From year to year, businesses of all sizes implement enterprise resource planning systems to remain agile and competitive and increase their operational efficiency. However, implementing a new ERP system is likely to be one of the most expensive decisions a company’s leaders can make. To ensure such financial investments are not in vain, the right ERP selection solution from the outset is essential. In this article, we share the top five mistakes companies make when deciding on ERP software and some working tips on how to select an ERP system that will meet your specific needs and effectively support your business growth.
Table of contents
1. Poor needs and requirements analysis
Some companies may be tempted to jump straight into selecting an ERP solution, choosing the one equipped with the best-in-class features, AI, and whatnot without planning the exact functionality they need. With such an approach, companies risk choosing a system that fails to meet their specific business needs, which results in wasted investments and possible business disruptions. That is why the company’s current challenges, needs, and future goals should form the basis for defining the requirements of the future ERP solution.
Tip:
To identify your needs and specify requirements for your future business process automation services in ERP systems, perform an in-depth analysis covering the following aspects:
- Mapping and documenting your existing business processes (e.g., using flowcharts) to visualize workflows and decision points.
- Identifying pain points, repetitive tasks, and areas prone to errors. You can also gather feedback from your employees to understand process inefficiencies in their everyday tasks.
- Assessing your existing technology environment (tools and software you use) to identify systems that are too complex or obsolete.
- Examining how your data is collected, stored, and analyzed and identifying any inefficiencies in the process.
Such analysis will help outline specific goals for the ERP system (e.g., improving accuracy in reporting, reducing order fulfillment times, or enhancing customer experience) as well as create a list of required ERP features sorted out by priority (e.g., must-haves, nice-to-haves, and optional features).
2. Overlooked TCOs and unrealistic budgets
Overlooking the total cost of ERP ownership and thus miscalculating the project budget can lead to budget creep and a failed implementation initiative. When selecting an ERP system and planning the budget for the project, companies may primarily focus on initial investment, neglecting broader financial variables. A FinOps assessment can provide a clearer view of ongoing cloud expenses, helping businesses align their ERP deployment with cost control strategies.”
Tip: When calculating the TCO of an ERP solution, factor in the following criteria:
- Upfront hardware and software investments in case your choice is an on-premises ERP system
- Licensing fee for a cloud-based SaaS ERP, which is defined by the functional modules you need and the number of active users
- Software implementation, integration, and customization costs
- Employee training and other change management expenses
- ERP software maintenance and support
Considering these factors will help you calculate the ERP TCO and allocate a realistic budget for solution implementation.
3. Poor stakeholder involvement
The process of ERP implementation often falls on the shoulders of the company’s IT department. However, the process of selecting an ERP solution should involve negotiation with business stakeholders from across the organization. The future ERP system will affect the workflows of most of the company’s departments, including finance, HR, sales, supply chain, and customer services, so it is essential to have the people working with ERP involved in the ERP selection process.
Tip: To ensure the ERP functional fit, make sure to create a cross-departmental selection committee that will include representatives from key departments such as finance, HR, sales, supply chain, and customer service, who will actively take part in the ERP requirements elicitation and ERP selection process. However, keep in mind that attracting too many managers to the process can lead to disorganization and confusion around ERP requirements prioritization and platform selection.
4. Incorrect RFP documents
A request for proposal (RFP) articulates the company’s ERP requirements and is shared with ERP vendors who submit their solutions outlining how their software meets those requirements. While this sounds relatively straightforward, creating a feasible ERP document can become a problem for some organizations: the most common pitfalls that companies face when creating ERP RFPs are either RFPs lacking information on the company’s details and current systems or visa versa, RFP documents with excessive information, making it hard for ERP vendors to focus on your requirements.
Tip: A good RFP that can provide ERP vendors with a clear picture of your needs and ERP requirements and help them create a comprehensive RFP response should include:
- A company’s background information. Clear but concise information about your business type and its structure will help ERP vendors have a comprehensive view of your organization and make a more relevant offering. For example, for a growing retailer, a cloud-based solution can be preferable due to its scalability, whereas for a governmental organization, an on-premises solution with the strongest levels of data security and governance will be a better fit.
- Requirements list. Functional and non-functional ERP requirements form the backbone of your RFP document and describe business processes you want to automate, desired functionality, software scalability, capacity for performance, and more.
- Project scope. Apart from the requirements for the ERP system itself, specify why your organization plans ERP implementation, as well as which departments and how many employees will use the system. Moreover, outline your change management plans so that ERP vendors can understand your ERP training and support expectations.
If you lack the in-house expertise to define the requirements for your future ERP system and draw up a comprehensive RFP document, consider turning to professional ERP consultants who help companies with ERP requirements elicitation and RFP composition.
5. Overvaluing brand names
When choosing a new ERP solution, organizations may tend to favor popular ERP vendors, like SAP, Sage, or Microsoft. Indeed, such “big” names do ensure credibility and the proven quality of the solutions they offer. Although such vendors typically offer solutions for businesses of various sizes, it is very easy to be misled into choosing a solution with excessive functionality or one that requires significant customization.
Tip: When selecting an ERP solution, consider not only Tier 1 ERP solutions, like SAP or Microsoft Dynamics 365 but also Tier 2 options like Netsuite or Odoo or industry-specific Tier 3 systems. Make your business objectives and technical requirements specification the basis for picking the most optimal ERP solution instead of relying on big names.
In conclusion
Selecting ERP software is a crucial step that will define the success of your ERP implementation initiative and the overall business process efficiency. By taking a structured and sound approach to the selection processes with a strong focus on understanding your business processes, realistic budgeting, and ERP requirements specification, you are sure to land with an ERP system that best suits your organization. However, if you lack the in-house expertise to navigate the complexities of ERP selection, consider partnering with professional ERP consultants who will guide you through every stage of the process, helping you choose a solution tailored to your needs.
By Roman Davydov, Technology Observer