You want to introduce an ERP system – but which one? This article will guide you step by step through the selection process. In the second part, we reveal proven tips for ERP selection from our experience with hundreds of ERP implementations.
Why a systematic ERP selection process is necessary
There are hundreds of ERP systems on the market, and each of them is – of course – the best according to the provider. However, each system has different strengths and is more or less suitable for certain companies or scenarios. Your goal must therefore be to find the ERP that best suits your own requirements. Tests or top 10 lists on the Internet can provide orientation, but they are no substitute for careful ERP selection.
A wrong decision can result in high costs. Many expensive adjustments may be necessary; the project is delayed and blocks resources. Ultimately, the ERP implementation may even fail if it turns out that core requirements are not met.
You should therefore take a systematic approach to ERP selection.
ERP types: Standard, individual or industry software
ERP systems are basically divided into three categories.
- Standard software is intended for a wide range of companies. The needs of different industries or use cases are covered by modules or configuration options.
- Industry software is generally leaner and focused on functions that are relevant to a specific industry.
- Customized software is developed specifically for a company and its requirements. It can only be used for the intended application.
Unless your company is a rare exception, you are best off with standard software or industry software. Custom development is usually far too expensive and unnecessary, as almost everything can be covered with ERP standards.
In the following, you will learn seven steps to help you make the right ERP selection.
1. develop a basic understanding
How long has it been since your last ERP implementation? Perhaps 20 years or more. Or maybe you haven’t used one at all. ERP selection is probably an unfamiliar and challenging task for project managers. That’s why you should first refresh your knowledge and familiarize yourself with the essentials: how an ERP works, the associated technical vocabulary and the selection process.
This article is a great source for this: The articles linked below in the text will each provide you with more in-depth information.
2. define objectives and framework conditions
First define the strategic goals of the ERP implementation. What do you want to achieve? Growth? Develop a new business segment? Eliminate bottlenecks in certain processes?
Define KPIs or measurable criteria that you can use to measure success. This allows you to check later whether the project was actually successful.
Also set a time frame and budget for the ERP implementation.
3. analyze requirements
Now that the preliminary considerations have been made, it’s time to move on to the core tasks of ERP selection. You need to know your own requirements so that you can make a well-founded decision later on.
Processes
The most important requirement for an ERP is that it supports your processes. Otherwise you will not be able to use it for its intended purpose. Therefore, you must first list all relevant processes.
Differentiate between specific process dimensions:
- Management: Corporate management and corporate planning
- Core processes (value creation): Development, production, purchasing, logistics, marketing, sales, customer service
- Supporting processes: Finance, Human Resources, Quality Management, IT
Analyze these processes for their current status and potential for improvement. The TARGET definition of the processes flows into the requirements. The functions that the ERP system must have are derived from this.
Find out more: How to analyze and optimize your processes with the ERP system
Technical and other non-functional requirements
In addition to functionality, the ERP system must fulfill other requirements. These include aspects such as:
- Number of potential users
- Performance
- User friendliness (usability)
- IT and data security
- Interfaces to other systems
- Technologies
- Hosting, operation, further development and so on
Find out more: How to create a requirements catalog for your ERP
4. create specifications
You create your specifications from the requirements. It is the main tool for ERP selection: for the pre-selection of providers, the review of offers and the final decision.
Important: Only really formulate your (process-oriented) requirements in the specifications. Do not describe any specific functions. This is a matter for the provider later on. Otherwise you will limit your choice unnecessarily.
You will find detailed explanations in these two articles:
- Guide: How to create the ERP specification sheet
- Requirements specification and functional specification: What are the differences?
Ask the providers if you can talk to some reference customers.
5. check providers and offers
Conduct market research to find potentially suitable providers. To do this, compare the available information about the solutions with your specifications. Answer the following questions, among others:
- Does the solution cover the required range of functions?
- Can the ERP be integrated into our existing infrastructure?
- Is the ERP system based on standard technologies – or on special technologies for which new, hard-to-find knowledge is built up?
- Does the software support new and future-proof technologies, such as artificial intelligence?
- Can the ERP system be expanded?
- Does the ERP provider have demonstrable industry experience and references?
- Is the provider established on the market and offers us a high level of investment security?
Below you will find further tips on which factors you should pay attention to when selecting an ERP.
All providers who are still eligible after this check form your so-called longlist. Contact these providers. Send them the specifications. Request an initial assessment, a quote and further information.
Select four to seven suitable provider candidates from the feedback. Present and discuss these internally in the project team. Then create a shortlist of two to three ERP solutions. Conduct a detailed workshop with the providers. This allows you to thoroughly scrutinize the software and provider.
