Enterprise resource planning (ERP) has come a long way from its roots as material resource planning systems used by manufacturers. Today organisations of every stripe and industry rely on ERP software to run their businesses. From finance and accounting, to inventory management and professional service automation, ERP improves efficiency and cross-departmental coordination by connecting core business functions, eliminating redundancies and manual tasks and providing a single source of data to ensure that the entire business is working from the same script.
Whether you plan to upgrade an existing system or are evaluating ERP software for the first time, the 10 tips in this article will simplify the selection process and improve your chances of a successful rollout.
How to Choose the Right ERP
Selecting the right ERP for your organisation is not something to take lightly — it’s an important step to getting your business to the next level. It requires an organisation to take a deep dive into its operations, data and business processes. Because ERP solutions have broad capabilities, careful thought and diligence will be needed so that the ERP not only supports business operations today, but scales as the company grows. Engaging stakeholders from across the organisation early in the ERP selection process is key to getting the buy-in necessary to position your business for success once the ERP system goes live.
Key Takeaways
- ERP software benefits companies by increasing the efficiency of core processes, enhancing collaboration between departments and improving the accuracy and timeliness of business data.
- ERP selection requires careful planning and input from stakeholders across the organisation.
- Small and midsize companies rely on ERP systems to operate more efficiently, improve service quality and enable business growth.
ERP Selection Explained
At its core, an ERP system is an integrated suite of applications for managing finance and accounting; sales and customer service; order processing, inventory and warehouse operations; manufacturing; service delivery; and many other critical business functions. Although ERP implementations typically focus on finance and accounting first, any individual ERP rollout may start with whichever functional area presents the greatest challenges for the business. It’s that breadth of functionality, combined with the fact that ERP systems consolidate data from across the organisation and therefore serve as the company’s system of record, that makes choosing the right ERP system to match your business’s needs so important.
The main value of an ERP system is its ability to help companies plan and allocate resources, automate time-consuming manual processes and improve internal collaboration and communication. By providing a single source of accurate data for the entire business, ERP software also enables more informed decision-making that improves performance.
10 Tips to Choosing the Right ERP for Your Business
Choosing an ERP system that is fit for purpose can be time-consuming, so it pays to have a plan. While not an exhaustive guide to choosing the right ERP system for your business, the following list of 10 tips will get you started on the right path. By following these tips and putting in the necessary time and due diligence, most organisations will be able to select an ERP system that best serves their needs.
Tip 1: Determine the features and functions your business needs.
It’s crucial to the success of your ERP journey to determine, early on, the features and functions your business needs in an ERP system. If you’re starting from scratch, you will have to undertake a comprehensive business review and needs assessment to figure out which business processes and workflows will be taken over by the new ERP, which ones will remain independent and, of those, which ones will interact with the new ERP software. If you’re upgrading an existing ERP system, much of the functionality may remain the same but a thorough review is called for, nonetheless, to capture how business requirements have changed since the original system rolled out.
In either case, the needs analysis should include specific objectives — including a clear definition of what success looks like for your organisation. What problems is the company trying to solve? What goals will the system help it achieve? How will success be measured? It usually helps to have outside assistance when conducting these assessments. For many popular ERP offerings there are dedicated consultants, systems integrators and value-added resellers (VARs) who have extensive experience with these types of assessments. Once the analysis is complete, sit down with potential providers to review the findings. Since many vendors specialise in specific industries, many will not make it past the first cut.
Most businesses, regardless of the industry they are in or the products and services they offer, will use a basic set of ERP capabilities supplied by different components called modules. Each module itself is composed of a set of capabilities that can support multiple business processes and be customised to meet your business’s specific use cases. There are always ERP modules for finance and accounting, and most ERP providers also offer modules for functions including procurement, manufacturing, inventory management, order management, warehouse management, supply chain management, project management (for professional services offerings), customer relationship management and human resource (HR) management. Some providers offer others, such as ecommerce and marketing automation, for example. The needs assessment will determine the modules required for your organisation’s initial implementation. As needs change and the business grows, other modules can be added.
