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ERP Selection Best Practices Best Practices in ERP Software Selection


Flexible Software for Business Agility

While many enterprise software vendors claim to have an agile platform, few truly do. It is important therefore to evaluate ERP systems for actual agility so that you know the system can grow with you and that it can be reconfigured or further customized as your business changes over time. If you fail to do this you’ll soon find your business is held hostage to the technology.

In much the same way, you need to know that the licensing agreement is flexible enough to enable you to react and respond to business changes in a timely manner and at a reasonable cost. Make note of contract clauses that add or diminish your options going forward. However, don’t wait until you have a contract in front of you to do so – require this information early in the ERP selection process.

Evaluate the age and architecture of the vendor's technology, how quick they are to update it and how much they invest in research and development. If the business software technology is old, updates are few and far between, and/or the vendor does not invest heavily in research and development then the vendor is unlikely to survive for very long. Conversely, if the updates are too frequent, this could merely be a means to charge you more money for very little technical advantage.

Consider Custom Updates and Breaks

Odds are that you will be doing some level of customization regardless of which ERP software you purchase. However, some ERP systems are more configurable than others and you need to get a firm understanding of how much you can configure each product versus how much you’ll need to customize using programming tools.

Configurable software is simple to trial, easier to update and far less costly to deploy and maintain. Software customizations, on the other hand, are more complex and can break with updates and upgrades. You will need to do substantial work in additional testing and post-update rewriting to protect your customizations with each new version. Make sure you account for these additional expenses when it comes time to compare product pricing in the selection process.

Also be aware that there comes a point when your software customizations may eventually result in a system largely alien to the packaged product your purchased. This simply means that you have changed your system so much that it no longer resembles the ERP system you acquired. If this happens, the ERP vendor may decide support is too costly for your individualized system and leave you on your own. At that point, you’ll need to decide whether to add enough internal IT support to continue with what now amounts to a legacy system or to change to a new product. Best practice is to project when this might occur during the selection process and before you commit to a purchase.

Calculate the Cost of Support

Indeed, support costs can be substantial even without software customizations. It is vitally important that you assess these costs as part of the overall price before you make a decision to buy.

Some of the larger ERP vendors are charging as much as 20+ percent of the cost of the original software licensing fee on an annual basis. Be sure to ask vendors for full disclosure of their software support policies, all costs including annual fee increases, and the availability and comparative costs of third-party support services. In fact, just by asking about third party support services you may open the door to a price reduction. ERP vendors make their highest profits with their annual support plans and because those profits are being incroached by third party support organizations, the ERP vendors are suddenly motivated to reduce these costs rather than lose them entirely.

Weigh 'What Is' Against 'What is Preferred'

It is all too common for ERP systems to be scrapped in an effort to shed internal problems only to be replaced with a new system that has all the old problems. That’s because the problems were not intrinsic to the business software but inherent to the business processes.

Map your processes and note what is and what is not working. Then map your processes as you want them to be. Carefully note the differences between the two and whether the gaps are caused by policy, procedure, process or technology shortcomings. This will help you define what functionality you actually need in an ERP system and where you need to make changes in the processes themselves.

An ERP best practice includes identifying add-ons that can potentially rectify problems with your existing ERP and also evaluating those against a new ERP system. It is best to trial each add–on and the new ERP system before making a final decision. Don’t forget to consider blends. Cloud ERP systems in particular often offer online ecosystems of integrated third party products to address a wide range of specific issues.

Check References

Always ask for references of comparable users who have used a given ERP product for a year or more. Why? Because the new car smell has worn off after a year or so and the user knows where the engine knocks are and how bad the exhaust smells. A new user, by comparison, may still be googly-eyed over the bells and whistles or simply intent on justifying the spend to himself and his bosses. Also, ask for references from your industry as these are more likely to share lessons learned which are unique to your line of business.

Make a list of questions you want to ask before you actually call references. This will prevent delay due to follow-up calls and will allow you to get more useful and in-depth information about the product. Here is a basic checklist to get you started:

  1. How easy/difficult is it to work with the vendor in general? Can you give some examples?
  2. Were there any pricing surprises – good, bad or ugly?
  3. How good is support? Can you quickly reach someone? Are problems quickly resolved? What is the average response time?
  4. If you had the decision to do over, would you select the same vendor? The same ERP product? Why or why not? What would you do differently?
  5. How easy/difficult was it to implement the product?
  6. Has the product worked as it was promised or described by the vendor? If not, where were the problems/issues?
  7. How frequent is the product updated?
  8. How difficult is it to customize?
  9. Any integration problems with other software that I should be aware of?
  10. How well is it adopted by your staff? What are their most common complaints?

Remember that people serving as references for the vendor are busy so keep your list of questions relatively short but meaningful. Also remember that one bad rating doesn’t necessarily mean the ERP system is bad. Quite often a good system can get a bad rating based on a poor implementation. You are looking for a consensus from several references in order to obtain a true reading.

Gauge Retention Rates

Look at the list of references the vendors gave you: are they long-term customers or new customers? Too many new customers can mean the ERP vendor has trouble satisfying customers over time and focuses too much on just making the sale. However, too few new customers can be an indication of stale technology or the vendor’s financial instability.

Ask each vendor for their retention rates and then confirm such, as best you can, in the reference check or with industry analysts.

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An ERP best practice includes identifying add-ons that can potentially rectify problems with your existing ERP and also evaluating those against a new ERP system.


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