CIOs have long had a love/hate relationship with ERP systems.
On the one hand, ERP is credited with creating value by leveraging technology to increase manufacturing quality output, reduce inventory, eliminate redundant activities, anticipate and respond to product demand and maintain business continuity. It enables coordination between far-flung facilities around the world. It brings a new understanding of efficiency to the manufacturing process. It is the foundation of the business.
It also can be a major disruptor to a business enterprise when it introduces new or altered business processes, forcing a common data format and fundamentally changing the way that “things have been done for years.”
It can be an uncomfortable process, but even if some pain is unavoidable, the payoff is worth all the effort.
Efficiency without disruption?
But how does one avoid – or at least minimize – unforeseen delays?
A fundamental thing to clearly understand from the outset: At the most basic level, an ERP solution’s primary function is to efficiently execute business processes.
It is true that ERP has expanded beyond this core and provides a business with much more than transactional processing. The scope of the footprint means many ERP systems may include CRM, PLM, or many other XYZs that used to be exclusively standalone solutions. The fact remains, at its essence, ERP changes the very underpinnings of business. It touches, and thereby changes, the way a business buys, sells, and produces goods. ERP will always be one of the most challenging business projects a company can take on.
Business transformation via ERP
It’s essential that business process owners be identified at the beginning of the project planning. An exhaustive analysis of the existing business processes and the desired future state of business processes must be identified and agreed upon before any technology solution is undertaken.
A common error we encounter is companies that want to evaluate each functional silo independently. This is a fractured approach that seldom results in optimizing the benefits that an ERP solution can provide. Improvement is contingent upon looking at how functions relate to each other. The view needs to be holistic, not siloed.
Instead, companies should ask, “What’s the right process end-to-end?” It’s far better to look at the desired end state instead of gathering a laundry list of functional requirements. Requirement gathering within a function will deliver a happier user, but it may or may not lead to an optimized business process.
Before the selection
Some questions to ask before considering the selection process:
- Where are we today?
- Where do we want to be in five years?
- Which solution delivers the performance to fulfill our future state vision?
The right solution will enable, not constrain, the strategic vision.
Logical best practices
Best practices for selecting the right solution for a company’s unique needs follow a logical path.
- Choose an ERP solution based on industry segment
Research will show which ERP vendors have successful implementations in a specific industry. The vendor should be able to provide access to customers that can share their challenges and how they were able to overcome them. They can also provide insight into the level of service that can be expected.
- Determine total cost of ownership
Ensure that your budget is within the scope of the project as determined by the vendor. An initial quote typically includes the software, implementation consulting and support for the first year of service. If you are opting for a Cloud-based service or SaaS solution, be certain you carefully review the Service Level Agreement for costs for enhancements or upgrades. Additional due diligence is necessary when comparing software solutions with different delivery models, such as SaaS vs. on-premise.
- Define the technology strategy
Make certain the IT department is aware of infrastructure and staff needs as well as security protocols. Is the solution offered by the vendor consistent with the overall IT strategy for the enterprise? ERP selection and implementation should be well planned on the IT roadmap.
- Evaluate the vendor
Does your company want to align with one of the four $2B+ ERP vendors: SAP, Oracle, Microsoft or Infor? You can be relatively certain they won’t be acquired and disappear into a larger company’s stable of products. Perhaps your company would be better off with a more nimble – and less expensive – smaller company. Smaller niche vendors often offer solutions tuned to a specific vertical solution that may be a better fit for your company.
- Talk with industry peers using the solution
It’s common for vendors in the final stage of the selection process to offer a list of current customers that can speak to the advantages of the vendor’s solution. It can be very informative and help provide reassurance which may allay your concerns before committing to a purchase and deployment. We recommend you ask for a list of customers from the same industry vertical that have been using the solution for a year or more. An on-site visit by the selection team can be a tremendous help in determining if you have made the right choice or whether you should continue the selection process with other candidates.
Making the right decision
There’s no question that choosing an ERP solution is a major decision that impacts everyone involved in the entire business. A poor decision where a company wastes time and resources on an unwise choice can be disastrous and spell the end of promising careers for executives tasked with making the right choice.
Fortunately for companies facing the inherent challenges of the selection and implementation processes, following a well-defined series of best practices can guide the decision-making and help ensure your choice is the right one.