How to choose the right ERP system for your company?

What is ERP?

ERP (Enterprise Resource Planning) or Enterprise Resource Planning is an information system that supports the effective running of a company.

The ERP system includes control and management of key resources and processes in almost every business area:

• Supply chain management – warehousing and inventory management, sales, logistics, procurement, production planning and handling,
• customer relationship management (CRM),
• Corporate financial management – finance, accounting, managerial accounting, cost accounting, controlling,
• Human resource management (human resources and payroll),
• Management of other resources – fixed assets, transportation resources, equipment,
• other areas such as transportation management, project management or quality management module, etc.

Integrated ERP system

An integrated ERP system is distinguished by working on a single database that can be accessed by all departments of the company. Unlike modular systems (consisting of independent, cooperating applications), there is no exchange of data between modules, as all system functions use the same data in real time.

Analysis of the company’s needs and goals

Conduct a review and analysis of your company’s processes, examine its needs and define its goals. The resulting knowledge will help potential software providers select the right
product for your company’s needs. This will ensure that you don’t waste time demonstrating systems that don’t meet your requirements.

Examine what are the biggest barriers to your company’s growth.
Is it inefficiency of processes, insufficient knowledge of the business condition, lack of consistent data for decision-making? Maybe it’s the excessive cost and time-consuming nature of making business changes with respect to the changing business and regulatory environment. Or maybe something else?

Start by analyzing and documenting your current business processes and identifying your company’s problems and strengths. The analysis should also reveal what you think your company’s operations should look like in the future.

Identify your needs

To be fully prepared, you need the support of senior management, who will define the strategic goals of the implementation and give you “delegation” to consult with employees at all levels of the organization. By reaching out to employees who are familiar with specific processes and will ultimately use the system you will get a complete picture of how the company operates and what it needs. The analysis and needs discussions must include the entire company: from senior management to end users and the IT department.

A proper business process analysis will reveal areas of operation that need improvement, processes that have not yet been documented, or that are “outside the system.”

Answer the following questions for yourself:

• What is the size and structure of your company?
• What departments, areas of the company, processes will be
• were subject to computerization?
• What system features are essential?
• What features of the new system would be a bonus?
• Whether the system will be used locally, off-site,
• Or maybe both?

All departments must have input into defining the requirements and expectations of the new system.

Remember that the analysis of the needs of subsequent departments cannot be based only on the functions and scope of use of the current system. Take into account that departments that do not currently work directly on the system may benefit from the data it processes or reports it generates, and the scope of data or functions used is not always sufficient.

Define your implementation goals

Consider what potential business benefits you want to achieve by implementing a new system. There is no point in changing the system just “to make it the same, only more modern.”

Look at ERP software as a way to reduce costs, increase revenue, improve the speed or quality of operations, or increase the scale of the business or value of the company.

If you want to realize the full potential of ERP, set measurable indicators for your goals and establish expected but realistic values for them. During implementation, they will serve as a control tool, showing whether the project is going in the right direction. Later, based on these indicators, you will measure the actual effects of the implementation.

What can you achieve?

• Data integration in one location and one database.
• Wider analysis and reporting capabilities.
• Better control over key elements of processes by centralizing them.
• Reduce labor intensity by automating processes.
• Improved customer service with faster access to accurate information.
• Eliminate human error through automation and control mechanisms.
• Better budget control.
• Creating a more productive and profitable business model.

“If you don’t measure something, you can’t manage it”., and thus you can’t improve it. This slogan of management expert Peter Drucker also (or perhaps: primarily) applies to the Enterprise Management System.

In short

Before you start looking for suppliers, make a clear list of requirements.

The more accurate it is, the easier it will be for you to talk to suppliers and analyze the capabilities of potential systems. This, in turn, will translate into more accurate pricing and better estimates of implementation time in the bids presented to you. If your ERP system is to meet your company’s needs, you need to know them thoroughly and document them.

If you already know what your company needs, you can move on to review the most important factors that go into choosing ERP software.

