Choosing your next enterprise resource planning (ERP) software system is a challenging decision. Ad hoc, unstructured selections of an ERP system will likely result in significant extra costs and disruptions to corporate efficiency.
In many cases, businesses evaluate ERP systems based on their market reputation, a referral from a friend, or a colleague’s prior experience with an ERP system. However, what frequently occurs is insufficient requirements gathering, generic vendor demos, an overemphasis on total costs, employee bias, attempted self-implementation, and an ERP vendor’s misinterpretation of requirements.
We have all encountered at least one or more of these situations, and the financial impact can be enormous, significantly decreasing the likelihood of a successful ERP software pick. The necessity of following an organized approach will boost your chances of success – the following are some points to consider:
1. Conduct a review and analysis of business processes
Avoiding significant problems while selecting ERP software demands a disciplined strategy. The first and most critical activity that a business must complete is a Business Process Review (BPR) and a Needs Assessment/Analysis (NAA). By utilizing BPR and NAA, either internally or through the engagement of a professional services firm, you may identify the precise business and end-user requirements and ascertain the impact of the business process. You’ll discover ways to improve efficiency, lower overhead expenses, and gather warnings and reporting requirements at critical phases of the business workflow. By explicitly outlining your business processes and system needs, you can share them with the vendor, who can then deliver a solution presentation tailored to your business, rather than a generic demonstration of their software.
By doing a comprehensive requirements assessment/analysis, you will be able to evaluate the financial impact of each business process in order to identify your organization’s hard and soft expenses. When selecting new ERP software, calculating the return on investment (ROI) will be considerably easier if you include the amount of labor required to remedy inefficiencies and gaps in your present system.
2. Conduct an evaluation of the ERP technology platforms that are supported
Due to the variety of technology platform alternatives – on-premise, cloud, and managed services – choosing the correct ERP system for your organization should be the first step in the decision-making process. While technology platforms are an integral aspect of any ERP software, each solution has distinct advantages and disadvantages. While cloud-based ERP systems have gained acceptance in our business cultures, cloud solutions still account for a very small portion of overall ERP systems sold in North America. Managed Services provides server and backup outsourcing services. They are typically employed by larger businesses to manage capital expenses and are based on a leasing model. On-premise refers to the traditional technique of purchasing an ERP system for installation on company-owned servers. You’ll need to determine which ERP system is the greatest fit for your business and implement the technology platform that the ERP system supports.
3. Comprehending TCO (Total Cost of Ownership)
As is the case with any business owners, we exaggerate the expense of a new ERP system and related technology platforms. Between five and seven years, many businesses reassess their ERP requirements in response to changes in the business environment. However, many businesses have used the same ERP system for over a decade, thus understanding the Total Cost of Ownership (TCO) is critical when making a selection. While we often focus on the first year of investment as the impact on the business, looking at the initial investment plus subsequent support costs over a five, seven, or ten-year period provides a more accurate picture of the total cost of a new ERP system. Numerous ERP software companies now offer a subscription-based pricing model. Although the entire initial investment is significantly less, the total future costs can become significantly larger. With a subscription price plan, you must calculate the total cost of ownership over five, seven, and ten years in comparison to alternative pricing models, such as leasing.
4. Determine the new system's potential commercial benefits.
The prospective business benefits of a new ERP system should be quantified quantitatively, qualitatively, and financially. The benefit can be simply defined by doing an assessment of your business’s critical functional areas to identify the impact on all stakeholders, including customers, vendors, and workers. While many business owners believe they have an intuitive sense of the influence on all stakeholders, a requirements analysis should be conducted to assess and confirm the expenditure required to optimize a return.
5. Ascertain the ramifications for staff
Let us not underestimate the influence that implementing a new ERP system will have on your staff, particularly if they are not involved in decision-making. Your employees have a thorough understanding of the requirements necessary to assist them in performing their day-to-day job responsibilities and empowering those involved in the selection process will undoubtedly assist in achieving the commitment necessary to achieve success during the implementation process.
The Litcom Approach
Litcom provides independent advice and assistance. We have helped our clients in evaluating and selecting enterprise-wide business systems, as well as solutions for specific industry verticals, best-of-breed software applications and the hardware and network infrastructure required to support their business. We start by defining our clients’ unique business and technical requirements. In gathering requirements, we not only look at the way you do business at present but also help you see possibilities of process improvement with the assistance of our experienced professionals. To see how Litcom can assist you with your organization’s vendor selection process, please contact us at: [email protected].
