ERP selection: the definitive guide

ERP selection: the definitive guide

February 8, 2024

Valery Panteleev
by Valery Panteleev, ERP Solutions Consultant

The ERP market has matured, with thousands of software options and vendors available. Since an ERP is not a system you can easily replace every five years, selecting the right one is an important decision. And even though experienced ERP consultancy can streamline ERP selection, it still requires a company’s active involvement.

ERP selection is a structured evaluation of multiple ERP platforms to decide on the best-fitting option for a company. A well-chosen ERP will bring the company multiple benefits, including integrated business processes, business workflow standardization, and enhanced productivity.

In this guide, we cover all aspects of ERP selection to help you make a sound choice and ensure successful ERP adoption.

A 7-step ERP selection guide

To help you choose an ERP solution that will bring maximum benefit to your organization, we’ve compiled this guide that walks you through every step of the selection process.

ERP selection is all about negotiations. If you want it to be successful, you should know what you need precisely, clearly understand the offered capabilities, and imagine what you can eventually get.

Konstantin Pilkevich

Konstantin Pilkevich

Solution Consultant, Head of Itransition's ERP Center of Excellence

Step 1. Build an ERP selection team

An ERP selection team is a group of employees (department managers, team leads, subject matter experts, shareholders, and partners) from different departments, business units, and locations. Their goal is to assist the ERP project team with software requirements and attend ERP software vendor demos. Experts should be selected based on their competence, not job title, and should not be afraid to speak up and voice unpopular opinions. The team should also include employees who are quite familiar with your current processes and will use the ERP daily.

If there is no relevant experience in your company, you can consider hiring a professional consultant to help with ERP selection.

Note: If time allows, your company can encourage a wider discussion among employees and stakeholders. Another option is to delegate this decision to a smaller group of stakeholders who can drive consensus within limited timeframes and champion change.

Step 2. Create a plan

ERP selection can take from several weeks to several months, and a plan can help ensure the process won’t be drawn out. During this step, a company has to make up its mind about:

  • Overall ERP solution scope, or what business function and workflows should ERP cover
  • Key integrations with existing systems
  • Major constraints (budget, timelines, IT expertise) to ERP selection and deployment
  • Decision-making criteria to assess the solution
  • Selection deadline

Step 3. Determine ERP requirements

This step focuses on getting to know end-users, their needs, objectives, expectations, common workarounds, and unique ways to handle their business processes. Based on these findings, companies can outline the overall vision and goals. During requirements gathering, focus on the ‘what’ and ‘why’, but not on the ‘how’. That way, you won’t let end-users’ established views on doing certain tasks dictate software requirements. You need to conduct interviews, workshops, Q&A sections, and existing policies and practices review to learn:

  • Business process inefficiencies
  • Workflow breakdowns and bottlenecks
  • Goals for ERP implementation
  • Minimal ERP requirements
  • The vision of ERP success
  • Fears and risks connected with the ERP implementation

Note: ERP is not a technology, but a business project. Without a clear understanding of end-users’ needs, you risk making decisions based on technical features solely, which would lead to failure.

Step 4. Document ERP requirements

Aggregate and formalize requirements into a software requirements document. All elicited requirements can be split into groups by priority, for example ‘must-have’, ‘not mandatory, but beneficial’, and ‘nice to have’. Afterward, all involved stakeholders have to discuss and approve the prioritized feature list.

Step 5. Shortlist ERP vendors

Move on to compile a vendor selection list with viable candidates. After assessing ERP vendors against the shortlisted criteria yourself or with the help of experts, you can issue requests for information (RFIs). RFIs should contain your organization’s most important ERP requirements, short- and long-term goals, and a request for high-level pricing information. After receiving vendor responses, you may end up with two or three you’d like to pursue further.

Note: Don’t necessarily aim for tier 1 ERP – not all organizations need such extensive systems. Besides, some advanced tier 2 and tier 3 applications have similarly rich feature sets.

Step 6. Schedule demos & Q&A sessions

Send the selected ERP vendors requests for proposals (RFPs) and personalized demo scripts. Such tailored demos will let your ERP selection team properly evaluate the software's ability to address your business requirements and make a difference for your company’s daily operations.

After the demos, the selection team should discuss them, give them scores, and decide on a second demo if necessary. It’s advisable to also hold Q&A sessions with the vendors - it builds trust and an open culture and helps avoid ambiguity. 

Note: Don’t settle for standard sales demos, ask for a personalized presentation.

Step 7. Seal the deal

Now it’s time to evaluate proposals, which cover implementation costs and recurring payments, timeframes and the scope of work, implementation approach and support level. Once the board has made a decision, you are ready to negotiate. Usually, vendor negotiations last several weeks or up to a month, during which you can get a discount depending on the number of licenses you’re purchasing and the agreement term.

The final stage of the ERP software selection process is signing a contract, which covers the provided software and services, costs, mutual obligations, timeline, roles, and responsibilities.

Need help with choosing the right ERP tech stack for your project?

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ERP software selection criteria

We shortlist the main criteria for choosing ERP software regardless of a company’s size, industry, geography, user count, or technology landscape.

