The Path to ERP for Small Businesses, Part 3: Selection of ERP Software

Parts 1 and 2 of this series described the processes of research and evaluation of enterprise resource planning (ERP) software. At the end of these two stages, you should have a pretty good idea which type of software might fit the needs of your organization and which vendors might provide this solution. Part 3 will describe the final stage—selecting the software that best fits your specific needs.

You started by defining the main activities and workflows in your company, then you created more detailed criteria lists, compared different products, and probably used a decision support system (DSS) to create a shortlist (list of vendors that are the best fit for your organization). Even when using the most complex DSS, some aspects of your business might still be overlooked; thus it's important to supplement your comparison by seeing the products demonstrated, performing reference checks, and reviewing other related information.

Major Steps in the ERP Selection Process
You benefit from enterprise software only when you make the right selection. By using accurate and relevant criteria on enterprise software functionality, you are better informed of your options. Using a suitable analysis process, your selection team can make accurate assessments about how well a vendor can meet your needs, which should ensure that you select the most appropriate enterprise software.

The most important steps in the selection phase are activities related to creating scripted scenarios based on your most important business requirements:
• issuing a request for proposal (RFP) (including costing information),
• inviting vendors for a site visit,
• conducting vendor demos and proof of concept,
• evaluating vendors’ implementation strategies,
• conducting a total cost of ownership (TCO) analysis,
• identifying the best-fit solution,
• developing an audit report of the selection process,
• obtaining executive approval,
• notifying winning and losing vendors,
• performing reference checks, and
• negotiating the contract.

1. Vendor Product Demos

The most important thing to do during the vendor product demonstration is to take control of the process. In order to do that, you should create a demo script for the vendor that allows them to show you how the system handles your main requirements, step-by-step. This will give you control over the demo and the vendor will have to demonstrate how it covers the functionality that is the most important for you. Depending on the complexity of your business, be ready to spend a significant amount of time viewing vendor demonstrations.

Of course, the demo script should cover the most important processes. You should only request details when the functionality demonstrated is essential for you and your company. The demonstration is also an opportunity to evaluate each product on its qualitative aspects, such as ease-of-use. Also, don’t forget to rate the product—ideally for each functionality demonstrated—so you can compare products afterwards. Here’s what a typical demonstration script might look like for order entry:

Please demonstrate the following:



1.1.1 Quickly create a sales order (SO) from scratch  
1.1.2 Quickly create a SO from a quote  
1.1.3 Quickly create a SO from an existing sales order (duplicate)  
1.2 Picking  
1.2.1 Check available-to-promise before picking  
1.2.2 Convert a SO to a picking list  
1.2.3 Convert a picking list to an invoice  
1.3 Invoicing  
1.3.1 Modify discount and prices on the invoice  
1.3.2 Warn users when there are credit issues  
1.3.3 Option to print packing list when the invoice is generated  
1.1.3 Quickly create a SO from an existing sales order (duplicate)  
4 Qualitative Assessment  
4.1 Ease-of-use  
4.2 Process fit  
4.3 Degree of process improvement  

Once this is done, remember that a demo can only cover functionality, therefore you should also consider technical factors for the solution, such as operating system, database support, delivery model (on premise, on demand, software as a service (SaaS), integration with other systems (e.g., accounting, customer relationship management [CRM], etc.), multisite management, security, device interface management, and application tools (programs which can be used to manage or develop the software).

2. The Shortlist
Before reviewing the product demonstration you probably had a list of ten or more vendors who claimed that they can do most of the things you need for your company. If conducted in a proper manner, the demo and the technical criteria mentioned above should bring the list down to no more than three or five vendors.

There are other factors that can make your list even shorter, and some of them are related to the vendor’s capability to deliver:
• Implementation: The product may be great, but if it can be implemented in a year and you need it up and running in six months, the vendor will be disqualified. Also, if you’re not happy with the implementation methodology your vendor has or if the references are really bad, you may want to think twice before working with them.
• Post-implementation training and support: If you’re in North America and your vendor only has offices in Europe and Asia, they will probably have a hard time responding to your requests and they may not deliver quality training and support.
• Competitive pricing: This can make a huge difference when selecting the vendors for your shortlist. The best solution in the world will not be enough to justify an exorbitant price, but you should also be careful when the price a vendor offers is extremely low and make sure you understand how much you’re going to pay after the promotional period is over.
• Consulting services: Change management, business processes development, post- implementation auditing, can be done by the vendor or third-party providers having partnerships with the vendor. Depending on how much you need consulting, this can be an important factor when selecting among several vendors offering similar functionality.

3. The Winner
After taking into account the different types of criteria (functional, technical, financial, etc.), you should find one vendor that can not only provide you with the best software for your needs, but will also implement it on time, will be able to fix bugs, answer questions promptly, and can also help you redefine your business processes.

If at the end of the process you are still hesitating between several vendors, you should review some of the steps or go into more detail on what’s really important for you and hasn’t been covered thoroughly (e.g., you need to import data from another system every week, you do backups every 12 hours, your partners need access to a portal to exchange information with you, etc.).
But even when you think you found the best solution, there are a few things you should do to make sure:
• Install a demo version of the product that people can use before going live and avoid going live with the new system while still using the old one.
• Get feedback from users on what’s missing and what could be improved in the new system and communicate it to the vendor.
• Keep track of the steps required during the implementation and take corrective actions when important actions are not done on time.
• Make sure the entire data you need to function properly gets imported before even considering going live—sometimes, it is better to delay the live date than to fix problems later.

There are no good or bad ERP solutions, but only very few of them will work for you. This is why all three stages described in this series of articles are extremely important for you to research, evaluate, and select the best product for your company’s needs.

Often times, selecting an ERP solution is a compromise, but you should make sure that you do not compromise on functionality or characteristics of the solution that can have a great impact on your company in the future and make you lose money if the investment in the software does not bring the expected result.

And finally, remember that these three stages of a software selection and evaluation process can only give very good results when used together. If you treat any of them lightly, it may affect the entire process and the end result (e.g., the software you selected) may not be what you were looking for.



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