As you begin ERP selection, you’re probably wondering how long the process takes. If you want to set realistic expectations, you need to plan for some of the overlooked aspects of ERP selection. This includes defining organizational goals, developing an IT strategy, evaluating deployment options, defining business processes and reviewing statements of work.
5 Overlooked Selection Activities
Defining Organizational Goals
Many organizations decide to evaluate ERP systems because their current system cannot scale to support the company’s growth. However, this reason alone doesn’t justify an ERP investment. You must be able to articulate how a new ERP system aligns with your organizational goals.
While enabling business growth may seem like a legitimate goal, it’s not specific and measurable enough. Consider goals such as improving data visibility or improving the customer experience. These goals are legitimate because you can measure the return on investment.
Before evaluating ERP systems, you should develop a business case to justify the investment and to estimate business benefits and return on investment. (You can use our ROI Calculator for these initial estimates). Defining your goals and developing a business case ensures you realize the full potential of ERP software. It also ensures organizational alignment.
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Developing an IT Strategy
Once you understand your organization’s overall strategy and goals, you can develop an IT strategy. Now, you have a lens through which to evaluate your current enterprise systems and infrastructure. Determine what’s working and what needs to change if you are going to pursue new organizational goals.
Understanding your current state is essential as you’ll need to determine how new ERP software will integrate with your current IT infrastructure. For example, a best-of-breed solution may require many more integrations to your existing systems than a single ERP solution. Additional software integrations are worth the investment if a best-of-breed strategy aligns with your organization’s long-term goals. In fact, a standalone CRM system may have more robust functionality than a CRM application within a single ERP system.
When selecting best-of-breed ERP software, one mistake many organizations make is looking for software for one particular functional area without considering other functional areas. While all your business functions may not be in need of improvement at this current juncture, they likely will require new technology in the future. The functional area you’re focusing on now needs technology that will align with technology you implement in the future. If you define your long-term IT strategy, you will know what to look for in a standalone CRM system or HCM system.
The final step in developing an IT strategy is defining key performance indicators (KPIs). This will help you measure your return on investment throughout your ERP implementation. It’s also important to develop a benefits realization plan.
Evaluating Deployment Options
While evaluating deployment options is part of developing an IT strategy, it deserves to be mentioned separately. There are some important market trends of which you should be aware.
Different deployment options each have their risks and benefits. Your decision should depend on your organization’s unique needs and goals. While cloud and SaaS solutions can be easier to deploy, they can limit your flexibility. ERP vendors may claim they will only support cloud solutions in the near future, but we have found this is purely a sales tactic. Cloud ERP is more profitable for vendors, so they provide higher compensation to sales reps who successfully sell cloud technology.
The truth is, on-premise software isn’t dead. We work with several VARs and system integrators that still sell and support on-premise solutions. These solutions are viable. In fact, some have ten- to twenty-year roadmaps, which is great news for their large install bases. As you’re evaluating deployment options, be sure to take the cloud sales hype with a grain of salt.
Many organizations choose cloud deployment for some but not all their business functions. This is called hybrid deployment. In these situations, organizations keep their back-office functions on-premise and implement cloud solutions for functions like sales and marketing.
Defining Your Business Processes
How can you know what enterprise technology you need without knowing what business processes it needs to support? You can’t. That’s why it’s important to define your business processes before selecting ERP software.
Start by mapping your current processes and looking for pain points. Involve all departments and ensure managers seek input from their teams. This collaborative approach results in process improvements that align with your organizational goals. Your future state will be a combination of optimized and standardized processes from which you can define business requirements. Prioritize these requirements so you can evaluate the functionality of various enterprise systems and determine which systems are most effective at addressing your highest-priority requirements.
Business process reengineering is a complex activity that can increase your selection timeframe. However, you will make up for this time during implementation since you won’t have to spend time defining your processes after selection.
Reviewing Statements of Work
Once you have statements of work from your top vendors, you may think the worst is behind you. Unfortunately, one of the most challenging tasks of selection remains: You must compare cost estimates that each make different assumptions about your implementation approach and desired level of customization.
When reviewing statements of work, you should ensure that the estimates include essentials, such as support and maintenance fees. You don’t want your system to go down just because you didn’t keep it updated. You also don’t want a security breach.
As you can imagine, this process is confusing and time consuming. Many organizations hire an independent ERP consultant to analyze statements of work and negotiate with vendors.
How Long Does ERP Selection Take?
These five activities don’t encompass the entire ERP selection process. ERP selection also requires you to conduct organizational readiness assessments, develop a data management strategy and attend ERP vendor demos, among other things.
All these activities can add up to a selection process that takes a minimum of fourteen weeks. Larger organizations with multiple locations typically need at least sixteen weeks to select the right system.
Now that you have realistic expectations, you can find the right expert to assist you. Look for an ERP consultant that focuses on all the necessary success factors of ERP selection.