Product capabilities

Recommendations

To find an enterprise resource planning platform with the most suitable feature set, you have to draw up a clear and comprehensive list of functional requirements defining the future solution’s modules, such as customer relationship management (CRM), project management, procurement, supply chain management, marketing and sales, ecommerce, inventory management, etc. You can gather them across the organization, narrow them down to the most crucial ones, and approve them with key stakeholders. This document can be further used as a checklist for ERP platforms evaluation.

Considerations
  • Why do you need an ERP solution?
  • What business workflows and time-consuming tasks should be/can be automated?
  • What is wrong with your current system, if anything?
  • What areas of the business or functional areas lack visibility/reliable reporting?

Flexibility & extensibility

Recommendations

Even if you find a perfectly fitting solution feature-wise, chances are you will still need to customize an ERP platform when your business grows more complex. Therefore, you need to ensure the ERP platform allows for extension and customization with no adverse effects on other ERP components.

Considerations
  • Can new software features/modules be added?
  • How well does an ERP platform support your business plans?
  • Does an ERP platform allow for extended customization?
  • What support for ERP customization is provided?
  • How much does ERP customization cost?

Performance & availability

Recommendations

For the effectiveness and usability of the solution, you have to ensure the platform's uptime and performance are well-aligned with your business specifics. For real-time business-critical workloads, some ERP vendors guarantee up to 99.9% uptime, which means a company faces up to no more than 8.76 hours of downtime a year.

Considerations
  • Can an ERP platform meet your technical needs?
  • How many users will use the ERP platform?
  • How many users will use the platform daily?
  • What are the most common ERP workloads?

Scalability

Recommendations

The ideas for future ERP enhancements usually come long after the initial ERP implementation. So when selecting an ERP platform, consider your future needs, the growing complexity of business workflows, and whether the solution can fully cater to them. Also, pay attention to ERP’s pricing model to understand the cost of adding new users or implementing it across multiple sites. For example, on-premises solutions may need additional servers to scale.

Considerations
  • Will we need to add users in the future?
  • Can an ERP platform accommodate more employees, departments, and types of users?
  • Does our organization have the potential to expand into new markets or go global?

Security

Recommendations

Make sure the ERP platform supports the required security level and satisfies all regulatory and compliance requirements. Factor in role-based data access, multi-factor authentication, consistent approach to patching and vulnerability management, data encryption, data masking, and more.

Considerations
  • Are security upgrades included in licensing?
  • What level of flexibility do you need for access control management?
  • Does the platform offer built-in functionality to support your industry-specific requirements?

Integration capabilities

Recommendations

Since an ERP system needs to access and use data from other corporate applications and systems as well as third-party tools you use, look for software with rich system integration capabilities, such as standard communication protocols, open and easy-to-use APIs, and pre-built connectors.

Considerations
  • How does an ERP system support integrations with our business applications, including legacy systems?
  • How will data migration be performed? Is real-time data synchronization enabled?
  • What out-of-the-box integration tools does the ERP platform have?
  • Does an ERP system support EDI?
  • How is data consistency enabled across systems?

Industry expertise

Recommendations

In-depth industry expertise defines how well the ERP platform caters to the business specifics of the company. It may not be necessarily an industry-specific ERP solution, but should still support manufacturing or distribution workflows, offer customized extensions, and ensure compliance with common industry regulations. 

It’s a good tactic to choose a platform that was successfully implemented by companies from your field, especially companies of comparable size and with similar requirements and corporate culture. 

Considerations
  • Does the nature of your business require a specialized industry platform?
  • How long has the vendor been working in your industry and have they been successful in it?
  • Does the ERP system cater to my business market segment?
  • Are there many successful implementation cases?
  • Can the vendor provide customer references?

Deployment model

Recommendations

When choosing an ERP vendor, you have to decide whether you deploy the solution in your own IT infrastructure or in the cloud, where the implementation and maintenance is performed by the provider.

When considering deployment options, factor in IT support and staff skill sets, your geolocation, and government regulations such as GDPR and CCPA.

Some ERP vendors offer both deployment options or a hybrid approach, while most offer only one model. In the case of the former, make sure the vendor doesn’t plan to abandon the version you choose in the foreseeable future.

Considerations
  • How much will an on-premises and a cloud-based ERP system cost?
  • Does a vendor offer cloud migration support?
  • What are the egress charges?

User experience

Recommendations

Ensure that the ERP platform caters to end-users’ needs, enables quality supplier-buyer interactions, and is easy to use. Therefore, factor in usability and ease of navigation, the learning curve, and a typical adoption rate. An additional advantage will be free access to training videos and product documentation, an online knowledgebase or user community, and a call center. 

Considerations
  • Have employees used an ERP system before?
  • Are your end-users tech-savvy?
  • What training will be most effective for end users?
  • Are ongoing support and training for end-users included in the licensing fees?
  • Is user experience consistent across departments/devices?
  • Are there an intuitive user interface and self-service capabilities for non-tech users?

Support & maintenance

Recommendations

ERP software requires solid tech support for ongoing daily operations and issue resolution. Thus, when choosing a new ERP system, determine the type of support and maintenance approach offered, SLA types, how version compatibility is maintained, and who the vendor’s implementation partners are.

