products was largely a result of acquisitions.
Or take SAP, a giant in the ERP space, has spent about $40 billion for various business application capabilities.
If you’re an outsider looking within this industry is hard to tell...
- which products are the result of acquisition
- which products received the bulk of the R&D dollars
- which products are being phased out over time
- which products have a robust partner ecosystem
- which products have many successful (or not so successful ERP implementations)
Do you really want to invest time and money with a ERP vendor only to find out about these pitfalls after you’re live on your new ERP software?
In other words, don’t get caught up in flashy marketing and a high pressure sales process, you have options!
That’s where ERP selection firms like KnowledgePath can help with your ERP selection process.
ERP selection consultants have experience selling and implementing various ERP software packages within many different types of industries.
With this depth of experience they know all the details of what you can really expect with various ERP software applications and partners.
In fact, the KnowledgePath team, has substantial experience with practically all of the major vendors (Oracle, NetSuite, SAP, Microsoft, Sage, Infor, Epicor, IFS and more) and contains deep expertise within the manufacturing and supply chain sectors.
One way to look at this is that ERP selection consultants provide an element of insurance that your ERP initiative will ultimately be a success and will provide many years of value to the business.
What Does an ERP Selection Process Consist of?
While each ERP selection consultants' process and client’s needs are unique, here’s what you can expect from reputable ERP selection consultants like KnowledgePath.
Identify the EPR Project Team
When building out your ERP project team you should consider including stakeholders from every functional area of your business. You'll want folks who can thoroughly described their day to day role and the way they interact with their current systems.
The project team should include someone from within the executive suite that can fulfill the role of executive sponsor. This role is critical for making executive decisions and providing leadership level support for the initiative.
Finally, don't forget you'll want to have someone playing the role of change management team lead. Ideally this person will have real life experience helping businesses migrate from one ERP solution to another, has excellent communication skills, and understands why employees are resistant to change and ways to mitigate these challenges.
Current State Analysis
The current state analysis starts by gathering information about all the systems, people and processes.
These take the form of requirements gathering sessions. These sessions are designed to pull in employees from across the entire organization so that everyone can fully understand the business processes end to end and avoid potential changes that may have harmful downstream effects.
At the end of the day, you’re not just replacing one software application for another, you may be changing long established processes and/or hiring new staff to support your ERP initiative.
Taking a holistic approach (people, process & technology) is necessary to understand the full weight of change required to ensure a successful ERP outcome.
ERP Software Evaluations
Once your ERP selection consultant understands your needs (“critical success factors”) and the problems it will address, your consultant will recommend a list of potential ERP vendors to consider.
This is where working with the right ERP selection consultants is critical.
KnowledgePath leverages its proprietary process and deep bench of industry experts to evaluate hand selected vendors based upon their decades of personal experience and track record.
At KnowledgePath we’ll compare your critical success factors against the software vendor's (proven, not just stated) product capabilities to measure how much of an impact each potential ERP vendor will have on your business.
From there, we create a shortlist of vendors that we feel confident will actually meet all of your business needs without compromise.
In addition, we want to fully understand and vet that the products/vendors we are proposing have future plans to invest their R&D into future releases that align with your business objectives so that you may have a viable, long-term relationship with the chosen ERP vendor.
We will take lead on proposal solicitation and/or ask vendors to come in and provide product demonstrations addressing specific use cases that directly tie back to the critical success factors we identified during our requirement gathering.
During these unique times with COVID, most of this phase of the evaluation is done remotely and frankly we’ve had great success with this approach.
Pro Tip: Buyer Beware
Unfortunately some ERP selection consultants in this industry are biased due to the fact that they have financial incentives tied to the sale of certain ERP products. While they may recommend solid, reputable software vendors the financial motivations could skew their recommendations that may not be ideal for you. KnowledgePath is 100% vendor agnostic and we never take money from software vendors for recommending their ERP products. It’s critical to identify these conflicts earlier in your evaluation process, ask the tough questions, or ask us and we'll tell you!
ERP Deployment Considerations
A critical factor that plays into your choice of vendor is how you intend to deploy your ERP solution.
For example, do you plan to house the ERP platform on servers within your own server closet or data center, that your company owns/maintains, or are you looking for a vendor to provide you with a turnkey, browser based, hosted solution?
The majority of ERP vendors are pushing customers towards a subscription based, cloud-ERP solution. For example, both SAP and Oracle have retooled their large on-premise ERP solutions for the cloud via a subscription based model (SaaS).