What should you pay attention to when choosing an ERP system?

Choosing an ERP system is a choice for years, so it’s worth preparing really well for it. Below you’ll find aspects you can’t overlook if you want to make a fully informed choice of an ERP system that will be closest to your company’s needs.

1. technology and integration

Implementing an ERP system should be, first and foremost, a business initiative, not a technology one, but technology is of no small importance in this case. An ERP system will operate in some environment and must fit into those elements of the infrastructure that remain constant. The easiest way is to choose a system that is compatible with the existing software you plan to use in the future.

The simplest doesn’t always mean the best – consider whether it’s time for a change and whether an ERP implementation might be a good opportunity to make one.

Consider, too, that the need to integrate a new system with a solution running on a specific system platform may limit your ability to choose the best ERP system for your company in terms of functionality.

A broader point of view

Even if the applications you are currently using are working correctly and as required, and their implementation was an investment that consumed a lot of time and money, remember that technology is constantly evolving. Solutions are changing and keeping technology obsolete can be inconvenient and even dangerous. If you are using applications or technologies no longer supported by the vendor, you are left without help in case of problems. Besides, at some point there will be a need for replacement if only because of incompatibility with current system software.

Consider the option of extending your new ERP system with those functions implemented by your current solutions that you need. This will give you a natural integration (within a single system), without the need to create interfaces and connect separate systems.

If you decide to keep your legacy applications because, for example, they are the only ones that work with the specific devices you use, check whether the ERP system you are considering will be able to integrate with these applications, and what the possible scope and manner of this integration will be.

2 Functionality and ergonomics

When choosing ERP software, the most important thing is to verify that the system offers the modules and functions your company needs. An ERP system is supposed to reflect the business processes defined in the analysis, perform the functions described in it and allow you to achieve the goals set in it

Look for software that most fully implements your processes. Check the way the system works and the implementation of critical processes. The ability to castomize will be a big plus.

Similarities and differences

In general, ERP systems are similar in terms of functionality. However, they have their strengths and weaknesses, so verify whether and to what extent a particular system performs the functions and processes identified at the analysis stage as most important for your organization.

If the way your company operates and the processes it implements are less typical, look for ERP systems that allow for greater configurability (parameterization) or castomization.

In good systems, a lot can be achieved with available wizards and parameterization. They allow you to extend the functionality to the extent provided by the manufacturer, but without having to make changes to the business code of the system.

On the other hand, thanks to castomization, it is possible to define processes and functions in the system that are very far from the standard solution and, thus, significantly expand the functionality of the software. These can be new functions, modules or integration possibilities with other systems used in the company. By choosing a customized system, you gain the opportunity to create a solution tailored exactly to your needs. Those of today and, thanks to the possibility of further configuration, also those of the future – when they arise, of course.

Extended configuration-based solutions have their advantages. These are easier implementation of upgrades (compared to castomized systems) and greater functional capabilities (compared to closed standard solutions). Castomization costs more than purchasing an off-the-shelf, closed system or performing parameterization. In addition, updating a castomized system is complicated and therefore more difficult. On the other hand, castomization gives much more possibilities at the implementation stage and in the long run of operation.

A trustworthy fit

• Consider the extent of system changes you need relative to typical solutions. Will you be satisfied with the standard system offered by the vendor (with a large but closed standard functionality)? Maybe your company needs a system with extensive configurability through parameters? Or, however, is a castomized system essential? Remember that you have to reckon with the fact that more changes mean higher costs and longer implementation time.
• Check whether the software vendor (especially if it is not the manufacturer) has an adequate, trained team to perform the configuration, or castomization, of your system
• Find out whether the code for the program’s business functions is available and possible to change on your own, and whether the vendor allows you to carry out this work with the effort of your development team.
• Make sure the vendor will train your team on how to use developer tools to make changes to the system.

Ergonomics

Ergonomics is inseparable from functionality. From functionally identical systems, choose the one that provides better ergonomic operation.

