In this multiple part series, we will discuss every step that you will have to take in order to succesfully implement an ERP system. In this second article, we will discuss how you should select the appropriate ERP system for your business.
The ERP Selection
In this step you need to identify which ERP system is right for you. This is not an easy process. There are many vendors that are interested in your business. To find vendors you can:
- Search the Internet
- Talk with your colleagues
- Speak with consultants or industry associations
- Read trade publications and journal.
Many people feel lost when they try to Google their way through this process. There are some excellent consultancy solution that help you in the right direction. I will make sure to post a couple of them later. The problem with trying to find a vendor on your own, is that:
1. It takes a lot of time
2. You cannot always trust the information of the suppliers themselves
It doens’t help that ERP systems are very complex and that the background of your company is important in selecting the approriate ERP. This means that an ERP system that is great for one company, can suck for another. There are some general rules however. If you’re a smaller company then you want other vendors because you need a smaller investment and less complexity. The tier one products (high-end solutions) have a lot of flexibility, but you need more training, setup, and knowledge of operation.
Finding a Good Reseller
A VAR or Value Added Reseller can make a big difference to you. Companies that are looking to new systems will spend a lot of time analysing products as well as the vendor, but not enough time analysing capabilities of the VAR. The vendor may have assigned the VAR and it might not be the right one. Vendors use a methodology to assign leads to partners or VARs and this isn’t well understood. You could be getting a VAR that is next on the list and once one is assigned the vendor is reluctant to introduce a new one as this can cause competition among the VARs for the prospect. You should get the VAR form someone you know or do some pre-screening first before picking the VAR.
You Need to Issue a RFP or Request for Proposal
To communicate your needs to vendors and to create a short list you can use RFP as this is a good tool. You want the vendors to answer questions that are related to technology, costs, developer, customer base, similar customers, and implementer qualifications. To get the vendors to respond to requirements, you can use a number like the following:
- 7 in release and estimate given
- 6 in release
- 5 available in 6 months’ time
- 4 workaround or adjustments needed
- 3 third party
- 2 ready in a year
- 1 need major workaround or modification
- 0 not available now
If you extend the priority of each requirement and times the vendor response, you can sum the results and this gives you a score that tells you how well the vendor will fit your needs.
Make sure you Attend Demonstrations
By now the vendors will understand your key requirements and Critical Success Factors. You should give them an agenda so the vendor can allocate time. You should attend demonstrations, but no more than 4 and limit this to about 2-3 hours. Ask the attendees to identify the weaknesses and strengths and to give this a score of (-10 to +10) to determine how well they did with each of the topics on the agenda and then indicate the importance (1 to 10).
Call the References
Call the reference to determine how well the vendors understand their customer base. Use a checklist to do this and ask make sure you tell the reference a little about yourself before you ask your questions so they feel comfortable talking to you.
Make Sure You Can Prove that the System will Work for You
Have a script with sample transactions to be processed through the system. The script contains the important business processes that you work with in a day. Make sure you include reports and documents as well. You can talk to 1-2 vendors to get them to provide a proof of the concept. This is time consuming for the vendors as well as you, but you’re focusing on the vendors that are most likely to get your business.
Negotiate the Contract and the Price
You should get about 10% off in the first quote as this is a buyer’s market. There’s a lot of competitive pricing with vendors so they will work to lower their price to get your business and provide you with a viable solution.
Understand the TCO or Total Cost of Ownership
You have to have a good understanding of all the costs such as implementation, license fees, hardware, support, communications, and networks before you make your decision.
The Boardroom Pilot
To understand the system you need to do a pilot. If you want to have customization for example, you need to know all the workarounds. The vendor may know the customizations, but might not have given you a quote of these yet. By using a boardroom pilot you can provide the vendor with your requirements and you’ll gain a better understanding of the system before you buy software or sign any contracts. You need to pay the vendor for time so get a fixed price during the boardroom pilot as one of your deliverables.