ERP Vendor Selection: A 3-Stage Roadmap for Strategic Decisions
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Marcie Nguyen
Marcie is a skilled writer at Havi Technology focusing on creating content for marketing, eCommerce, point of sales, and ERP solutions. With over 8 years of experience in the retail, eCommerce and ERP technology sectors, Marcie is dedicated to providing insightful answers to business owners of all scales.
Although you can quickly find a list of top ERP vendors anywhere, making the final decision is very difficult. Your selection journey is full of uncertain pitfalls and outcomes.
Therefore, our recommendations provide you with an easy-to-follow path to help you take control of this significant decision. We'll break the selection journey into attainable steps that, in short, help you:
Let’s dive in.
The 3-Stage Roadmap for Strategic Decisions
Selecting an ERP vendor is more of a strategic decision because the investment can transform your entire business operations. In a 2024 study by Panorama Consulting Group, after ERP implementation, around 65% of respondents realised the reduced operating costs. Moreover, 90% of them saw an improvement in productivity and overall efficiency.
However, with so many vendors and features to choose from, finding the best fit is stressful. Our 3-stage roadmap allows you to make well-prepared decisions for your ERP vendor selection journey. It guarantees that you select an option that meets your requirements and encourages long-term success.
Stage 1: Understand Your ERP Needs
Before getting into ERP vendor assessments, it's critical that you first know your current business context and future objectives.
Why Invest in an ERP System?
One of the top reasons for investing in an ERP system is moving from an outdated system. Moreover, a clear trend reported that businesses investing in ERP systems gain higher operational efficiency, approved by 90% of Panorama report’s respondents.
ERP system as a single source of truth
Here's a better look at the two major advantages:
Know the Challenges & Risks
Besides the robust advantages of implementing an ERP, you need to acknowledge these 3 common challenges:
Conduct a Business Process Analysis
Consider your current business scenario carefully before choosing a vendor. This stage involves 3 main goals as below:
Here we recommend scheduling a business process consultation with certified ERP experts. They will be your long-term partner in the ERP implementation process.
Stage 2: Find Your Ideal ERP Vendor Profile
Knowing your requirements, the next step is to determine the right ERP vendor profile.
Determine Industry Experience and Needs Alignment
Selecting a vendor with prior experience in your particular sector indicates that they are aware of the particular challenges you face. ERP solutions designed specifically for your industry come with pre-configured features that are industry-based. This simplifies your implementation process and minimises the requirement for customising.
Here are 2 suggestions that could serve you in finding vendors who have a track record of success in your industry:
Invest in the Future and Scalability
Select a solution that will expand your company by thinking long-term. Make sure the vendor's solution can take into account your expected future expansion and growing data volumes or user demands.
Secure your ERP investment by considering these 2 recommendations:
Know Total Cost of Ownership (TCO): A Holistic View
When evaluating ERP systems, a lot of businesses incur the error of relying just on the upfront licensing costs. Nonetheless, it is crucial to approach the Total Cost of Ownership (TCO) thoroughly.
Assess the Total Cost of Ownership (TCO) of an ERP system
Upon the first licence fees, there will be three main types of additional fees:
Stage 3: Shortlisting & Evaluating ERP Vendors
If you have a firm grasp of your requirements and your preferred vendor profile, you are ready to move on to the evaluation phase.
Create a Customised Request for Proposal (RFP)
Provide a concise and accurate RFP that details your needs and standards for review. This work acts as a guide for ERP vendors and partners to learn about your requirements and present their offers.
Perform an ERP Gap Analysis
You must conduct an ERP Gap Analysis before demos and reference checks. This important stage assists you in determining the difference between the functionalities provided and what your company needs. 3 ways how an ERP gap analysis benefits you are as follows:
Conduct Proof-of-Concept (POC) Projects & Vendor Demos
Witness it in action. You can test the ERP system's capabilities and get a firsthand look at it with demos and proof of concept (POC). Specifically, 2 aspects you can have a look at are:
Verify Reference & Customer Testimonials
Get in contact with the ERP vendors that are on your shortlist and ask for references. It's valuable to gain useful information from firsthand descriptions of implementation scenarios, overcoming problems, and general user satisfaction.