Tip 2: Ensure you have executive and team support.
Since an ERP implementation can reach into every corner of the organisation, gaining executive buy-in and leadership is critical to its success. Use your business requirements review to win executive support by showing senior management the ERP system’s potential value. It’s a good idea to elect an executive sponsor who will champion the project. CEOs, COOs and CFOs are all good choices.
Because organisational change is hard and ERP rollouts are, in part, exercises in change management, an executive sponsor’s main role is to get people on board with the project. They take responsibility for making the ERP implementation a success by serving as the project’s chief evangelist, promoting its benefits to every part of the organisation. They also can help to remove roadblocks, streamline decision-making and, when needed, make hard decisions about trade-offs between competing priorities.
Tip 3: Write a formal request for proposal (RFP).
In a project as central to the organisation as an ERP, it’s important to take the time to create formal documents. The process of writing formal RFPs demands that you think through what you’re looking for in the ERP system on a deeper level than you might otherwise, so you can communicate it clearly and concisely in written form. Formal RFPs also help vendors understand the scope of the project and create a level playing field for vendor responses.
Tip 4: Figure out if your ERP integrates with other software you use.
If you plan to continue using existing applications for certain business processes, you will want to choose an ERP solution that easily integrates with those applications. Many popular ERP systems come with certified integrations to other common business applications, such as ecommerce storefronts, point-of-sale (POS) systems, online marketplaces, vendor management, project management and third-party provider and partner ecosystems. These out-of-the-box integrations ensure that core business processes can remain unchanged if needed. Integrating applications into the ERP solution can also eliminate the need to manually reenter data from one system into another.
Look for ERP systems that use industry-standard interfaces, such as REST and SOAP APIs, so you can quickly and easily connect any application to the new ERP. Industry-standard connectors are highly secure and well understood by developers, so using them will help speed the rollout of a new system.
It also is important to look for an ERP system that supports CSV file import and export. Support for Microsoft’s ODBC SQL-based API and the JDBC SQL APIs will ensure a new ERP communicates natively with SQL databases.
Tip 5: Consider the functional fit of the ERP system within your organisation.
Functional fit can be loosely defined as the ERP system’s ability to solve business problems. It’s crucial to make certain that the chosen ERP solution is a good functional fit for your organisation, so you will need to understand how the ERP will work with existing business processes. While it is important to match the ERP against the business processes in use to meet current needs, you should also think about the future. By gaming out future business scenarios, such as the company expanding internationally, you can come to understand whether the ERP solution under consideration will be functionally fit in both the short and long term.
It’s also important to determine whether a rigid ERP system will suffice or a more configurable system is needed. Rigid systems have many predefined processes that your organisation must adapt to, while a more configurable system adapts to how your business runs.
Determining functional fit requires input from all of the organisation’s stakeholders. Everyone who will be impacted by the new ERP system should be consulted to ensure the solution will fulfil many needs with as little customisation as possible. Look around to see what competitors are using. Some ERP solutions are optimised to run best in a particular industry. Figuring out which systems fit this bill can help you narrow the selection process by short-listing a handful of potential vendors.
Although by no means an exhaustive list, answering these questions can help you find the answers needed to determine function fit:
- Where are our current systems failing?
- What do our current systems do well?
- How many and what type of manual processes can be automated with a new ERP system?
- Where do we need improved reporting and visibility?
- What other in-house and partner systems will need to be integrated with the new ERP?
The answers to these questions should generate a detailed list of the requirements that the new ERP system must meet to be effective. Because functional fit is so crucial to a successful ERP rollout, companies shouldn’t even begin their ERP evaluations until these questions are answered.
Tip 6: Assess the reputation of your potential ERP vendors.
