ERP Vendor Selection : Choosing Software that is Right for your Company

ERP vendor selection can be a daunting task, and one that is often not given the appropriate attention. CIOs or other executives in charge of making such major decisions often make decisions based on perception or faulty information. For example, the business media often highlights companies that experience failure implementing a specific package. However, information such as this does not necessarily reflect what is appropriate or inappropriate for your specific company.

In choosing an ERP or IT software package, executives need to make decisions based on objective and unbiased information rather than gut feel or limited information. In particular, companies should consider the following:

  • Why Do you Want to Implement ERP? Unfortunately, this question is the toughest to ask once you're already on the ERP bandwagon. Many times, ERP is not going to solve your business problems. If your business strategies or key business processes are flawed, even the most advanced IT system is not going to help. Before making a decision as large as implementing a system that will cost millions and affect your entire company, it's important to have a clear understanding of what you want to accomplish by taking on this challenge. There may be more cost-effective and lower-risk options such as improving processes, redesigning your organizational structure, consolidating your global supply chain, or implementing a performance management system.
  • What are your Business Requirements? Once you have decided that ERP is the route you need to take, it is important to begin by looking at your desired operational model and using that as a starting point in determining which software to implement. Executives should define and document key business requirements for any package they may select. This includes not only nice-to-haves, but also requirements that are "deal-breakers" if the software is unable to accommodate. And executives should also use ERP business requirements as an opportunity to improve current operations, efficiency, and effectiveness. The last thing a company should do is implement software to automate the same flawed business processes.
  • What is your Business Case? This is where many companies fall flat. Even if you complete the first two items discussed above, it is important to understand and document what your costs will be, as well as your anticipated business benefits. This is important in gaining approval from other executives or your Board of Directors, and it is also helps ensure that you realize the potential benefits of implementing the software. All costs, including hidden costs such as internal project resources, data conversion, and lost productivity immediately following go-live, should be included in the business case and ROI calculation. And benefits should be reasonable and not overly aggressive. Ultimately, your business case should be a tool to manage business costs and benefits going forward, not just as a sales tool to justify a decision that's already been made. And if the resulting ROI does not make sense or meet minimum investment criteria for your company, then it's probably not a good idea to undertake the project.
  • Who will Be Your Implementation Partner? Have you thoroughly assessed all of your options in evaluating potential external implementation teams? Software companies aren't always the best at implementing their software. You can often find third-party vendors and consultants that can implement ERP more successfully or at a lower cost.
  • Do You Have Enough Resources to Commit to the Project? Even if ERP is perfect for your company and you have chosen the perfect software, things will head south very quickly if you don't have enough money or employees to dedicate to the project. It doesn't matter if you have assembled the best team of consultants and implementation partners; it's your employees that will ultimately make the project succeed.
  • What's the Contingency Plan? No matter how well-run your project is, you should be prepared for failure. We've all read of the technical glitches that shut down shipping at Fortune 500 companies for weeks at a time, so it's best to acknowledge that something bad could happen. If the project does fail or if the software is not implemented correctly, what is the backup plan? Will users be able to access legacy systems? Will certain processes be performed manually until the system is up? Dramatic failures are not common, but they do happen on occasion, so companies should be prepared for the "what-ifs."
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