Choosing the Right ERP System for Your Business

An Enterprise Resource Planning (ERP) system is a software architecture that connects informationamong the different functions of an enterprise, when implemented successfully. The differentorganizational silos (which often function separately irrespective of dependencies) are then able touse the flow of seamless integration of information and utilize it to present an enterprise-wide "bigpicture" to the decision makers. This enables the decision-making process to be timely, consistentand reliable across organizational units and geographical locations. The hallmark of a successfulERP implementation lies in the long term efficiencies (increased productivity and speed ofexecution) that are gained due to information integration underpinned by elimination of redundantinformation and resulting cost savings. It is a huge investment entailing an exhaustive changemanagement process, that several organizations undertake with the promise of huge returns overtime.

Identifying the Need for an ERP system

So what prompts an organization to adopt an ERP system? There are several reasons as ERPsystems are adopted across multiple industry verticals like manufacturing, retail, distribution,financial services etc., to integrate several corporate functions (or business processes) includingfinance/accounting, human resource management (HRM), customer relationship management(CRM), supply chain management (SCM), etc. Depending on the industry vertical that theorganization belongs to and the associated set of business processes, the need for an ERP varies.Typically, the following conditions justify the need to adopt an ERP system.

Shortcomings in the existing system such as data redundancies resulting from duplication of efforts

Too many resources allocated to business functions that could easily be automated

Organizational growth factors such as expansion into multiple geographic locations, thus renderingexisting systems incompatible or inefficient

Golden Rules for Selecting an ERP System

Once, one or more of the above conditions come true, the organization considers adopting an ERPsystem. The next step is where most organizations hit the first speed breaker on this difficult path.Which is the most befitting of all the various ERP solutions available in the market? Let us list downsome golden rules that should help narrow down the choices.

Define the "As-Is" and "To-Be" Scenarios

In plain terms, this is nothing but articulating where your organization stands now and where itwants to get (in terms of goals and objectives) after a successful implementation. Ensure that this issomething you do even before you begin to shortlist vendors or arrange for vendor demonstrationsas those interactions could cloud your assessment of where you really want to go, based on yourview of the available solutions. Put together a team of experts from various business functions anddocument both the scenarios as part of a serious organization-wide effort. Mapping your businessgoals to the implementation strategy is something you will need to do on a continuous basisthroughout the ERP implementation, so select your team from a long-term perspective. At the end ofthe first phase of this exercise, you must have a "vision" document that will help your prospective

ERP solution provider with defining the scope of the solution in the requirements gathering phase.Not just that, once you start talking to vendors who claim to have a "one-size-fits-all" solution or an"easily-customizable" solution, you will have your vision ready and documented to ask relevantquestions about the features of that product. This exercise will go a long way in narrowing down theERP solutions to one that's best-suited for your business requirements.

Plan For the Evolving Business Scenario

While doing the "To-Be" analysis ensure that you project a scenario for your organization severalmonths into the future. As is the norm, implementation may take months and even years tocomplete, depending on the complexity of the project. You don't want to end up with a scenariowhere a change in business process or some new initiatives few months down the line were neverconsidered while building the ERP solution.

Vendor Selection Process

ERP projects span several months, even years resulting in a long-term relationship with the serviceprovider. There are two schools of thought when it comes to vendor selection. Many corporatesbelieve that networking and lobbying must not qualify a vendor. That is to say, don't choose a vendorjust because your organization has dealt with them in the past, select according to the system thatfits best to solve your ERP needs. However, some others believe that a past relationship and theresulting trust are important for the successful implementation of such a cost-intensive effort. It isrecommended that you strike a balance between these two views. Proceed with your trusted vendoronly after subjecting them to due diligence regarding their experience with a similar implementationand let the selection process be thorough (checking references and verifying claims etc.), just likeyou would do for a new service provider. Come to an understanding with your final vendor that theywould be held fully accountable for their third party relationships (the vendors' vendors) and obtaina sign-off on the entire scope for the end-to-end implementation.

Strong Sponsorship

The "vision" document will serve as the business case for enlisting leadership support for theimplementation effort. Ensure that you have been guaranteed strong sponsorship from thebeginning to the end of the project. Top management commitment and support are critical to thesuccess of an ERP implementation.

Demonstration and Prototype Building

Vendor selection must be based on evaluations conducted after thorough demonstration of theirsystems. You can weigh the strengths and weaknesses of each vendor based on thesedemonstrations. Although most vendors would not show a solution or module that's an exact fit for

your needs, the demonstrated capabilities must convince you that their existing system can be easilyevolved to suit your requirements. What you get to see must not be vastly different from what youneed. Some vendors promise that they have very agile architectures that can be easily and quicklymodified for your needs, in which case you might want to ask for a prototype development for asmall but reasonably complex module. You can then evaluate the vendor's claims based on whetherhe is able to turn around the desired prototype in a reasonable span of time.

Phased Implementation and Module Integration

Just as breaking down complexity makes it easier to handle, projects implemented in phases areeasier to track and handle. Don't go for an end-to-end solution just because the vendor tries to makeit sound feasible. Go for a phased implementation and/or buy only the modules that you require foryour business functions. Go for the big bang approach only in case of modules that need to beimplemented quickly and urgently.

Project Team Selection

ERP implementation requires the knowledge of technology systems as well as the businessfunctions. Ensure that you have a project team with reasonable expertise on both counts. Familiaritywith the technology of the service provider would undoubtedly be a great advantage. The projectmust be entrusted to a project champion with excellent leadership traits including business,technical, managerial and project management skills. Remember that the stakes are high and youmost certainly need someone who can convey that message constantly across the project team.Based on the complexity of the project, you must consider hiring an ERP consultant.

Evaluate Total Cost of Ownership

Ensure to discuss the total cost of ownership while doing vendor evaluations. Remember that you'llneed to pay not just for the solution implementation but for customizations, scaling up ofinfrastructure, additional staffing and training as well.

An ERP implementation is a mammoth effort. Chances are few that you will be able to find a perfectsolution or a perfect solution provider or vendor. Your success lies in identifying the best fit andpreparing to evolve the solution along with the solution provider bearing in mind the pitfalls of anyERP implementation. The implementation phase will be followed by an array of change managementprocesses that will help the realization of the projected benefits. It is only after all these activitiesare completed and the ERP system has been live for several months (or even years) that you cantruly begin to measure the results that justify your choice of the ERP system.