Considerations for Your Business When Selecting a New ERP System
The average lifecycle of an Enterprise Resource Planning (ERP) system for a business can vary depending on several factors, including the size of the business, industry, technology advancements, and the specific ERP solution in use. However, on average, businesses tend to go through ERP system lifecycles every 7 to 10 years.
As businesses look to make this strategic investment, there are both big opportunities for improvements as well as significant risks in selecting an ERP system for your business. As a mission critical system, the right ERP solution can take your business to new heights by managing core processes and improving overall performance, but given the investment in your financial, workforce, and customer experience, it's wise for companies to do their due diligence. Below are some important factors you need to consider when deciding on an ERP system for your business.
Functionality that Meets Your Company's Requirements
It's critical to evaluate the unique business requirements of your company before starting the ERP implementation process. An ERP system's available modules are essential for meeting a variety of needs. For example, manufacturers need to consider the available modules, including those for Supply Chain Management, Project Management, and Warehouse Management. They may also want robust functionality for Reporting, Data Analysis, and CRM. Make sure the ERP system you select can support the features and workflows necessary for your particular business processes in addition to meeting industry-specific requirements.
Furthermore, a comprehensive ERP solution should offer more than just the bare minimum of features; advanced features like predictive modeling, AI-driven analytics, and automation capabilities should be evaluated, and determine if they could be valuable add-ons to your business model.
Scalability & Flexibility to Secure Your Investment for the Future
If a system is going to last, on average seven years, then you should consider if the ERP system can scale for your business needs today and as your organization grows. For example, accommodating a larger user base, processing more transactions, and integrating additional business functions or departments. Furthermore, carefully examine how well the system can be adjusted to changing business needs and industry standards.
Also, think about the scalability in terms of geographic expansion as well as data and user capacity. If your company wants to grow internationally, make sure the ERP system can work in unison with foreign taxation, currency, and regulation systems. This worldwide viewpoint guarantees that your ERP system can grow with your company without any limitations.
Configuration vs Customization
When selecting a new ERP system, the decision between configuration and customization is a critical aspect that organizations need to carefully consider. Both configuration and customization refer to the process of tailoring the ERP system to meet the specific needs and requirements of the organization, but they differ in their approaches and implications.
Configuration involves adapting the ERP system to the organization's needs using built-in tools and settings without altering the underlying code. It is generally considered a more straightforward and less complex approach. On the other hand, customization involves modifying the source code of the ERP system to tailor it to the organization's specific requirements. This could include adding new features, modifying existing ones, or integrating with other systems.
When considering ERP software, a thorough evaluation of the level of configuration versus customization, and how each model fits into your business long-term goals is important. Since no two businesses are the same, an ERP system that is designed for everyone may not work for everyone, so the level of a system’s adaptability is critical.
Consider these questions: How much can the system be configured to meet your business needs? Does the system have an open architecture to allow for customizations? If you go the customization route, how does that impact your ability to upgrade to new versions? Is system customization a model that your business wants to utilize?
Integration Capabilities for Best-of-Breed Solution
Integration capabilities are fundamental for an ERP solution to effectively serve its purpose as a comprehensive, unified system. For example, your organization may have other mission critical business systems that require real-time information from your ERP solution. Similarly, if you require add-on functionality outside of the ERP feature set (we’ll discuss this concept more in Understanding the ERP Ecosystem below), you’ll want to ensure seamless integration and efficient workflow so that you’re not doing manual or duplicate work.
Regardless the need, make sure the program of choice has robust integration features to achieving a unified view of your business activities, process automation, and data interchange. An ERP system that seamlessly interfaces with machines, other business apps, and new technologies promotes a connected and cooperative organizational environment.
On-premise, Cloud-based & Mobility
ERP systems are designed to provide a centralized platform for data and information, enabling better communication, collaboration, and decision-making within an organization. When you evaluate the environment on which these systems run, you have a few options to consider. On-premise ERP systems are installed and run on the organization's in-house servers and computing infrastructure. This is in contrast to cloud-based ERP systems, where the software and data are hosted on external servers and accessed over the internet.
