How to Select an ERP System

 

Any company that has decided to invest in a new ERP system is faced with an important question: what do we do next? How a company answers that question is just as important as the answers themselves. Often the first reaction is make up a list of ERP systems and see which one is cheapest or which one competitors are using. That reaction often leads to unsatisfying results. System selection is important, but should be done the right way.

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Before choosing a system, the company needs to make sure that it has the right people on board, including an experienced project manager. This person can make the selection process more effective, not to mention easier. The project manager should have previous experience selecting and implementing systems. But almost as important is that he or she should not be an advocate for any particular system.

The project manager’s first task is to help the company define what it needs from a new ERP system.  This goes beyond the basic information of the quantity of transactions processed or the number of users. Here is a sample of some questions the company should ask:

  • Should the system interact with (or include) other systems such Human Resources, CRM, or MRP?
  • Is the company subject to important regulatory requirements such as Sarbanes-Oxley?
  • How important is scalability? Will the company grow rapidly and thus need to install more capability than it currently requires?
  • How sophisticated are the reporting needs? Must the system report multiple legal entities, countries, or currencies?
  • How much demand will a system make on the company’s IT infrastructure?
  • How much training will be required to make the users capable of operating a new system?   

After the needs are clarified, the company should identify systems and vendors and compare various systems against those needs. There is considerable research that goes into this phase of the selection process. Unfortunately, accurate and unbiased information is often difficult to find. The project manager may want to start with demos from several vendors, ask for references or prepare sample transactions, scenarios and reports and evaluate the results from different systems.

Of course, once the decision on the system and vendor is made, contract negotiation is critical. Often there are three or more parties involved:  the company, the software vendor and the reseller (or software consultant).  Make sure it’s clear who’s responsible for what tasks and when.  At this point, the company should have a comprehensive implementation plan. Having the plan spelled out for all parties will help define the contract, and work to prevent misunderstandings going forward.

Edward Thomas Associates offers financial and advisory services. ETA can help you select and implement a new ERP system. For more information, contact: Ed Phillips, ed@edwardthomasassociates.com.