ERP Selection Criteria: How to Choose the Right One

Over 70% of enterprises use enterprise resource planning (ERP) software to streamline their business operations, improve efficiency, and enhance productivity. More and more businesses are adopting ERP as their tool to enable smart business decisions, data insights, and more. However, selecting an ERP system can be a complex process. Making the wrong choice can impact the organization’s operations and bottom line.

Keep reading to learn more about navigating through ERP selection effectively and avoiding costly errors.

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What Is ERP?

ERP is an innovative software solution. It allows businesses to integrate and manage their core operations on one platform. Whether it’s finance, customer service, HR, or supply chain, nearly all aspects of your business can be monitored and controlled from one platform.

Why Does Your Business Need ERP?

A well-suited ERP system offers countless benefits to businesses of all sizes and industries. Here are some of the key reasons your business needs an ERP system:

  • Streamlined Operation: An ERP system allows you to automate, streamline, and centralize different aspects of your business. This will enable you to make faster, smarter, and more efficient decisions.
  • Real-Time Visibility and Reporting: ERP systems offer real-time visibility into business operations and in-depth analysis. Managers and other stakeholders can use this accurate and up-to-date information to make data-driven decisions and identify areas for improvement.
  • Seamless Collaboration and Communication: With a centralized database and business management, different departments can share information, collaborate on projects, and work together towards common goals with ease.

How to Choose the Right ERP System

Evaluate Your Business Needs

Businesses use ERP for different purposes. For example, the manufacturing industry uses ERP systems to manage inventory, meet high-quality standards, and comply with regulations. Ask yourself what aspects of your business can benefit from the new system. This evaluation involves identifying pain points, lacunae, and areas for improvement.

Identify the Functionalities You Need

Once you have identified your business needs, create a comprehensive list of functionalities and features that could help fulfill them and determine the right ERP vendors and their solutions.

Involving Key Stakeholders

ERP system selection requires the collaboration of stakeholders. One person can’t determine the needs of an entire organization. Therefore, it’s best to involve key stakeholders from various departments to understand each demand.

Beyond the Price Tag

An ERP system can incur a variety of direct and indirect costs. Don’t buy this software based solely on its price tag. Here are a few cost factors that you also need to consider while choosing a new ERP system for your enterprise:

Total Cost of Ownership

The total cost of ownership (TCO) exceeds the initial purchase price. There are additional separate licensing fees, implementation costs, maintenance costs, training expenses, and ongoing support charges. Before deciding on one, compare the TCO of various ERP systems over their expected lifespan.

Recurring Cost

ERP systems typically have monthly subscription plans, translating into recurring additional budget costs.

Implementation Cost

Companies choose on-site, cloud, or hybrid ERP systems based on their needs. The implementation process may need extra hardware and enabling software. Estimate and calculate the implementation costs to determine whether the investment is worthwhile.

Defining ROI Goals

Undoubtedly, you can save on operational costs with an ERP system. For example, if you automate the supply chain or financial tasks, you can save money, make faster decisions, and more. Clearly define your long-term ROI objectives and expected outcomes before implementing an ERP system. See for yourself if the ROI exceeds the initial and lifetime investment and effort.

Assessing Vendor Credibility

When selecting an ERP system, it is essential to understand the credibility of the vendors you are considering. Research their reputation, active customer base, financial stability, market presence, and long-term viability. You will need a trusted partner to support and strengthen your ERP system over the long run, ensuring your investment remains secure.

Research Product Viability

After you have checked out the credibility of your service provider, you should learn more details about the product, including how long it has been on the market, its future scalability scope, and all other relevant data. Ask for references or validation from existing customers to ensure you are getting a reliable solution.

Consider Implementation and Support

ERP implementation is a process that could take more than six months to complete. This implementation process determines the success or failure of deployment. While evaluating each vendor’s process, you should consider factors such as the implementation timeline, data migration strategies, training, and post-implementation support. A well-planned implementation process and reliable support can make all the difference for your business.

Considering Future Growth Needs

ERP is a system that not only helps with business management but also accommodates your future requirements by efficiently handling growing databases, transaction volumes, and additional users while seamlessly integrating new technologies. A scalable ERP system will save you from the hassle and costs of a premature replacement.

Reviewing Contract and Licensing Terms

Once you decide on the ERP vendor, carefully review the licensing terms, models, software maintenance, and support agreements. Seek legal advice if necessary to ensure that the contract protects your interests.

Access Risk Factors

Every ERP solution comes with certain risk factors. Therefore, it’s essential to consider each of them and plan to mitigate any issues that may emerge during or after implementation.

Go for Trial

Finally, take a trial before making the final decision. Many vendors offer trial versions or pilot programs that allow you to experience the system firsthand. Allow end-users from different departments to test the system’s capability, ease of use, functionality, and compatibility with their workflows. This practical experience will help you make an informed choice.

Are you in the process of selecting an ERP system for your organization? BACS Consulting Group is a third-party consulting firm for ERP. As an experienced San Jose IT managed services provider, we can provide impartial and practical guidance on choosing the suitable ERP for your organization. Contact us today to learn how we can help you achieve a better digital transformation and competitive advantage.

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