It’s always important to feel confident that a future business partner offers an outstanding product or service with rock-solid support. Fortunately, determining whether a vendor’s reputation lives up to its hype is not hard to do, though it may take a little time. Start by looking at the level of experience the vendor has in your industry. Do they have an industry-oriented approach, with teams that have deep expertise in your industry or implementation partners with the needed expertise?
Gartner, Forrester and many other industry analysts publish annual or semiannual ERP vendor rankings and market research. These reports offer a good idea of a vendor’s strengths and weaknesses. Likewise, the technology industry trade press is a good place to get up-to-date news about a vendor. If the company is public, look for analyst reports about its financial performance, as well as articles in the financial trade press about its short- and long-term prospects.
For up-to-date reviews, look at enterprise software rating websites such as G2, Capterra, Gartner Peer Insights and Software Advice. All of these review sites offer customer ratings and customer comments. You can also leverage user groups on LinkedIn to ask questions about the vendor.
Once you’ve narrowed down your ERP candidates to the final two or three, a great place to get unbiased information is at a vendor’s user group meeting (assuming you’re allowed to attend). There you’re likely to find a cross section of customers who are well-versed in the vendor’s offering and usually happy to talk in between the new product announcements and how-to sessions. Likewise, this is also a good time to ask about support. Will you have dedicated teams and account managers? What is the average tenure and experience level of support staff? Can the vendor provide reference customers?
The vendor’s website may also be a good proxy for how the company operates and what it values. Does it have a lot of case studies about customers in your industry? Has it invested in resources pages that address common problems and allow you to find answers to questions on your own? If so, this type of content is a good indication that the vendor will take your success seriously. But be aware that, especially when it comes to technology vendors, a poor website experience may simply mean that the organisation doesn’t prioritise marketing as highly as, for example, product engineering.
Finally, Google the vendors on your short list. Look for information on reputation, complaints, bad press and the like.
Tip 7: Consider the costs and associated expenses.
ERP software costs vary greatly by vendor, the number of modules needed, whether the system is cloud-based or running on-premises, whether a third party will implement it and the number and types of user licences.
Importantly, not all users need full licences. ERP vendors offer different pricing based on the features each user needs access to, so access should be tailored to the data and features needed for each employee’s role — even C-suite participants. For example, the fee for someone who only needs to enter their expenses or track their time would be less than the fee for someone responsible for paying bills.
Depending on how the ERP system is deployed, there could be significant upfront costs, including licencing fees, annual maintenance, computer hardware (for on-premises installations), data conversion and transfer costs, custom coding, testing, training and implementation support from the vendor and/or consultants. To assess ongoing costs, consider the number of users/subscriptions needed, continuing support, anticipated future add-ons and customisations, and the number of countries you do business in.
Higher costs do not necessarily equate to a better system. If, for example, a more expensive ERP offering has features you don’t need or won’t likely use, the value of that extra functionality will be low. This is another reason why it is critically important to conduct a thorough needs assessment at the beginning of an ERP journey.
To achieve an accurate picture of the return on investment (ROI) for an ERP system for your organisation, it’s a good idea to look at the payback over a five- to seven-year time frame.
Tip 8: Clean up your data.
One of the biggest challenges with ERP implementations is deciding what data the new system will require. Migrating all of your organisation’s historical data, for example, is not necessary in most situations. If there is no compelling reason to include certain data sets, then don’t. To avoid migrating too much data, many organisations set a cutoff date where data generated before that time is automatically excluded from the migration.
Migrating clean data is important. Because customers interact with multiple departments across an organisation, duplicate versions of the same data is common. Plus, data is often stored in different formats — for example, formats for purchase order numbers, dates, names and addresses may be unique to each department and the applications it uses. Some information will be incorrect, and obsolete customer information will likely be present.
A clean data migration requires in-depth analysis to locate all of your organisation’s data, categorise it and understand what formats it is in. The goal is to identify and remove as much redundant data as possible, while transforming the remaining data to be migrated into the new ERP system formats.