5 Common Pitfalls When Selecting an ERP Vendor
Selecting the right ERP vendor is an important decision that has a long-term impact on your operations. Even if there are a lot of possible benefits, choosing wisely is difficult at times. Here, we look at 5 of the most typical mistakes to avoid:
ERP selection: 5 of the most typical mistakes to avoid
No.1 Focus only on price and neglect functionalities
Price is certainly a major factor, but putting it first can result in a costly mistake later on. If you select a system based on its pricing, this leads you to settle for a solution that isn't equipped with the features required. This ends up in resource waste, inefficiencies, and eventually system replacements or customisations.
The solution: Before searching for an ERP vendor, get a thorough grasp of your unique requirements. You must give top priority to features that solve your problems and promote your strategic objectives. This priority list is then used to assess potential vendors and make sure the system you select has the features required to succeed.
No. 2 Undervalue the significance of industry expertise
When it comes to ERP systems, a one-size-fits-all strategy isn't that effective. In many cases, industry-specific solutions are pre-configured with features that are catered to the specific requirements of your industry. Also, a key factor in long-term success is the cultural fit between your business and the vendor.
The solution: Look for ERP suppliers who have a track record of success in your industry. Assess their background and cases of businesses that are relevant to yours. Consider the vendor's responsiveness and communication approach during the selection process. Make sure that their principles align with the culture of your business so that the teamwork is at its best.
We believe you’ll be interested in our previous articles on industry-specific solutions:
No.3 Fail to include key stakeholders in the selection process
The implementation certainly has a huge impact on several departments in your company. User adoption is challenging and disagreement may arise if important stakeholders (i.e. department heads and end users) are not involved in the selection process. As a result, when launching an ERP, just about 26% of employees reported that they use their company's ERP, and 51% of businesses suffer operational delays (Software Path).
The solution: Include important parties from the departments of finance, sales, operations, or IT at every stage of the selection procedure. Motivate them to offer feedback, take part in requirements analyses, and attend vendor demos. This cooperative strategy guarantees that the selected system satisfies everyone's needs and encourages important users to have a better sense of ownership.
No.4 Rush the decision & skip the research
Selecting an ERP is a huge financial commitment, and making rushed decisions results in million-dollar mistakes. It takes a lot of investigation to make a good choice. In particular, rushing the selection causes you to miss critical details about ERP vendors. It's easy to overlook important details such as their creditworthiness, record of excellent customer service, or hidden expenses.
The solution: Set aside enough time for reference checks, vendor research, and demos. Do not hesitate to ask specific enquiries and get proposals from the vendors you've narrowed down. This approach makes sure their solutions fit your long-term goals and budget.
No. 5 Overlook the value of ongoing support & system scalability
ERP selection is a part of your long-term investment. Pay attention to the vendor's system scalability and ongoing support upon the initial purchase. It will be problematic if you underestimate the need for maintenance or implementation support. Selecting a system that cannot accommodate further expansion always comes with an expensive update later on.
The solution: Assess the vendor's support services: technical support availability, response times, or training courses. Make sure they have a well-defined plan in place to deliver regular updates and maintenance. Additionally, pick a system that is scalable to meet the increases in the number of users, data volume, and business complexity.
Wrap-up: A Strategic Decision Instead of a Software Purchase
In a nutshell, finding the ideal vendor is about more than simply features. It's also finding a long-term partner who shares your vision and supports your company's objectives. Do not hesitate to ask questions, do your research, and follow your instincts. Upon following the above steps, you can seek certified experts or implementation partners to detail an ERP transformation process from A to Z. They will be your closest companions throughout the entire journey.
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