Organizations use enterprise resource planning (ERP) software to run their business operations. Specifically, they use an ERP system to facilitate the integration of corporate processes in finance, distribution, human resources, procurement, and other departments in one central database, thereby maximizing efficiency. This technology offers four main features and benefits: business-wide integration, a common database, real-time operations, and consistency. These benefits make ERP systems attractive to business leaders and drive the demand for this system.
As small businesses grow, they may find that they have outgrown manual processes and need an ERP system to help them more efficiently run their operations. But choosing an ERP system is no small task. There are many types ERP systems on the market, and many different options for each type.
Organizations interested in purchasing an ERP system must do their due diligence to ensure they carefully assess all the relevant ERP systems on the market and ultimately choose the ERP software solution that helps them best conduct their business operations.
But what is involved in this process? And how does a small business choose the right ERP system?
Table of Contents
Research Available Solutions
Once you deem that you need to buy a ERP software solution, you need to find out and research the software solutions available on the market. Software vendors may offer a lot of information about the features and functions of their solutions on their website. Vendors will paint their solutions in a positive light and boast about their capabilities, but you can still get an idea of the different offerings that are available.
You may also use directories that list different software solutions as a starting point to see various solutions available and their capabilities. It’s not feasible to directly compare products from different vendors in this way, but you can still get an idea of the products that are available.
Determine Your Business Requirements
You want to see not only the various capabilities that different software solutions offer but also how those capabilities fit with your business needs and help you better conduct your specific business processes. Therefore, you need to first define your list of business requirements and expectations, and then match those requirements against the list of capabilities that the different vendor solutions offer.
After researching what is available in this type of software, you need to identify areas where your business can benefit. A frank discussion with managers and department heads about where the problems are offers important insights that will help you pin down what you require of the software. You can use assessment tools to map out your business functions to help you make decisions about system requirements. You can also revisit your monthly, quarterly, and annual goals for insights about how well your company is performing and what capabilities you need from the software you are looking to purchase to enhance your company’s efficiency and overall performance.
Evaluate Candidate Solutions
You may still be missing important features that you may need to run your business. You can get a general and comprehensive list of features and functions that ERP systems offer. Some companies will supply RFP templates for customer use. Request-for-Proposal (RFP) templates will feature lists for the type of ERP system you are interested in purchasing. Having these templates will bring you one step closer to identifying all your business requirements of the ERP system you are looking to purchase.
RFP tools provide a great way to get specific information from a vendor about what they have to offer. Once you have an RFP template that lists all the possible features and functions of an ERP system, you can review and modify according to your business requirements. You can then invite software vendors that you are interested in purchasing an ERP solution from to complete the RFP and state the level of support they provide for the features that are listed in your RFP and that are important to running your business. So, vendors need to provide a response that is adapted to your company’s unique requirements. Once you have all the completed RFPs from the vendors, you need a way to settle on a shortlist of solutions (two or three) that can best fit your business.
Consider the Cost
Price ranges vary widely for ERP software systems. There are many different pricing models to consider. Small businesses typically don’t have much overhead for information technology (IT) departments and may want to consider choosing a cloud-based solution rather than one installed on premises. So choosing a cloud-based subscription instead of committing to the substantial expense associated with a standalone license may be a more suitable option for a small business.
These lighter models also tend to come with less training and documentation. That’s why it is critical to factor training into the cost and ensure that you will have what you need to move forward.
As is always true in business evaluations, you must consider the return on investment (ROI) of the candidate ERP software as you decide on which features will serve your business best. When calculating the true cost of a particular system, it is important to also include soft costs such as possible downtime related to training, which can take weeks or longer depending on the complexity of the system you purchase.
Other factors that contribute to the overall price of the software are configuration and customization costs to adapt the software to your specific business needs, the time and effort required for implementing the software, and the use of dedicated resources to ensure the new software is adopted readily by users.
Select Your ERP System
Once you have listed all your requirements and cost factors, you are ready to consider all your software options and reach a decision. You can then use a decision support system (DSS) to help you arrive at your final decision. This business tool assists you in prioritizing the individual criteria and requirements that are critical for your organization, evaluating viable solution options, and making a final decision. While a spreadsheet works for decisions where the criteria list totals less than 20 items, this decision is more likely to be based on hundreds of factors, which is what your RFP has. Using a DSS allows you to evaluate hundreds of criteria, according to the priorities you have set forth according to your business, and evaluate the vendors’ responses, so you can arrive at a decision on the best-fitting ERP system for your business needs.
Once you have your shortlist of acceptable ERP software solutions based on your industry requirements and affordable price ranges in front of you, it is time to make a decision. As with any technology, it never hurts to ask friendly peers what they are using and how they would rank their satisfaction level. Unfortunately, this option is not always feasible. Additional unbiased data is available at impartial industry and tech review sites.
Remember that unbiased information is key. Try not to get bogged down with anecdotal commentary that is based more on emotion and tends to omit critical information necessary for making an educated decision. While it is not always easy to compare apples with apples, you have to try—or you risk making a poor decision. Favor analysts’ reviews over the company’s paid public relations comments about the system. For example, some organizations have impartial and detailed software reviews written by expert analysts in the field.
To further narrow down your list of potential candidate solutions ask the shortlisted vendors for a detailed demonstration. Reviewing the system with your own eyes during a hands-on demonstration is one of the best ways to truly evaluate any system.
But make sure that you provide a demo script to the vendor, so they can demonstrate the capabilities that are important to your business processes—not just any capabilities, which you may not use at all. If you need help creating a demo script and distributing it to the vendors, companies such as TEC can help. Be sure to have users from the various departments using the software attend the demo sessions and ask questions, take notes, and finally rate the demo. After viewing demonstrations for the software on your shortlist, then it is time to start eliminating systems that don’t measure up.
You can also ask the shortlist of vendors to provide you with customer references, which you can contact and inquire about their software selection experience with the vendor.
Before you commit to your new ERP system, it is important to get all your questions answered satisfactorily. What are the advantages and disadvantages of cloud vs on-premise ERP solutions? Do the benefits justify the cost? You have to conduct your research and see a product demonstration to answer these types of questions. This important purchase has the capacity to significantly impact business profitability. The information above can help guide your purchase, ensuring that your business ROI soars as a result.