Find out more: How to get from the longlist to the shortlist
Free whitepaper
Find out how you can systematically review the ERP providers on your shortlist and determine the relevant information in workshops.
6. check references
Reputable ERP providers name reference customers, usually directly on the website. Based on the experiences of existing customers, you can check whether the provider delivers what it promises. You will gain an insight into how the ERP system has proven itself in practice and what you should pay particular attention to.
Ask the providers if you can talk to some reference customers. You can ask questions like these in an interview:
- How was the experience with the provider? How much help did they provide with integration, for example?
- How user-friendly is the ERP system?
- How stable is it?
- Are there any problems?
- Did the customer only become aware of certain things during use (good or bad)?
Not every reference customer will openly share their experience with you, especially if it is a company in the same industry. Nevertheless, it is worth a try. Even more general statements will help you to complete your impression of a provider.
7. make a decision on the ERP selection
In the final step of the ERP selection process, you decide on a system. You conduct contract negotiations, approve the specifications and sign the contract.
Proven tips for ERP selection
Would you like a few more professional tips for your selection? With pleasure. Here they are:
Don’t automatically opt for the cheapest offer
Of course, the cost of the ERP system is one of the most important factors in the selection process. However, you should not base your decision on price alone. It says little on its own. The actual costs can otherwise be far higher than the price in the offer if you make the wrong decisions.
Instead, use the offer prices to sort out outliers. This is how you proceed: List the bids from all ERP providers and calculate the mean value. Then determine how far you think proposed prices may deviate from this mean value (15 to 25 percent is a good value). You can safely discard all offers that fall outside this range.
This approach is easy to understand in the case of outliers. Who wants to pay twice the market value for their ERP system? However, you should also take a critical look at downward outliers. These are often bait offers from dubious providers who later come up with expensive service contracts and individual customizations. It is better to look for providers with fair, standard market prices.
Distinguish between mandatory and optional requirements
No ERP system fulfills all wishes and fits your requirements 100 percent. You should therefore not apply the maximum criteria when making your selection. Make a clear distinction between mandatory and optional requirements.
Choose software that meets your must-have requirements and as many others as possible. If you don’t find your ideal solution, set priorities that should carry more weight in your decision.
Consider the usability of the ERP system
One factor that is often overlooked and is also not included in the offers: the usability or user-friendliness of the ERP system. Software may in fact meet all requirements. However, if employees do not enjoy using it, it is of little use.
You should therefore also pay attention to usability aspects during the selection process: Is it easy or complicated to use? Do the interfaces look modern and tidy? Can you find information quickly? Is it fun to work with?
You can recognize such things relatively quickly in product demos. Have the operation of the individual functions demonstrated to you. Ask the provider’s references for feedback from users.
Pay attention to the chemistry with the provider
Isn’t it unprofessional to include personal matters in a strategic decision? After all, there are professionals at work on both sides who do their job regardless of personal sympathies and antipathies.
In fact, the personal level has an immense influence on the course of an ERP project. It must therefore be taken into account. If those involved can hardly stand each other, the risk of misunderstandings, misinterpretations and conflicts increases. This in turn leads to delays and additional costs.
Ensure a good relationship between your project team and the provider’s employees right from the start. This will save you a lot of trouble. Insist on getting to know your future professional contacts in advance. Get your team involved and talk to each other informally. Meet up for a beer. Let the ERP provider know whether the chemistry is right or not. A reputable provider will take your concerns seriously – because unnecessary conflicts end up hurting both sides.
Check the flexibility of the provider
Changes are guaranteed to become necessary during the course of the ERP implementation. Perhaps requirements need to be specified or completely new ones arise. Or there may be unforeseen problems. How flexible is the ERP provider then?
You should already find this out during the selection process. Think about it: How did the providers react to our requirements, problems and queries? Were they responsive to us from the outset or did they just deliver clumsy sales pitches?
Ask questions in the preparatory discussions:
- Is there a meeting to discuss the joint implementation strategy?
- What does the resource planning look like? What else does the provider need from you?
- What happens if the resources are not available?
- Does the provider agree to exit clauses or flexible financing plans?
Find out more: Does agile ERP implementation make sense?
Conclusion: A systematic ERP selection ultimately saves time and money
ERP selection sounds like a lot of work, and it is. However, there is no shortcut. Ultimately, conscientious preparation will save you more time and money than it costs.
Therefore, carry out the ERP selection process systematically and do not skip any of the steps. See it as an investment in the success of the ERP implementation and therefore the future of your company.