Whereas mobile environments play a crucial role in extending the reach and accessibility of ERP functionalities. This is particularly beneficial for employees who are on the go, traveling, or working remotely.
The ERP landscape is continuously evolving, and some providers have shifted their focus more towards cloud-based offerings in recent years. The choice for these environments is often based on factors such as cost, user base, scalability, and IT infrastructure preferences.
Calculate the Total Cost of Ownership Beyond the Initial Investment
With regards to ERP, Total Cost of Ownership (TCO) speaks to aspects like custom deliverables, maintenance, and continuous support in addition to license or subscription fees. Evaluate the ERP software's potential Return on Investment (ROI) to make sure it fits your company's budget and offers the benefits you want.
A strategic and long-lasting ERP investment is ensured by a clear grasp of the financial ramifications. Take into account the long-term benefits when evaluating the TCO. Make sure your ERP investment is a strategic asset for your company in the long term.
Understanding the ERP Ecosystem
Large ERP ecosystems typically involve a complex network of software vendors, implementation partners, resellers, consultants, and service providers. These groups play crucial roles in the success, adoption, and ongoing support of ERP solutions. It’s helpful to understand their scope and how they each fit into larger makeup of your total ERP solution.
Key Aspects in the Larger ERP Ecosystem
Software Vendors (also known as ERP Providers): Major ERP vendors such as SAP, Oracle, Microsoft, and others develop and provide the core ERP software. They are responsible for continuous innovation, product development, and ensuring that their solutions meet the evolving needs of businesses.
Implementation Partners:
Consulting Firms: These firms specialize in implementing ERP solutions for clients. They help organizations customize, configure, and deploy ERP systems based on their specific requirements.
System Integrators (SIs): SIs focus on integrating ERP software with other systems and applications within an organization. They ensure seamless data flow and interoperability.
Resellers, Distributors and Channel Partners: Many ERP vendors operate through a network of channel partners and resellers. These partners may specialize in specific industries, regions, or functionalities, providing a more localized and customized approach to ERP implementation.
Value-Added Resellers (VARs): VARs add value by offering additional services, customizations, or complementary products to enhance the ERP solution. They may provide industry-specific modules, extensions, or integrations.
Technology Partners:
Integration Partners: These partners focus on creating connectors and integrations between ERP systems and other software applications, ensuring a seamless flow of data across the enterprise.
Platform Providers: Partners may develop applications or services that run on the ERP platform, enhancing its functionality and providing additional features.
Support and Maintenance Providers (also known as Managed Service Providers or MSPs): These providers offer ongoing support, maintenance, and monitoring services to ensure the stability and performance of ERP systems after implementation.
Training and Certification Providers: Some vendors and partners collaborate with educational institutions to provide training programs and certifications for ERP professionals. This helps build a skilled workforce capable of implementing and managing ERP solutions.
User Communities: Vendors often foster online communities where users, implementation partners, and developers can share knowledge, best practices, and solutions to common challenges.
Collaboration and Ecosystem Development: Vendors may actively collaborate with partners to develop joint solutions, industry-specific modules, or integrations that enhance the overall value of the ERP ecosystem.
The success of ERP ecosystems relies on the effective collaboration and synergy among these various stakeholders, ensuring that businesses can leverage ERP solutions to optimize their operations and achieve their strategic goals. While every ERP ecosystem won’t have all aspects of this complex network, some network groups are not mutually exclusive. However, a key benefit for organizations is the size of the Software Vendor’s network as it expands your options exponentially and can ensure long-term support.
Resources, Knowledge, and Experience
By now, you may be asking yourself if you have the expertise in-house to navigate the system selection process or where do you turn for help. Selecting the appropriate ERP system requires a careful assessment of both the current and future requirements. Contemporary business dynamics necessitate a comprehensive approach that not only tackles present obstacles but also adjusts to emerging opportunities.
If you’re looking to hire a system selection expert and ERP advocate for your business, please contact John Hannan LLC. If you are looking for more insights and tips on selecting ERP systems or ERP implementation advisory, follow us on LinkedIn.