And while their cloud ERP solutions are highly capable, some of the more specialized capabilities found within the on-premise solutions are not as fully baked as their cloud-based counterparts.
When you consider cloud-based deployments you have a couple of options. You can go with a public cloud option assuming the software vendor provides it or you can go with a private cloud option.
With a public cloud, you typically pay the vendor a subscription fee to use the software through a Software as a Service (SaaS) licensing model. You’re essentially renting the use of the ERP software. The benefit of a public cloud option is mostly economical. You can generally save time, money, and physical space by leveraging the hardware, software, and infrastructure of a third-party provider.
Deploying an ERP solution on a private cloud gives clients more control over the ERP solution while still maintaining the economic and functional benefit of a SaaS ERP product. In addition, the vendor may still assume responsibility for remotely managing and updating your ERP solution.
You can also opt for a hybrid ERP solution, where you maintain some aspects of your ERP solution on-premise while accessing others via a SaaS option. Hybrid solutions provide clients with the most flexibility and a well worn path to fully moving to the cloud at a future date.
The KnowledgePath team can guide you through all the advantages and disadvantages of the various deployment models and how it exactly pertains to your ERP goals and objectives.
ERP Software Cost Considerations
An ERP implementation is similar to heart surgery but within the context of a business and because ERP software touches every aspect of the business the cost to license ERP software can be quite hefty.
A typical ERP solution quote will consist of the ERP software license, first years support and the cost to implement the ERP software. Other factors that drive the total cost of ownership (TCO) include training, integrations, customizations and staffing.
Once we understand the full scope of your organizational needs, together with the shortlist of vendors, drill into the following areas:
- The kind of deployment needed – on-premise, cloud, or hybrid
- Number of licensed users (named or concurrent users)
- Additional cost based upon transaction/data volumes?
- Additional cost for reporting and/or third party reporting integrations?
- Additional cost or support for integrations?
- Additional cost for modules and/or advanced features?
- Technical support cost?
- On-going software maintenance cost?
Once we've explored all these areas at depth, our short list of vendors can assemble the ERP software and service proposal.
Taking a disciplined approach to ERP selection and implementation can and will take up more time in the beginning. However, the due diligence on the front end can result in less time needed mid-project trying to go back and fix things that were missed or not thoroughly vetted early on.
The bottom line: Remember you can pay now and ensure a successful outcome or you can pay later in the form of costly change orders, missed expectations, and a system that doesn’t fully meet the needs of the business.
Pro Tip: ERP Contract Review
While the cost of your ERP software license is an important consideration, one area we see clients make critical mistakes is on the ERP software contract itself.
They get so wrapped up in the big new client acquisition discount they fail to understand what their ERP license cost will be in years 2, 3, 4, and beyond.
And here’s the catch, ERP software vendors know that ERP software is incredibly sticky. Once you’re live, there’s a high probability that you'll be with that vendor for the next 7-10 years, if not longer.
This is why it’s critical to get language inserted into your contract that not only guarantees your initial discount but one that stays with you long after your renewal date, more specificity the better.
KnowledgePath has extensive experience working with all the major ERP vendors to ensure that you are protected and have complete visibility into your ERP software spend both now and in the future.
Don’t get caught off guard when it comes to the detailed language in your ERP software contract.
Choosing the Right ERP Vendor
Once you've received detailed proposals from the selected vendors, together we’ll compare how they align with your identified critical success factors and we'll want to perform a cost/benefit analysis for the vendors that participated in the selection process.
At this stage in the evaluation process we will generally have a clear front runner in terms of product capabilities, price, and ability to deliver. It's just a matter of "dotting our i's and crossing our t's" to get over the finish line.
The last point to keep in mind is that a typical ERP purchasing process would culminate with a signature shortly followed by a discovery process to fully gather all the requirements necessary for an implementation, which could take several weeks to several months.
A structured ERP selection process with KnowledgePath is quite different, your ERP implementation partner can roll up their sleeves and get to work on configuring your ERP system in short order because we did all the heavy lifting on the front end, bringing immediate business value, and cost savings since you've already licensing the software.
Again, you're going to spend the money one way or the other. We think it's wise to invest on the front end to ensure a successful outcome that you and your team will feel good about.
We welcome a conversation about your ERP initiative, regardless of what phase of the purchasing process you are in.