Because of the complexity of the task, many organisations create a data migration team that can identify which data needs to be migrated, how it will be migrated and what formats and templates are needed. The disposition of data that is not being migrated should also be addressed. The team should include members from across the organisation who understand how data is consumed and created in their business units.
Because of the complexity of data privacy today, it is a good idea to include on the team someone with overall responsibility for regulatory compliance — preferably with decision-making authority.
Tip 9: Map out the implementation process.
ERP software offers a broad set of features that touch many different parts of your business, so it’s important to think critically about the implementation process. Each vendor’s offering is unique; some are highly customisable and will adapt to existing business processes, while others require users to change how they work in order to use the new system. Figuring out obvious stumbling blocks early on will help you avoid unpleasant day-one surprises and ensure the new system will be adopted across the organisation as quickly as possible.
Start by finding answers to knowable questions early in the decision-making process: Will employees need to be retrained to use the new system? Who should lead the implementation team? How will we handle change management? Depending on product complexity and company size, implementation can take anywhere from a few months to over a year. With good project management in place, missing key milestones along the implementation road becomes less likely.
A detailed project timeline helps to smooth out ERP deployments. Most ERP implementation plans include six phases, starting with discovery and planning. After an ERP system is chosen comes:
- Design: Existing workflows are analysed, any needed customisations are worked out and how you will migrate data is determined.
- Configuration: The software is set up, training materials are prepared and data import begins.
- Progressive testing: This includes fine-tuning of the system.
- Deployment: The ERP system goes live.
- Ongoing support: This ensures that users have all they need to get the most out of the system and a place to turn to address any challenges that emerge.
Setting realistic expectations is an important step in the success of an ERP rollout, as well. Overpromising and underdelivering on things like project length, scope and cost can create unnecessary suspicion and pushback from stakeholders and the board.
Another important consideration is whether your ERP system will be deployed on-premises or in the cloud. Cloud-based ERP solutions can be more cost-effective because they do not require the same level of upfront investment as an in-house system. Most companies today are adopting cloud-based solutions.
Tip 10: Assess what you’ll need for ongoing support.
Estimating what level of post-implementation support will be needed depends on many factors. They may include, for example, the number of time zones the business operates in, whether it has in-house IT admins who are certified to manage the new ERP system and whether it requires a great deal of customizations.
For on-premises ERP installations, an overriding factor has always been the level of system availability your organisation requires. To understand this, companies would have to estimate the potential costs to the business in terms of lost productivity, revenue and impact to reputation if the ERP systems were to go down, even for a few hours. The answer helped to inform the level of support the organisation needed. With cloud-based ERP software, however, uptime is no longer a consideration in support-cost calculations because cloud service providers generally guarantee all customers the same very high level of availability.
Many vendors offer custom support packages with tiered levels of support, such as bronze, silver and gold. With a basic support package, customers typically have access to a knowledge centre of support resources, such as blogs, articles, guides, ebooks and video tutorials. Premium support packages usually add priority access to live technicians and telephone support during business hours. At this midtier level, 24x7 support is usually reserved for critical issues.
Advanced customer support services are usually more proactive and designed to keep your ERP system operating at peak efficiency.
ERP Features Most Businesses Use
While most ERP solutions contain many modules that provide businesses with flexible, extensible software to run their operations on, the core features found in most ERP implementations include:
- Finance and accounting for tracking accounts payable, accounts receivable and managing the general ledger. This module also creates financial statements, including income statement, balance sheet and statement of cash flows, as well as automated invoices, payment receipts and tax statements.
- Customer relationship management (CRM) for tracking customer activity, managing sales leads and converting prospects into customers.
- Human resources management for consolidating and managing employee information and providing employee self-service.
- Order management for tracking orders from placement to fulfilment.