Considerations
  • What minimal functional support is available? Is it included in the pricing?
  • Is infrastructure monitoring available? How often are reports on the system’s performance issued?
  • What support escalation options are available?
  • What is the guaranteed response time for each type of support?

Product roadmap & innovation

Recommendations

To make sure the ERP platform will be supported over the contract’s duration and the vendor will continue investing in it, weigh in how long the product has been on the market, its global presence, customer base, ongoing R&D investments, and so on. Prioritize ERP systems that have recently been updated, because it’s a sign that the vendor has future plans for it. And vice versa, if a product has not been recently updated, the vendor may be planning to discontinue it. Because advanced technologies can improve many ERP operations, look for systems that support the Internet of Things (IoT), mobile access, BI, workflow automation, ML and AI, and RPA.

Considerations
  • What is the vendor’s product roadmap? What new features/versions/updates are planned?
  • Does the vendor publish updates on a prescribed schedule?
  • How frequently are updates and patches planned?
  • Is there an additional charge for a new feature upgrade?
  • Does the ERP system support AI/machine learning, IoT, blockchain, and other advanced tech?

Total cost of ownership

Recommendations

There are a couple of cost factors to take into account, including initial purchase of software and hardware, license fees, implementation and setup costs, software support and maintenance costs, and end-user expenses.

Firstly, you have to decide on the deployment model. With on-premises ERP solutions, you take on the heavy lifting of all upfront hardware and software acquisition costs, implementation and customization, employee training, ongoing administration, upgrades, and security.

Cloud-based ERP solutions are provided as a service, thus you pay a subscription fee that is defined by the functional scope, number of users, infrastructure resources consumed, and support level. No doubt, the absence of heavy upfront investments makes SaaS ERPs appealing, however, in the long run, this model may prove more expensive.

Don’t eliminate ERP vendors too early on because of the price tag. TCO comes into the picture only after you know what system’s functionality, integrations, customization, and support level you need as well as your recurring software costs and costs for a three- and five-year period.

Considerations
  • Does the software licensing model align well with our business needs?
  • Does the pricing include security, maintenance, and updates?
  • How soon will we see return on investments (ROI)?
  • What is the cost of the transition from legacy platforms?

Vendor viability

Recommendations

To evaluate vendor credibility, trustworthiness, and risks related to the long-term partnership, consider company credibility (their age, financial health, development methodology), active customer base, case studies, and pricing policy transparency.

Considerations
  • How long has the ERP vendor been on the market?
  • Does the ERP vendor have a clear development approach?
  • Who are the vendor’s clientele?
  • Are the vendor’s pricing and development policies predictable?

ERP software selection challenges

Challenge

Solution

All platforms promise to satisfy your business needs. How to choose the right one?

A surefire way to choose the best ERP technology is resorting to a professional ERP consultancy. In case you want to make a choice on your own, focus only on your specific requirement, not a general set of capabilities for your industry, and do not contact vendors unless there’s an established list of key requirements. Additionally, don’t try to negotiate with too many vendors – instead, shortlist three to five vendors and request further information from them.

Some of your decision-makers have already worked with a particular ERP. Do you need to use the same?

A structured approach to the ERP selection process and well-defined criteria can greatly help keep bias at bay. However, remember that an ERP project is a business project, where the executives should agree with each other.

Not all employees are excited about ERP and may not want to use it after the implementation.

To mitigate resistance to change among future ERP users, companies should gauge employees' attitudes beforehand and make sure to dispel their worries, stressing the benefits of ERP implementation. Proper user training and a change management strategy can make ERP adoption less stressful for employees.

ERP selection checklist

We’ve created a checklist of smart ERP software solution capabilities.

ERP selection checklist
  • Out-of-the-box functionality covers 80% or more of the solution scope 
  • Industry-specific functionality out of the box or as an add-on extension 
  • Deployment flexibility
  • Transparent pricing
  • Rich customization and integration capabilities (open APIs and pre-built connectors)
  • Highly scalable
  • Easy to use and intuitive
  • Regular upgrades and updates
  • Provided support 
  • Self-service capabilities
  • Built-in business intelligence capabilities 
  • Mobile-ready
  • Сompatible with emerging trends and technology (AI, ML, RPA, IoT)

Make a sound ERP technology choice with Itransition

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ERP selection FAQs

Why is an ERP selection process so important?

Without a structured approach to ERP selection, a company can choose based on other companies' reviews or advertising. If their technology choice turns out wrong, they can end up overspending, in need of heavy customizations, or facing user resistance.

What are the most common mistakes during ERP selection?

Among the most common mistakes companies make are predetermined bias, not paying enough attention to user requirements, and preferring certain vendors or products because of the hype.

What to look for when choosing an ERP consultant?

Factor in the following aspects:

  • An ERP consultant has to be vendor-agnostic
  • They should have a structured and proven ERP selection process
  • They have to provide guidance throughout the entire ERP implementation process and know how to address typical ERP implementation challenges
  • An ERP consultant should see the big picture, have industry experience, understand your business and its strategy, and be able to tailor ERP to your business strategy
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