Whether it is a Fortune 500 company or a SMB/SME, replacing an existing ERP or selecting a new ERP is one of the most crucial and difficult decision any organization has to take. By selecting the right  software and the right vendor which will result into successful implementation, will be very beneficial to the organization on a long run. This may lead to higher revenue, better performance and lower costs, in turn higher profitability. Where as a wrong selection of the software/vendor can be very detrimental to the organization may include loss of time, money, productivity and which may lead to lower revenues & profitability for several years.

This article is an attempt to help organization (especially SMEs) in their ERP selection process.  

Before we look at how to select the right ERP for your organization, it is very important to understand why it is important to select the right ERP. There are various research and statistics on this topic & they vary a great deal. The variation is due to the different  sample size & data quality & interpretation.  In general the failure rate is higher for SME/SMB compared to large organization/MNCs. The reason behind this is very simple, large organization has lot of time (people) & money and can afford to spend lot of time & money in the selection process. Unfortunately small organization does not have the luxury of either one of these.  Hence they rely on their own knowledge,  the information provided by the vendors & select the lowest cost solution. Penny wise Pound foolish approach, the reason for more than 60% of the ERP implementation failure; see the pie chart below:

As you can see, the statistics of ERP failure or unsuccessful/unhappy implementations are mind boggling.  Before we get into the selection process there are two more things I think one should know to avoid the common pitfalls many SMEs fall into, knowing them & avoiding them will save you lot of time & money (& the headache of dealing with the unsuccessful EPR implementation). 

 Let us look at some of the reasons why many of the ERP implementation fails:

·         Wrong ERP Software
·         Wrong Implementation vendor
·         Improper planning/change management/Project Management
·         Circumventing  BPR/SOP before ERP implementations
·         Lack of commitment from certain group/team/division/top management
·         Inadequate training
·         Implementing limited modules  ( mostly because of lack of funds)
·         Biased Decision 
·         Selection based on lower price
·         Inexperience in selection

Here are some of the steps (partial list) that should be taken to avoid the ERP implementation failures:

  •  Do the due diligence on an ERP or the vendor before finalizing one. This can includes research available solutions (local & international), seeing the detailed demo, mapping it to your organization, talking to the references etc.
  •  Make sure that you go through complete proposal carefully, including the fine line. Avoid all the hidden cost mostly craftily concealed in the assumptions.  Also go through the entire Terms & Conditions & avoid the possible pitfalls.
  • Make sure that NDA, SLA, rewards & penalties are in place in the contract.
  • Look into ROI & TCO.
  • DEVIL IS IN THE DETAILS.  Make sure that you go through the entire implementation process in minutest detail & clarify roles & responsibility of your organization and the vendor/s.
  •  Follow the structured ERP selection process ( see the steps below)
  •  If you are inexperienced in ERP selection (first time ERP implementation) or had a bad experience with your last ERP implementation then I would highly recommend that you take some ERP consultant’s help in the selection as well as for implementation. 

Structured vs. Unstructured ERP select process:

Now that we have seen the reasons why ERP implementations fail & how to avoid such failures,   I am sure now you would appreciate the need to know “How to select the right ERP”.  Every organization does go through some or the other selection process. In spite of that why do most of the organizations select the wrong ERP? 

Answer is quite simple. The selection process what most of the organization adhere to is ad-hoc or unstructured. This is why most of the time they fail. In fact, one of the important criteria of selection for an SME is low price. In the unstructured selection process the price seems to be low at first, however it increases gradually & TCO for say 5 years is higher compared to structured process, where sometimes the initial cost may be higher but the TCO for 5 years will be lower than that of unstructured.  The following diagram depicts the graphical representation: 

Here is the Structured ERP selection process:

  1. Select an internal ERP Selection Committee consisting of at least 1 person from management team and 1 person from each department; optional - include the external ERP consultant in this steering committee.
  2. Define the requirement/scope/budget/ RFP
  3.  Define the selection process
  4. Do the due diligence
  5. Select 5-10 software/venders which initially meet your criteria
  6. Go through the short listing process ( high level  demos)
  7.  Short list the final 2 vendors
  8. Go through detailed demos, T&C, Project management, R&R, SLA, NDA,….
  9. Price negotiations. 
  10. Select the vendor – award the contract. 

There are several surveys on why many ERP implementations have failed in spite of careful planning for its success.  One of the important factor which can reduce the chances of ERP failure is to have a external/independent consultant who can help you with the entire process of planning, BPR, architecting/designing, budgeting, preparing the RFP, selecting the right vendor.  External consultant can also take up the entire Project Management and give you independent view on the progress and if required escalate the problems in its early stage to mitigate the risk of the major failure or bottleneck at the later stage.  In a nutshell, while selecting the ERP, make sure that you know what you are doing, if not hire someone (consultant) who knows what you should do.

