ERP Selection: 5 Criteria to Consider

Implementing a new ERP system isn’t easy. Many ERP implementation projects take much longer and cost much more than anticipated, and some implementations fail altogether. 

Even among companies with “successful” ERP implementations, many take much longer than expected to realize a return on their investment.

Still, if you’ve outgrown your existing systems, you know it’s time to make the jump to an ERP software. Doing so can bring plenty of benefits to your company:

  • Integration of different business processes into one system
  • Elimination of data silos
  • Gaining a single source of truth for all business data

There are many factors that determine whether an ERP implementation project succeeds. One of the most important is also one of the first steps in your ERP journey: selecting an ERP system

Not all ERP systems are alike, and choosing the wrong one can undermine the project before it even starts. Thus, the ERP selection process should be undertaken carefully and thoroughly.

In this article, we will review some of the most important ERP selection criteria. For full details, please download our eBook on ERP selection, The Complete Guide to Choosing an ERP System.

ERP Selection: 5 Criteria to Consider

1. Business Process Fit

Some ERP systems have features that make them better suited for some types of businesses than for others. A services business, for example, doesn’t need an ERP system that is optimized for manufacturing. 

Even if your business involves manufacturing, some ERP systems are designed for specific types of manufacturing industries, such as energy, consumer products, or pharmaceuticals. 

Thus, one of the first questions to ask a potential ERP software vendor is what industries their systems are best suited for. Ask for a demonstration that highlights business processes similar to yours.

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2. Scalability

In the process of ERP software selection, it’s tempting to simply choose one that works with your current business environment. Most companies use the following criteria as basic benchmarks:

  • Required number users
  • Size of your existing customer base
  • Vendors in your supply chain
  • Number of integration items
  • Locations for implementation 

But all businesses must grow in order to remain successful, so in the ERP software selection process, you need to think about what your business will look like in the long term — five or ten years. 

From an ERP system perspective, this means asking the ERP vendors about the scalability of their offerings. Can it accommodate the expected rate of growth? Is there a maximum number of users it can support before performance degrades?

You might think that these limitations are a function of the hardware, but that’s only part of the story. The software itself must also be designed for scalability. 

3. Technology

A discussion of scalability naturally leads to a discussion of the system’s technology options. One of the fundamental choices is cloud vs. on-premise, and each has its advantages and disadvantages. 

If you don’t have an on-premise data center to house the server hardware, cloud might be your only option, and some cloud-based ERP systems work better than others.

4. Integration with Existing Systems

Most ERP systems are modularized, which means that they have separate components for different business areas, such as accounting, supply chain management, logistics, manufacturing, and warehouse management. You can select which modules you want to implement.

One of the primary benefits of an ERP is that it is a single, integrated system. However, many businesses have made significant investments in their existing systems, some of which already meet the criteria mentioned above. 

In these cases, it is often more cost effective to integrate these systems with the ERP, rather than replacing them with ERP components. 

Some ERP solutions are more easily integrated with legacy systems than others. Ask your prospective ERP vendors to show you examples of integrations with common third-party systems as well as systems developed by their customers in-house.

5. Flexibility

It’s possible that all of your business processes follow industry standards with no quirks or peculiarities specific to your business. If this is the case, the right ERP system will work for you “out of the box” with no custom code.

This scenario, however, is unlikely. Almost all businesses have one or more processes that depart from so-called “best practices,” whether by design or by accident. 

In your implementation, we recommend reviewing your business processes to determine whether they can be modified to follow industry standards. This is not always possible, but it’s an important factor to consider going in.

To accommodate these quirks, the ERP implementation vendor may have to write and test some custom code for you as part of the implementation project. The trick is to write code that will still work after a system update or upgrade. 

Some ERP systems do this better than others, so it’s worthwhile to ask how easily customizations can be implemented and how robust they are against system changes.

Download Our eBook to Learn More

These are just a few of the many ERP selection criteria to keep in mind when evaluating ERP systems. For more information, download our eBook on how to choose an ERP system

In this guide, we take a deeper dive into ERP selection and the choices that will have the biggest impact on your project. You will gain valuable insight about

  • How to analyze the total cost of ownership
  • How to complete an ERP requirements template
  • How to evaluate possible implementation partners 

Download it today and learn how to choose an ERP system that’s right for your business.

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