How to select ERP software: tips and common challenges

By 2030, the global enterprise resource planning (ERP) software market is estimated to grow almost three times and reach $117.09 billion compared to $43.72 billion in 2020. Such growth means that more and more companies will be adopting ERP software to optimize and digitalize their business processes. 

The success of such initiatives lies in selecting an ERP system aligned with the company’s specifics, size, and business objectives. For example, discrete manufacturing software will differ substantially when compared to systems for healthcare etc. Poorly selected ERP software can result in unfavorable outcomes from minor time and budget overruns to considerable loss of revenue.

Selecting ERP software is a rigorous step-by-step process, so we offer several selection guidelines as well as tips to avoid common obstacles and benefit from the implementation of suitable ERP software.

6 actionable guidelines for selecting ERP software

1. Audit current business processes. Notably, shortlisting potential ERP vendors isn’t the first step when selecting an ERP system. Instead, companies should begin by looking at their current state of affairs. Audit your current workflows, applications and IT infrastructure to get a clear picture of your business state and detect possible tech silos or security issues. Being aware of your company’s technological readiness and understanding how processes should evolve will help to clearly define your ERP system needs and outline specific requirements to the ERP vendor.
2. Gather an ERP selection team. Form an ERP selection team, consisting of your most experienced and knowledgeable employees like department managers, team leads, stakeholders, etc., to do research and look for the best ERP software. Attracting representatives of multiple company departments can positively affect the ERP selection process, as they know better the applications they use and their department’s current processes and specific needs. Relying on their practical experience, they will share what kind of ERP system they want to have, list the desired features, and define potential and real problems an ERP system should solve. 

Among other things, an ERP selection team will help you not overlook such important considerations as time and budget, optimal deployment option (on-premises, cloud, or hybrid), industry regulations, tech trends, and more.  

3. Define ERP selection criteria. Based on your company’s needs and growth plans, use key criteria to select the ERP software that’s right for you:
   • System capabilities. An ERP software should cover most needs of the company’s departments. Let the selection team draw up a list of their main functional requirements to the ERP system to then use as a checklist when evaluating various platforms.
   • Scalability. ERP software should be able to not only support your current business operations but also scale up along with your business plans, whether it is company growth, entering new markets, merging with another entity, etc.
   • Flexibility and customizability. Even if you opt for a fully custom ERP solution, make sure it still allows for at least basic customization and functionality extension, as you may need new functionality along your business development. 
   • Security. An ERP system should provide a high level of security to protect your company’s sensitive information and employees’ personal data. Most common security mechanisms involve role-based access control, multi-factor authentication, data encryption, regular patch update, vulnerability assessments, and more. 
   • Performance. Your future ERP system will be the backbone of almost all critical business processes and therefore should be high-performing. Still, you need to be careful with what ERP vendors offer, because the difference between 99% or 99.99% uptime doesn’t seem so great until you calculate it. If 99.99% uptime results in only about 52 mins of downtime per year, then 99% uptime implies about 3 days and 15 hours of downtime per the same period. 
   • Usability. Make sure the ERP system you want to adopt is easy to use and navigate. To speed up user onboarding, an ERP vendor should provide access to the training materials, knowledge base, and software documentation.  
4. Check ERP vendor credibility. Do some research on how long the company is on the market, how they ensure the security and quality of their product and services, and whether or not they have experience in your industry. Reliable vendors can support their words with certifications, use cases, clients’ references, or awards. 
5. Request customized ERP demos. A standard ERP demo is a good opportunity to review the general ERP functionality. But a customized demo allows you to observe the ERP solution up and running when tailored to your specific requirements. To help shortlisted vendors prepare a customized demo, send RFPs with a detailed description of your needs, ERP functional requirements, and your business specifics.
6. Map out ERP implementation beforehand. According to a 2023 Panorama Consulting report, 40% of ERP software implementation projects end up having budget and time overruns due to project scope changes. So, when making your decision about a particular ERP platform, outline a detailed implementation plan that includes everything from process design and data migration to organizational change management activities. 

Challenges when selecting and implementing ERP

1. Accurately calculating ERP software costs. Companies tend to concentrate on upfront ERP software costs during the purchasing stage and overlook the total cost of ownership in the long term perspective. While the cost of ERP platform purchase lies on the surface, there are also hidden costs that include implementation expenses, licenses, hardware, cloud hosting, software support and maintenance, and more.
2. Lack of change management. Introducing a new ERP system significantly alters employees’ everyday work operations. Employees usually have established ways of doing different tasks, so it is natural for them to resist changes. To mitigate employee resistance, C-suite should outline a change management strategy and make sure it’s followed from the very project start. If you make the process more interactive, involve people from across the organization, demonstrate the solution’s value, let employees test it, and ask for their feedback, you can expect high adoption rates. 
3. Insufficient resources. You may find yourself in a situation where your in-house IT team lacks the particular skills required for ERP selection and implementation. Don’t be afraid to go for a third-party ERP consultancy and implementation assistance. With external professional help, you’ll gain the missing resources and save money in the long run, as underestimated project staffing is the number one reason for cost overruns.

Wrapping it up

Not every company manages to fully reap the benefits of such a powerful tool as ERP. Deciding to implement an ERP system is one of the most complex initiatives for a business to undertake, but with diligent planning, third-party consultancy, and careful attention at each stage of the selection and implementation processes, you are sure to overcome all hurdles.

Share Article

Follow Us

Return to Previous Page