How to Evaluate ERP Software
The key to picking the right ERP software is identifying your business needs and finding the solution that best meets them. That's easier said than done, however. These tips will help.
Many ERP projects are deemed failures because of budget overruns and lengthy implementation delays. Panorama Consulting's 2013 ERP Report found that 53 percent of its survey respondents experienced cost overruns in their ERP implementations in 2012, while 61 exceeded their planned schedules.
Digging deeper, though, unrealistic expectations are often the real reason companies end up less than satisfied with their ERP projects, said Eric Kimberling, managing director of Panorama, an ERP consulting firm.
ERP vendors and the companies themselves share the blame for these overly optimistic expectations, he said during a recent webinar. While sales personnel likely do not mean to intentionally mislead prospective buyers, they are "not incentivized to point out the risks or challenges you may encounter." That said, he pointed out, "a lot of times, you hear what you want to hear" when buying ERP software.
The software evaluation process is key to ERP success, Kimberling said. "Any project can fail, even with the right software. But force fitting the wrong software never works." Selecting appropriate software is an "ante," he noted. "It helps keep you in the game and gives you a chance to succeed."
He also offered seven tips for ERP software evaluation:
Define Clear Goals for Your ERP Project
Many Panorama clients say they need a new ERP system because the old one is outdated and the vendor no longer offers support. While this is a valid reason, it shouldn't be the primary one, Kimberling said. "We encourage our clients to look beyond that to identify the business purpose or goal they are trying to accomplish." Examples he offered included reducing inventory levels or increasing customer satisfaction.
Define Business Requirements in Detail
Many companies opt to take this step after selecting a vendor. But Kimberling recommends doing so beforehand. "It help makes your evaluation more thorough and ensures you understand what you are buying," he said. In creating requirements companies should focus on defining their business processes – both the current state and how they want them to look. It's also a good idea to involve front-line employees, not just IT personnel and executives. These staffers are good at identifying potential ERP "blind spots" since they probably know processes better than anyone.
Choose the Right ERP Software
Companies should be careful not to select software based on what competitors are using or what is receiving lots of attention in the trade press, Kimberling cautioned. While the popularity of certain solutions in a given industry vertical is a valid data point, he said, "it should be one of many data points." When questioning vendors about their products, he added, don’t just ask "can your software do this?" and accept a simple "yes" or "no" answer. Ask for more detailed information.
Set Realistic ERP Implementation Expectations
Again, he emphasized, remember sales reps will try to sell you a solution, not set realistic expectations. They may not have much experience with actual ERP implementations, so it's important to talk to someone who does. Benchmark your project against projects of similar size and scope, he suggested. Don't forget to address non-technical needs such as change management, user training and process workflow definition. Such factors tend to get overlooked by technology-focused system integrators, VARs and vendors, he said, calling it a "critical blind spot."
Involve Front-line Employees and Key Users
Involve business people and not just technical types, Kimberling reiterated. Through its research studies, Panorama has found that the most effective ERP projects are ones in which users are involved throughout the project lifecycle, from evaluation all the way through to post-implementation training.
Develop Thorough Processes and Workflows
Again, many companies choose to do this after they purchase software. But Kimberling believes it helps speed ERP implementations if it is done during the evaluation stage. VARs, vendors and system integrators tend to focus on system-level transactions. It's important to also include business processes. "You want to understand how information and/or products flow through your organization," he said.
Position ERP for Benefits Realization
Kimberling referred to another key statistic from the 2013 ERP Report: 60 percent of respondents said they were receiving 50 percent or less of anticipated ERP benefits. Kimberling said this is often because those involved with ERP projects create a business case designed to get a green-light for the project rather than one that outlines actual business benefits. Identify where and how you will gain benefits by achieving business goals, he urged – and make the goals "actionable, realistic and measurable." If reducing inventory levels is a goal, for example, you want a good sense of how much they will decline and how that can save you money and/or help you improve service.
Ann All is the editor of Enterprise Apps Today and eSecurity Planet. She has covered business and technology for more than a decade, writing about everything from business intelligence to virtualization.