If you are a SME and are in the process of selecting an ERP for the first time or the second time and are not sure of the ROI, are having challenges  in the selection process and need some Consultation or Advisory services please take advantage of our FREE Consultation  or Click Here. 

There are several advantages of Cloud/SaaS over On-premise ERP software (or any software solution).  Before we get into the benefits, let us look at the basics:

Definition according to Wikipedia - SaaS - Software as a service sometimes referred to as "on-demand software", is a software delivery model in which software and associated data are centrally hosted on the cloud. SaaS is typically accessed by users using a thin client via a web browser.

According to me one of the biggest advantages of SaaS is its pay as you use model, there is minimum or no upfront cost. This advantage is most beneficial to SMEs.

We can categorize all the benefits of SaaS over On-Premise into two, tangible (measurable) benefits and intangible (strategic/not measurable) benefits.  

Tangible Benefits of SaaS ERP:

·         No Upfront cost: pay  as you use model
·         Availability: up to 99.999%  uptime
·         Reliability : Automatic back up & data security (physical as well as digital)
·         Automatic Upgrades: no upgrades  requires
·         Faster & easier deployment
·         Fewer IT resources required
·         Minimum IT hardware/software required
·         Better ROI/TCO
·         No AMC required
·         Energy efficient ( greener solution)
·         Better productivity & performance
·         Lower operation cost & better bottom line

Intangible Benefits of SaaS ERP:

·         Better accessibly (anytime, anywhere)
·         Quicker scalability
·         Customer satisfaction
·         Employee satisfaction

While we are discussing the advantages of SaaS over On-Premise solution, let us also look at the disadvantages of SaaS (which are the advantages of On-Premise):

·         Very limited control over the software/data
·         Minimum customization available

There are several surveys  on why many ERP implementations have failed in spite of careful planning for its success.  One of the important factor which can reduce the chances of ERP failure is to have a external/independent consultant who can help you with the entire process of planning, selecting, customizing & implementing the ERP. 

An ERP consultant can help  you with any of the following:

  • ERP Selection
  • Project Management
  • Change Management
  • Infrastructure Management
  • System Integration

As ERP consultants would have worked with several ERPs, hence would be aware of Pros & Cons of each of them, would be familiar with the price-features comparison with other ERPs;  with this knowledge he can help you with the selection of a right ERP & this could save you lot of time & money. An ERP consultant also brings experience of several industries, including the best practices of your industries,  he can guide with setting up the SOP and /or BPR, which in my opinion a “must do” task before selecting the ERP.

Over the entire ERP selection and implementation process you would be inundated with the choices and in some cases it would be difficult to decide. An experiences consultant can   provide  you pros & cons of each options & the ramifications of some of the critical decisions.

“To hire or not to hire” an ERP consultant is a difficult decision. If you know what you are doing  and have experience  in selection & implementing  an ERP successfully in past,  then you may not need an ERP consultant, else, I would highly recommend  to hire an ERP consultant.

An ERP consultant/s can cost you 5-20% of the ERP cost, but it is worth it.  You will have a trusted adviser  who will guide you every step of the way and make sure that your ERP implantation is a success.

If you are a SME and are in the process of selecting and implementing an ERP for the first time or the second time and are not sure of the selection process and are having challenges short listing the vendor, calculating the ROI/TCO, setting up the SOP/BPR and need some Consultation or Advisory services please take advantage of our FREE Consultation  or Click Here.    
SME in India (also Globally) is one of the fastest growing market.  Information Technology (IT) plays an important role in growth of any  SME.  To improve the productivity & performance to cope up with the highly competitive global environment  , it is inevitable to have a right ERP for any SMEs. 

The ideal way to select and implement an ERP should be as follow:

* Set the expectations right.
* Do the due diligence.
* Do the planning.
* Select the right implementation - On Cloud or On Premise.
* Set aside the right Budget.
* Select the right software & the vendor

The last point " Select the right software & the vendor "   being the most important let us discuss this in detail.  
Deloitte and Touch surveyed hundreds of companies who had purchased a new ERP system; D&T separated out the respondents’ criteria into first time and second time purchasers to determine if experience changed purchasing criteria.    In this article Top ten criteria for selecting ERP software are mentioned. These criteria include : 

* Level of support from the solution provider 
* Vendor’s track record of performance 
* Software’s ability to fit the business 
* Growth potential of software 
* Price of the software 
* Quality of documentation 
* Functionality of the software 
* Ease of use
* Ease of implementation of the new system 
* Software works with existing hardware 

The full article is available at : http://www.erpsoftwareblog.com/2009/06/choosing-an-erp-system-so-many-things-to-think-about/

In my subsequent articles, I will cover this topic in detail - How to select an ERP? 

If you are in the process of selecting an ERP and need some Consultation or Advisory services please take advantage of our FREE Consultation  or Click Here.