- Inventory management for SKU-level inventory tracking.
- Production management to plan and manage manufacturing production runs and supply chains.
- Procurement, for sourcing goods and services.
Services businesses often include a professional services automation module for project tracking, expense management and team collaboration purposes.
Consequences of Choosing the Wrong ERP
If a company chooses poorly when it comes to its ERP system, it is less likely to gain the business process efficiencies it was looking for. Even worse, a poorly chosen ERP system can cause operational issues as users try to shoehorn existing workflows into a system that is not properly designed to run them. So the consequence of choosing the wrong ERP comes down to a lot of wasted effort — a major undertaking to improve the business that, in the end, doesn’t.
But what constitutes a poorly chosen ERP? It’s simply an ERP implementation that does not make business processes run more smoothly, faster and with automation at key points. That result usually only happens when the software doesn’t actually work the way the vendor promised or when the promised features don’t really match the requirements of your business objectives.
That’s why all 10 tips discussed in this article are designed to help you identify strong business objectives for your ERP implementation, articulate those objectives clearly and comprehensively, in writing, and define what your success will look like and how you will measure it. Armed with that detailed information, companies will be prepared to choose their ERP wisely — that is, to find the ERP system whose features and functions best match the requirements of their business objectives.
Choose the Right ERP. Choose NetSuite
NetSuite’s Enterprise Resource Planning (ERP) System is an ideal solution for companies looking to improve performance today and continue growing in the future. NetSuite was built from the ground up as a cloud-native solution, giving companies the flexibility and scalability necessary to adapt to changing conditions and continue supporting the business as it evolves. NetSuite’s real-time data and roles-based dashboards make for faster and better-informed decisions at all levels of the company.
All of this increases a company’s competitiveness by lowering costs, streamlining business processes and increasing operational agility, empowering the business to reduce risk and capitalise on new opportunities.
Pave the Pathway to Success with NetSuite
Choosing the right ERP system for your organisation can be a challenging process because ERPs affect many different parts of your organisation. Companies that choose well are rewarded with a system that meets the needs of their business today and helps their organisations grow with fewer points of friction. By following the 10 tips described in this article, companies can do more than select the right ERP; along the way, they will gain a deeper understanding of how their organisations actually function. They will likely uncover some uncomfortable truths but will also gain the valuable insights they need to successfully make the changes to help them grow and prosper.
#1 Cloud ERP
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ERP Selection FAQs
What are the criteria for selecting ERP?
The No. 1 overriding criterion for an ERP system is flexibility — to make sure it fits your organisation’s needs today but will also grow with your business, not hold it back. Another is usability, meaning the ease with which different tasks can be completed. Business analytics, role-based dashboards, custom reporting, integration with third-party applications, easy configuration and top-notch training and support are also essential.
What type of business would ERP be most appropriate for?
Manufacturers were the first to implement ERP systems, and are still among the top ERP users, followed by retailers, wholesale distributors, service providers, healthcare, transportation and telecommunications companies. While early systems were designed for very large enterprises, today many startups and small businesses also rely on and benefit from ERP systems.
How do you evaluate ERP systems?
Evaluating ERP solutions can take several weeks or months depending on the needs of the business. Stakeholders from across an organisation should be involved in carefully examining their organisation’s requirements, both today and into the future. Potential ERP providers should be measured against those needs.
Does a small business need an ERP?
ERP systems were originally deployed by larger businesses, but cloud-based solutions are now available for companies of almost any size.
Which industries can benefit from ERP?
Businesses in most industries can benefit from an ERP system.
What should I look for in a new ERP?
Look for an ERP system flexible enough to meet your needs today and in the future. Your ERP system should be supported by an experienced vendor with a good reputation, as well as a strong community of third-party consultants, implementation partners and value-added resellers.
What is an ideal ERP?
An ideal ERP system is one that alleviates multiple business process problems and can scale with your organisation as it grows.
