ERP Software Evaluation – Decision Support

If it’s time to replace your legacy system with Enterprise Resource Planning or Wholesale Distribution software, and the choices available seem overwhelming, an experienced ERP decision support consultant organizing and researching during hardware and software selection can lessen the frustration, and get the project moving.  An independent, technology-agnostic consultant that is not obligated to any software vendor or hardware manufacturer, is what the project requires to avoid the risk of taking the cheapest product, or the one with the best sales representatives.  The decision support consultant will bring proper methodology to the table and lead your team through a well-organized process to help you arrive at the best decision for you and your organization, including:

  • Guidance in creating a business case for use in evaluating the software, in order that the software you ultimately select supports your strategic business goals.
  • Guidance through the multifaceted process of creating and issuing an RFP
  • Help determining what ERP functionality is required for a successful go-live and what features can be added later as part of your wish list of enhancements.
  • Providing you with a vendor evaluation model that reflects your priorities, and supporting your team in making the final selection.

We’ll discuss six phases to the process below.  It’s not as simple as checking off a list of items which will insure success.  The approach will depend and vary based on the business, and the personal experience and observations of your staff, and the decision support consultant.

Project Kickoff

The project “Kickoff” will charter the project, gather basic company information, and introduce the client’s team to the selection process. Some of the project items to be reviewed should be:

  • Goals
  • Scope
  • Timeline
  • Roles and Responsibilities
  • Expectations
  • Communications
  • Questions

An internal “champion” should be selected for the project. This should occur at the beginning of the system selection project to ensure their commitment and agreement with the system selected.  In addition, functional leads and training “super users” should be assigned.

One of the most important questions to be answered is, “Are you organizationally prepared for the selection and implementation”?

Business Case

A business case should be created to develop a vision for the future system, along with anticipated costs, benefits, and ROI.  Infrastructure should be assessed and discussed, as should organizational readiness, including organization preparation, communication, and training.  Among the topics are:

  • What business challenges do you expect ERP to solve?
  • What necessary functionality do you think your current system is missing?
  • What are the key issues and concerns the current system?
  • Which modules and functionality are required?
  • How will we define success for the new ERP system?

Software Requirements Analysis

Based on interviews with key personnel, a more detailed Software Requirements Analysis, or Needs Analysis should be created to define a complete set of key functional requirements and operational constraints as criteria for selection.  Document and prioritize unique business requirements.

It’s very important to get employee involvement in the process.  A significant amount of knowledge exists, no doubt, only in the heads of the employees.  Their input will be crucial.  Not only are they the only ones with some of the information, but it’s essential to include them in the process to secure their buy-in for the endeavor.

We will also want to decide which modules and functions are part of the initial implementation, and which ones can and should be implemented after go-live, in a “phase 2”.

Software Vendor Research

Next, a “Long List” of software vendors will be created using internet searches, industry magazines, ERP contacts, and so forth.  Large general vendors as well as smaller vertical market specific vendors should be considered.  Do not underestimate the value of a vendor being local.

Lengthy RFPs are usually unnecessary, because ERP software in general is standardized, and most systems handle the basic functions well, but it is important to insist that the company’s unique set of business needs and requirements be documented.  It is then that a Request for Information should be sent to the “long list” of vendors.  Some of the questions to consider are:

  • What are the different levels of support plans offered by the vendor?
  • What is the availability of after-hours support?
  • What on-going services should you require from your ERP vendor?
  • What response times can the vendor promise?
  • Is the vendor experienced and comfortable with companies of similar size?
  • What deployment options are offered? (Software-as-a-service, or on site)
  • Is there a one-time license fee, or do they charge by monthly subscription?
  • Does the vendor have special expertise in your industry?

Short List Preparation

Based on a review of vendor responses a “short list” is prepared.  You will also engage with software vendors and resellers in an effort to gain insight into their value added, as well as their interest in the project.

Vendor Analysis

You and your consultant will meet with and screen the short list candidate vendors, and ask them to demonstrate how their software fits your business, using a customized demo script. Ask each vendor to show you, step-by-step, how its software can accomplish the most difficult and time-consuming processes.   This can help you assess the product’s look and feel, learn about the company, and verify the first impressions you may have formed during the research.  If software modifications are required to accomplish these processes, the vendor should indicate exactly how it can be done, and how expensive it is likely to be.

Keep in mind that vendors who can quickly understand what your business requires, and can determine a relatively easy-to-accomplish change on the spot, may well be the best, and least expensive, choice in the long run.  These situations will be encountered many times during implementation, and a group who can get past them easily is invaluable.  This skill is often particular to an individual rather than to the company.  Make sure you will be working with the right person.  Many businesses try to reach a purely quantitative conclusion, but ultimately it comes down to which vendor will be the best cultural fit.  You will need to decide which of the vendors you feel most comfortable moving forward with.

Financial Comparison Analysis

When calculating ERP deployment costs, they should always be calculated over a period of between five and ten years.  Ten years is recommended since companies generally rely on their ERP system for at least that long. The evaluation should be based on the Total Cost of Ownership (TCO) approach.

Now is the time to use the leverage you have.  Once the contracts are signed, future discounts are much more difficult to achieve.  As soon as you implement the ERP, you’re locked in. It’s usually prohibitively expensive to switch ERP systems, and the vendor knows it.  You’ll never have more negotiating power than you do before you sign the deal.

The long-term operating cost of the ERP software is of special interest in the selection process.  The software’s upgrade path is vital to the discussion.  You should insist that the vendor disclose the real cost of future upgrades.  The total cost of some ERP system upgrades can be extremely expensive.  Programming modifications should be undertaken with this topic in mind.

Of fundamental importance when selecting an ERP system is the economic stability of the ERP vendor, and its future strategy.  The support structure and ongoing software development have to be ensured over many years.

Final Recommendation

After the results are evaluated, references verified, prices and contracts negotiated, and budget finalized, the winning vendor is selected.  Keep in mind that if we have followed the plan, we’ll probably be selecting among two or three vendors who can all satisfy the requirements.   While it is very important to follow the right process and not to decide just on gut feel, this part of the process is often “splitting hairs”.  It may all come down to who is trusted more, or who is more local.

Conclusion

The guidance of a professional decision support consultant will maximize the likelihood that the new system will be selected and implemented with the least possible business interruption, at the least possible cost, and in the shortest timeframe.

Best wishes with what will be an exciting and worthwhile endeavor for your company.

Visit Enterprise Resource Consulting at http://www.EnterpriseResourceConsulting.com

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