The most important things summarized
- A selection process for ERP systems enables companies to find the right system and avoid potential wrong decisions.
- The selection process for ERP systems follows a step-by-step selection procedure.
- The offer review during the selection process includes comparing the features, integration, scalability, and references of the providers.
- Before making a final decision on an ERP system, aspects such as costs, must-have vs. good-to-have functions, user-friendliness, and the relationship with the provider should be considered.
You’ve heard about the many advantages of ERP and started looking for a suitable system, but are completely overwhelmed by the hundreds of ERP systems on the market? That’s precisely why there’s a systematic selection process you can follow to find the ideal ERP software for your needs.
In general, you will benefit from any ERP software you choose; however, ERP systems from different vendors often have different strengths, as they are usually tailored to specific industries.
Poor decisions become apparent when your chosen ERP system fails to meet the core requirements essential to your business. The consequences are high costs, expensive adjustments, lost time, business delays, and wasted resources.
Therefore, it is always important that you do not only rely on top 10 lists, but search for an ERP solution that best meets the requirements of your company – and we will show you exactly how!
Understanding ERP – What types are there?
The first step in your selection process is to understand the different types of ERP software available. Basically, there are three main types of solutions:
Standard software
These solutions typically cover the standard functions of ERP software. Ideally, they also allow for the addition of specific modules and configurations to meet the particular needs of different industries and application areas.
Industry software
These types of systems place a greater focus on specific functions that are most important for the industry in which these ERP systems are used.
Individual software
With this software, you receive a customized ERP solution from the ERP provider. Such systems are usually highly specialized and therefore only intended for specific use cases. Modifications can thus be difficult or even impossible to make.
Generally, you are best served with standard or industry-specific software, as this covers the most important needs for day-to-day business operations in general, or within your specific industry. Custom software is a rare exception among ERP systems, since suitable ERP systems already exist for most industries, and custom development is very expensive.
The selection process – step by step
To make an informed decision about which ERP system from which provider you ultimately want to implement, you need to work through a checklist step by step. Without such a list, the selection process can become a major challenge, but we’ll explain how you can simplify your search.
1. Acquire basic understanding
If you have never had ERP software before, or it has been a long time since you implemented it in your company, you should familiarize yourself with the topic of Enterprise Resource Planning:
How do ERP systems work?
Are there any unfamiliar words in the technical vocabulary?
2. Define the framework and objectives
Since you want to implement an ERP system in your company, you probably already have some goals in mind that you want to achieve with it. Nevertheless, it’s always helpful to ask yourself the following questions to get a better picture of the software you actually need:
What is your budget?
What is the timeframe for the software rollout?
What are your strategic goals? (Growth? Eliminating bottlenecks?)
What KPIs or measurable criteria do you use to determine your success?
Although an ERP system is generally worthwhile for most companies, a very basic question to ask before you begin the entire selection process is:
Is an ERP system even worth it for me?
For example, if your company is still very small, you might want to wait to implement until your processes have grown and it becomes easier to partially automate them using an ERP system.
3. Creation of an ERP requirements specification
The ERP requirements specification is your primary tool and best friend when selecting an ERP system, as you enter all your requirements into it. These requirements then serve as a pre-selection tool for vendors who will submit proposals for an ERP solution and ultimately inform your final decision. You should ensure that you only describe your processes and requirements in the requirements specification and do not include explicit functions that you will need, as this can unnecessarily limit the vendor’s proposal.
4. Define requirements
Next, you need to analyze the current state of your processes to identify which ones you want to improve. The resulting target state definition will then allow you to determine the functionalities your ERP system should have. It’s important to distinguish between different process dimensions:
Management processes: Corporate governance and planning
Core processes: Sales, marketing, customer service, logistics, development, production, etc.
Support processes: personnel, IT, finance, etc.
Furthermore, in addition to your processes, there are other requirements, especially technical ones, that you should consider when selecting an ERP system:
Number of users
Ease of use
IT and data security
Hosting
Further development
Interfaces
Performance
Technologies
These are just a few of the many requirements you should consider when selecting an ERP system. Ultimately, it’s worth giving it more thought to avoid costly mistakes later on and to fully address your ERP project needs.
5. Review offers from the selected providers
The first step in identifying potential suppliers is market research, where you compare information from suppliers with the requirements in your specifications and can use certain questions as a guide:
Does the offered ERP system cover the necessary functions?
Can you integrate the ERP software into your existing IT infrastructure? (How easy/difficult will it be?)
Is the software future-proof by supporting new technologies? (e.g., AI)
How scalable is the ERP solution?
Can the ERP system provider demonstrate industry experience and is it established in the market?
After this step, you can already eliminate some providers; you can send your requirements specification to those you like best and request quotes. In the next step, it’s best to discuss this with your team and further refine your list. Ideally, the provider should let you test the software before a full implementation. In the end, only one can remain – the one you like best.
6. Check the supplier's references
Positive references are always a sign of a good provider, so you should definitely look for them. References can give you a good indication of whether the software works well, but if you want to go a step further, you can always ask the provider if you can speak with any of their reference customers. It’s quite possible that the provider’s reference customers will decline contact, especially if they are competitors in the same industry, but it can certainly be worth trying to get in touch to gather some more insights. Topics you could ask about include:
Experience with the provider regarding integration and maintenance
Ease of use of the software
Stability of the system
Later impressions of the system
7. The final decision
Before you decide on your new ERP system after the long software selection process, we have some advice for you to help you make the best possible decision.
8. Cheap doesn't mean better
One of the most common mistakes made when comparing products of any kind is allowing users or customers to be persuaded by the cheapest options. While lower costs are certainly attractive at first, they don’t really tell you much about the actual quality of the product. Therefore, it’s worthwhile to find an average price among the quotes you’ve received and eliminate the outliers at both the high and low ends. This is the best way to avoid paying double the market price or falling into the trap of bait-and-switch tactics.
9. Must-Have vs. Good-to-Have
At the end of the day, you can’t have everything in life, which is why it’s quite possible that you won’t find an ERP system that perfectly matches all your requirements. With this in mind, it’s advisable to distinguish between the requirements that your desired ERP system absolutely must meet and the requirements that it can meet.
10. Usability is more important than you think
Even software that ticks all your boxes can suffer from the problem of not being user-friendly. If a system has many functions, but you can only discover and use them with great difficulty, then the system doesn’t offer you as much as you originally expected. You can quickly identify this user-friendliness issue during product demos, which is why it’s always worthwhile to request one.
11. Chemistry to the supplier
Finally, the chemistry between you and the vendor can also play a role in the selection process. You should always ensure that you get along well with the vendor to avoid misunderstandings and conflicts later on during the implementation of the ERP system. A good relationship will save you a lot of trouble on the road to greater efficiency.
Conclusion
Ultimately, the selection process for an ERP system is a lengthy but necessary one to avoid potential mistakes. Choosing the wrong system can end up costing more than a thorough search. Therefore, follow the steps in our guide to avoid as many problems and errors as possible and successfully invest in your company’s future with an ERP system perfectly tailored to your needs.