• ERP System Selection. Do not be foolish!
  • Ray Tetlow
  • Management Consulting
ERP System Selection. Do not be foolish!

Irrespective of whether the company is a multi-national, multi-million dollar organization or a small company with single digit million turnover, the goal of system selection is to source a system that can provide functionality for all of the business processes; that will get complete user acceptance; management approval and, most importantly, can provide significant ROI.

Given all of the potential solutions, it is not uncommon for companies to choose a system that is not the best fit for the business and this normally leads to more expensive implementation and maintenance; that increases over time. 

A proper ERP system selection methodology will deliver, within time and budget, an ERP system that is best fit for the business processes and therefore the company.

When system selection is not formalized, the following can happen:

Incomplete requirements

Because implementation of a new ERP system "requires people to do their job differently", it is very important to understand user requirements, not only for current processes, but also future processes. Without detailed user requirements, review of systems for functional best-fit rarely succeeds.  The requirements must be formalized and go into sufficient detail for complex processes, or processes that may be unique to a particular business. 

Reliance on vendor demos

Vendor demonstrations tend to focus on very simplistic processes. A typical demonstration shows an ideal order to cash process where a customer orders a quantity of product that is in stock. The reality in most businesses is that most customers have varying and more complex commercial arrangements, and products are not always in stock.

Over-emphasis on system cost

While the cost of an ERP system is significant for a company, other important decision criteria, such as functionality; future proofing; underlying infrastructure [network & database & software as a service options]; and e-commerce capability among others, may be understressed.

Selection bias

It is not unusual that the decision on which system to purchase is made by one individual or by one department within the company. In these situations, an ERP system that may be excellent at one function but weak at other processes.  This may have serious consequences for the business since you are now linking all these processes.

Failure to use objective professional services

One of the main reasons for failure in system selection is the understandable lack of knowledge within the company.  Experienced consultants can provide information on all of the packages that are available in the marketplace; the latest functionality available in the most common packages and, most importantly, can assist the user in deciding whether a specific requirement would provide added value to the user and to the business.   It is worth noting that the professional help must be provided by objective consultants who have no affiliation with ERP system vendors.

Inability to understand offering by ERP vendor

It is estimated that approximately 90% of enterprise system implementations are late or over budget.   A plausible explanation for implementations being late and over budget is that the company did not understand the offering by the vendor before the contract was signed.

A typical example of this would be the scenario where a vendor may offer 5 days of services for the purpose of data migration.   The reality is that there is a huge amount of work required to input data onto a new system. The vendor will import the data into the new system but expects the company to put the data into a file that is easy to import into the system. The company are also expected to extract the data from the old system; clean the data and add new data that is required by the new system. "ERP, to be successful, requires levels of data integrity far higher than most companies have ever achieved – or even considered.   All records and need to become highly accurate, complete and properly structured.   This typical scenario is one of many issues that cause implementations to be delayed and invariably lead to requests for more resources.

To address these common mistakes:

Structured approach

The first step in selection of a new system is to adopt a structured approach to the process. The set of practices are presented to all the stakeholders within the enterprise before the system selection process begins. Everyone needs to understand the method of gathering requirements; invitation to tender; how potential vendors will be selected; the format of demonstrations and the process for selecting the vendor.

Focused demonstrations

Demonstrations by potential vendors must be relevant to the business. However, it is important to understand that there is considerable amount of preparation required by vendors to perform demonstrations that are specific to a business. Therefore it is imperative that vendors are treated equally in requests for demonstrations and it is incumbent on the company [and the objective consultant assisting the company in the selection process] to identify sufficient demonstrations that will allow a proper decision to be made but will also ensure that vendors do not opt out of the selection process due to the extent of preparation required.

Full involvement by all personnel

The decision on the system must be made by all stakeholders within the enterprise. It requires top management leadership and participation… it involves virtually every department within the company.

Tactics helps you navigate this entire process. 

Our Process Coaching ensures your users describe their processes accurately; 

Our Solution Design ensures you formalize your requirements, select the right vendors, see the right demos, identify (upfront) the major gaps and most importantly, have a detailed step by step project plan for implementation.

  • Ray Tetlow
  • Management Consulting