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Expert advice for the ERP software selection process

Selecting the right ERP system for your business needs is no easy task. Find out six steps to ERP software assessment and selection that will help you make the best decision.

Most companies that are evaluating potential ERP solutions confine themselves to tier I vendors. If you have a small to midsized business, there are countless other options. For a large company, there are dozens of viable options that can deal with complex businesses and scale for growth.

Here at Panorama Consulting Group, we encourage our clients to go through the ERP selection process with their "eyes wide open." When our company embarks on a software selection project with clients, we start with more than 80 different ERP packages. Most are offerings from established companies with established client bases. Many can deal with complex requirements, such as product configuration, product development management, engineering change orders, project accounting, etc. The only difference is that they don't receive the publicity and marketing exposure that the larger guys have. Based on our experience, they are often a better fit, more flexible, and less risky than typical tier I software options.

There are plenty of viable alternatives to the household ERP names. Many of these companies are well established, with international offices, international customers, and user counts ranging from 10 to 1,000s. And many of their offerings will cost much less to purchase and implement than a tier I option.

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In addition, these smaller vendors often provide more functional specialization and industry focus than traditional ERP options. A complex, engineer-to-order type of discrete manufacturer is not likely to want a package that also tries to deal with the processes for high-volume, make-to-stock manufacturing. Instead, you should consider a solution that handles your type of business very well rather than one that tries to be "all things to all people."

Six steps to an effective ERP assessment and software selection

To simplify the evaluation process without overlooking a package that may be a strong fit for your organization, we recommend a multiple-phase process to evaluating vendors. This process includes identifying your "to-be" business processes and business requirements, which are both critical to an effective ERP assessment:

1. Identify both industry-specific and general ERP packages. Based on your business requirements and budgetary needs, you will probably eliminate most vendors. We typically recommend developing a "long list" of six to eight vendors.

2. Once the long list has been compiled, identify the key requirements that a package must have in order to make the short list. These "deal-breakers" should help you arrive at three to four short-listed vendors. Typically, discussing business requirements with each of the long-list vendors and getting an RFI (request for information) response will be the basis for moving to a short list.

3. Conduct a detailed assessment and analysis of the short-list vendors. Identify and prioritize the detailed business requirements that your organization needs in a potential ERP package. From these requirements, create demo scripts to ensure that each vendor demonstrates its product as it relates to your business processes. Vendors like to focus on their strengths and not necessarily on how their software fits with your business. This is the time in the evaluation when you should issue RFPs (requests for proposals) to the short-list vendors. The responses will include their costs, software capabilities, and proposed implementation strategy.

4. During the short-list and demo evaluation, involve key users and ask them to complete evaluations for each of the vendors. These evaluations should be quantitative assessments of how well the vendors' products address the key business requirements in demo scripts.

5. In parallel with the functional assessments, assess the technical capabilities of the short-listed vendors. This should include areas such as scalability, ability to integrate with legacy systems, openness of the architecture, etc. These technical factors may be as important as your functional business requirements.

6. Make a decision based on the input from the vendor evaluations and technical assessments. Gather the input you've received from the various assessments, and prioritize the vendors' strengths and weaknesses. Finishing your selection may require more of a quantitative ranking and weighting to evaluate how well each of the packages meets your business requirements.

Choosing an ERP software package is one of the most important decisions your organization will ever make. It is also one that will have long-lasting effects, positive or negative, on your company's financial performance. Many ERP implementations last for 10 years or more. This process may seem overwhelming, but it is a good way to consider a comprehensive set of options in order to arrive at a decision. Given the importance of such a decision, it is worth taking the time to make the vendor software selection that is right for your organization.

By the time your evaluation and selection is complete, you should have a good understanding of the commitment you are making. ERP projects are usually more complex and costly than expected, but it is better to understand that fact before your ERP decision than when you are already in an implementation.

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