How to Evaluate ERP Software: 7 Criteria Checklist
The average business will look for a new ERP maybe once every 4-7 years. Choosing the perfect Enterprise Resource Planning (ERP) system can help or hurt your business operations. With an overwhelming number of options, each with unique features, cost structures, and scalability options, the decision is far from simple. Use these 7 criteria to evaluate your ERP selection and avoid a failed implementation.
7 Tips for ERP Evaluation
Tip 1: Define Your Business
The first thing you’ll need to evaluate is your business needs. Start by assessing current work processes and pain points to identify specific goals the new ERP can address. From there, create a detailed list of requirements and features for the software to meet those objectives.
Some questions you can ask include:
- Do you have industry-specific requirements beyond the ability of your current system?
- Can your employees, partners, and vendors access company data over the web and via mobile devices? Is this something you could benefit from?
- Does lack of flexibility hurt your company’s ability to keep up with new and more complex business processes?
- Does your company rely on manual processes, double entries, and/or spreadsheets?
- Do you struggle to meet industry-specific compliance requirements (such as IFRS, DCAA, etc)?
- Is your current system widely accepted in your industry?
With these answers in mind, you can start your search by knowing what you want the ERP to do. The more functionality you expect, the higher the costs will be. Knowing that makes it possible to determine an acceptable budget for your ERP. Remember to go beyond the cost of the software itself. Consider the need for additional resources, such as new hardware, IT personnel, and user training. By setting realistic cost expectations, you can avoid going drastically over budget during implementation.
Tip 2: Vendor Research and Product Demos
The next step is to identify potential ERP vendors based on your desired functionality and the determined budget. Check out our list of the best ERP software vendors to find which matches your needs. We tested and reviewed the software ourselves to help businesses understand what each vendor offers.
Be sure to consider the vendor’s location during your search. Although there are more and more entirely cloud-based ERP systems out there, having someone local to handle training and implementation can make a big difference in some businesses.
Once you’ve narrowed down the list of appropriate vendors, request a trial of the ERP. Try to get as many users onto the trial as possible to get accurate feedback on how different features work for different departments. Guided product demonstrations can also give you insight into how the software works. Some vendors will tailor the demonstration to your business and functionality requirements.
Tip 3: Compatibility and Integration
The next step is evaluating ERP software compatibility with legacy systems at your business. The last thing you want is to spend all the time and effort implementing a new ERP only to switch software because it doesn’t integrate with your legacy accounting system. You’ll want seamless integration with any existing tools. However, there are circumstances where it might be better to drop the old software and move everything to the new ERP.
You should also consider scalability for future growth. Ask the vendor what other integrations are available as your business expands. Or see if custom integrations are possible as new products come onto the market. If the ERP on its own can’t scale with your business, it might be better to find a different solution.
Tip 4: Customization and Flexibility
During your initial software research, compare which products have the functionality you need out-of-the-box and which would need customization to work best. This personalization can range from cosmetic changes to the UI to brand-new coding. All of these changes can drive up the price, and customization can add time to the implementation process.
While customization comes at a cost, it increases your software’s adaptability to meet evolving business needs. That flexibility makes it possible to stay competitive even as the market changes.
Tip 5: Data Security and Compliance
Next, examine the ERP’s data security measures and encryption protocols. Be sure to evaluate the developer’s disaster recovery and backup capabilities. You need a clear understanding of how your business will be impacted in a worst-case scenario.
Depending on your industry, this is also the time to ensure compliance with industry regulations and standards. This may be a time to consider industry-specific ERP solutions for:
These solutions are best when most of your software requirements are unique to your industry and require an expert.
Tip 6: Total Cost of Ownership (TCO) Analysis
Once you’ve narrowed down your list of potential ERP systems, it’s time to calculate the TCO of each option. The lifespan costs involved with a software purchase can include:
- Software
- Hardware
- Implementation
- Maintenance
- Customization
- Training sessions
- Support and updates
Every vendor will charge differently for each element. For instance, one vendor may have a one-time implementation fee but charge separately for support, while another might offer free support within the first year of purchase.
For accuracy, try to project out at least 5 years. Then, compare TCO across different ERP options. Based on your already determined budget, this should be an important factor in determining which ERP is the best fit for your organization.
Tip 7: User Training and Support
Finally, it’s time to onboard your users, as your employees’ ability to interact with the system will largely determine your path to ERP satisfaction. Review available training resources and materials, such as guides or video tutorials from the developer. See what each vendor has to offer for onboarding. For instance, do they handle training whenever you hire a new employee? Or will that training need to be done by your team?
If you have the chance to demo the software independently, discuss any user feedback with the vendor to see if there are any workarounds. If someone has difficulty with the preset processes, pre-implementation is the time to explore options.
Find the Best ERP
The right ERP for your business depends on preference, cost, and convenience. Following this evaluation checklist can help you find the software that matches all your criteria.
