The Path to ERP for Small Businesses - Part 1: The Research

When looking for business software, small companies might fall into the trap of being selected instead of selecting vendors. This usually happens because small companies do not allocate extensive time and resources to the process and do not have selection methodologies, which help decision makers select a product without further investigation.

Not every company takes advantage of a sound software selection methodology. The good news is that other companies have been through complex selection projects before, built sophisticated tools, and developed processes to make it solid, speedy, and successful. This article will broadly review the phases involved in a well-organized software selection methodology. Adhering to a sound methodology helps ensure that you select the right software rather than risk wasting money on all the problems that can arise down the road from a selection, which fails to meet the needs of your organization.

No matter which methodology you use, the process has three main phases: A) research, B) evaluation, and C) selection. We will describe the main activities for research in the following pages and two future articles will describe evaluation and selection.

Research: The First Essential Step in Finding the Right ERP Solution

The most important objective during this stage is to determine what the needs of your company are, which type of software will be best suited for it, and how to find it. It is also essential during this stage to have a better understanding of what’s going on in your company and why (besides helping you find the right ERP for your company, this will also make you (re)define business processes and workflows).

The initial research phase consists of preliminary study and defining your organizational strategy and tactics. Organizations at this stage should begin to understand what its overall strategy is regarding the software it’s looking to implement. In addition, an organization needs to know both its short- and long-term objectives and constraints with respect to its business processes. During this phase, it’s also important for you to review which systems are currently in place in order to gauge whether it’s worth upgrading the current software, as opposed to acquiring an entirely new system.

This phase includes actions related to defining your organization’s objectives, developing a business case, identifying and interviewing your employees, selecting your project team, achieving internal consensus and developing your list of requirements, and creating your long list of vendors.

What Does Your Company Do? (Main Activities)

To find the best compromise and to efficiently use internal resources, here’s what a small business can do when searching for an enterprise resource planning (ERP) system:

Establish who does what in your company. In order to do so, make a list of all your employees, write down their most important daily tasks, and make a note of how long each one takes. Here’s an example:

Figure 1: Matrix describing the main activities in a company.

Of course, there will be exceptions. There are things that people do just once a month or even less frequently, and it’s not always easy to approximate the exact time for each activity. Still, you and your employees should know what the main operations are and what the average time to accomplish them is. When you’re done with the list, summarize it, showing where you should have the most important activities, depending on duration, priority, and reoccurrence. You should decide what the priority is for each activity, based on its type, duration, and importance for the company. For instance, bank reconciliation can take an hour but might be more important than data entry, which may take a couple of hours each day.

What you have now is a high-level list of processes, which is the starting point for the selection process. Ideally, you should not base your decision on this list only. You should get into more detail, depending on the complexity of your business processes and the future growth of the company.

How Does your Company Function? (Business Processes)

You know what your main activities are; therefore you should have a pretty good idea which processes the best ERP system for your organization should support. But, since there are several ways to do the same thing (e.g., picking and shipping), do you know which way is easier and more efficient for your organization? Remember, just because a process or workflow works well, it does not mean it’s the best way to do it. You should always find ways to improve a process or workflow.

To make sure you find the best ERP system for you company, you must first understand what processes are the most appropriate for your organization. Appropriate, in this case, means suitable for your industry, but also efficient for your company (sometimes processes are defined along the way by people who try to make their life easier, not always including the others) Defining workflows for the major activities of your company will help you better define what you should expect an ERP solution to do for your organization. Here’s an example of a simple workflow for picking and shipping:

Figure 2: An example of workflow for sales, picking, and shipping.

The final step of the research process and the first one for the evaluation process is the search for business software vendors that might offer the right product that fits the needs of your company. The easiest way to do it is on the Internet, where you can find specialized Web sites describing the main vendors in specific industries or fields, and the products they’re offering.

Vendor directories contain lists of vendors that companies can use to compare different products on an apples-to-apples basis. With a little searching on your own, you'll also discover a variety of Web directories listing software vendors and products (for example, TEC's Vendor Showcase). Some will provide a high-level summary of the product’s functionality while others will allow you to drill down to the leaf level (very detailed functionality). Additionally, not all vendor directories have information on all the vendors that might be a good match for your needs. Therefore it is a good idea not to rely on only one source.

Analyst firms and consultants can offer precious advice that can help you select the software you need. Even though these companies charge for their services, most documents regarding software selection and evaluation can be downloaded free of charge here.

There are other online sources of information that can be used to give you an idea of what software can do (or not). You can also find a lot of useful information on user forums. You can also consult industry reports and white papers, which are sometimes offered free, but you’ll generally have to pay for them. Finally, blogs and personal Web sites of industry experts can provide valuable information that can be used in the software selection process.  

At the end of the research stage, you should have a pretty good idea of your company’s software requirements and also have a comprehensive list of sources of information where you can find what you need for the next stage—comparable vendors and products best suited for your organization. Part 2 of this article will describe what you should do in order to ensure a successful software evaluation.

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