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Five Steps to Selecting the Right ERP Software

Enterprise resource planning (ERP) systems can produce powerful benefits, but some organizations end up with costly, prolonged implementation and disappointing results. Selecting the right software solution--from a virtual plethora of options--is paramount. These five steps can guide you in the right direction.

Enterprise resource planning (ERP) systems are designed to deliver powerful operational benefits. Efficient, streamlined business processes. Data shared more effectively across the organization. Lower costs. Better customer relationships and satisfaction.

But mere thought of implementing an ERP system sends chills through many executives. That is not surprising. There are plenty of horror stories to go around--organizations that have spent millions of dollars and many months, if not years, tackling implementation, only to realize little gain.

When it comes to ERP systems, there is no such thing as a "vanilla" solution. To maximize the benefits, you will need to modify the system's parameters to your organization's unique requirements. This takes time, and it is where many implementation projects get bogged down.

Selecting the right ERP package in the first place makes a big difference. But with the array of products available, how can you be sure you're making the right choice?

Avoid the typical ERP pitfalls.

Taking five critical steps in the software selection process can have a significant impact on the implementation process--and on the potential for realizing benefits from the system in the future.

  1. Identify the processes that are most critical to your company. Finance, sales, marketing, human resources, production, warehousing, transportation, customer service--these are all important functions in many organizations. But, in any given environment, some will be more critical to operations than others. In order to select the right ERP package, identifying those functions that play the key roles in running the business is imperative. For a manufacturing company, those might be production, warehousing, and sales--and the company should give greatest weight to those areas when evaluating particular software solutions. It would be a mistake for that company to choose an ERP package primarily for its financial reporting capabilities. As an early step in the process, spend time reviewing corporate strategy--including mission, vision, values, market differentiators, and strategic objectives--with an eye toward singling out your most critical business processes.

  2. Think ahead when defining your needs. Corporate ERP implementations typically take at least a year, sometimes longer. Consequently, it is important to consider your needs and operations in the future -- otherwise, you are likely to gain little from a system designed around the way you work today. Look ahead three to five years. What are your organization's five-year goals? How will strategies shift? What impact will that have on processes? How will your customer base evolve--both in nature and in size? What will your product mix look like? Then, use these projections--not your current state--to define system requirements. For example, if your future strategy is to outsource distribution, then it will be important to select a system that focuses more on manufacturing and sales and marketing processes, and less on warehousing and transportation.

  3. Involve the right people in the process. Many times, purchase decisions are made by senior executives, who are most concerned with a system's top-level reporting capabilities. But, typically, senior executives will use the system far less than other employees. A better approach is a bottom-up approach, gathering input from those who know the company's day-to-day operations the best. One best practice involves forming functional teams that represent key user groups. Identify four to five employees from each function to participate on these teams and provide input into the selection process. Participants should represent different layers of the organization--from management to end users. In addition to incorporating input from end users, this approach also builds vital user support for what will be a significant internal change.

  4. Re-design critical processes for the future. Technology enables business processes, but it usually doesn't drive them. Before beginning the software selection process, take time to evaluate key business processes and make sure they are aligned with future goals and strategies. Engage your functional teams (described above) to assess your current state, map current processes, consider change readiness, identify key performance metrics, and design the future state and process improvement strategies.

  5. Use future-state processes to guide software selection. Have your functional process teams prepare the product demonstration scripts for vendors to follow. This way, you make sure that vendors show you exactly what you want and not what they decide is important. It's also a good idea to provide software vendors with company data to use in their demonstrations, so that potential users can evaluate products in a way that is directly relevant to their work. All functional team members, regardless of level, should attend all software demonstrations, and each team member should use a detailed scorecard to rate the vendors. For each ERP module, separating the scores of core team members from other evaluators will provide the best view of how potential users view a particular solution.

You may notice that, up to this point, we haven't mentioned price. Until you've identified which package best fits your needs and understand the level of customization required, price should not be a primary evaluation criterion. Often times, a less expensive package may require more customization and can end up costing more than an expensive package that is better fit for your needs.

Following these five steps can help you create a focused ERP strategy that guides your technology investment and the selection of a system best suited to your needs. Moreover, it can help you avoid a costly, prolonged implementation project and achieve faster, more substantial returns on your investment.

West Monroe Partners helps clients evaluate and implement ERP solutions, including optimizing the vital business processes they support. For more information, please contact Jeff Primeau at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

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