An ergonomic system, by definition, is a system that is best suited to human behavior and needs. This, in turn, translates into the best work efficiency.

An ergonomic system is easy to use, so it offers natural availability of necessary data and functions in the context of the business process. As a result, you operate faster and reduce potential human errors. The seconds or minutes saved on subsequent activities on a company-wide and system-wide basis yields measurable savings calculated in FTEs.

Fewer errors translate not only into savings in time and money, but also into higher quality service for contractors. You decide if it’s worth it.

3. budget and cost

When choosing a system for your company, you need to take into account financial conditions and constraints, both at the stage of purchase and implementation, as well as afterwards. Familiarize yourself with the total cost of ownership of the system you are considering and plan your budget within your company’s financial capabilities.

Estimate the cost of purchasing, implementing and maintaining the system. Look for solutions that fit your capabilities and vendors that offer flexible solutions in terms of their financing.

Vigilance required

Avoid the mistake of paying attention only to the direct cost of purchasing and implementing the system, ignoring the construction of the technical and design environment (at the implementation stage). Also keep in mind the staggered cost of system maintenance.

The total cost of an ERP system includes upgrading or purchasing the appropriate system hardware and software and building the infrastructure, purchasing the system and implementation services, the cost of training, the work of in-house staff involved in the implementation, the cost of system maintenance, service or support, the cost of upgrades, and sometimes the need to hire additional project or IT staff.

You can either avoid part of the cost or spread the cost over time by choosing a cloud solution.

Some of the costs are one-time, some will be spread over time, and many will be costs incurred over the life of the system.

When analyzing the price of the system itself, remember that high cost does not always mean high value of the solution for the company. Again, go back to the analysis you prepared earlier, which will be the basis for checking whether the functions provided by the system (which you are paying for, after all) and the services offered by the provider are needed by the company and will benefit it.

Analyze all costs against expected benefits.

Supplier flexibility, financing flexibility

You can lower the initial high cost of building a technical infrastructure by opting for a cloud solution in the SaaS (Software as a Service) model and using the infrastructure provided by the provider (hosting).

In the SaaS model, it is the service provider that provides sufficiently powerful servers and access infrastructure, and takes care of power, hardware, system and access security, billing the service on a subscription basis. This also reduces the fixed costs associated with the need to hire your own staff to take care of the servers, perform system software updates or data copies. These tasks will be handled by the service provider.

The SaaS model means not only hosting, but also the possibility of spreading the cost of purchasing an ERP system in installments. Settlement is usually in the form of a monthly subscription, the amount of which depends on the functionality or the number of modules used and the number of access stations.

SaaS software providers generally take a flexible approach to the number of system access positions, allowing you to change it in case of, for example, seasonal activity. In such a situation, they change your monthly subscription for a certain period of time without having to spend a high amount of money to buy licenses that you will use only during the season.

If you are considering such a solution, but ultimately the system is to be localized on your hardware – find out if the vendor offers both models and what it expects to cost to migrate the system from SaaS to on-premise.

Payment schedule

Find out what the payment schedule will look like during the installation and implementation period of the system, when the payment for system licenses takes place, and the settlement of subsequent implementation phases. Also ask the vendor about the possibility of buying the system in the cloud, in a subscription (monthly) fee, if you need to spread part of the cost of purchasing an ERP system over a longer period.

4. time

Sometimes the need to implement an ERP system arises from significant organizational changes or company growth. This can impinge on strict deadlines for the launch of the system or its various functionalities.

For example, if you are building a new logistics center and the functions of the new system to support logistics and WMS are needed to manage it, set the date for the production launch of this range of ERP functions in line with the date of the center’s launch.

Determine the required deployment time of the system. When choosing a system and vendor, check the ability to implement within the required time.

Keep in mind that the time required for production startups includes:

• Building the hardware and access infrastructure,
• Software delivery and implementation,
• essential integrations,
• staff training,
• tests,
• data migration.

After the production launch of the system, you still face a period of stabilization, when the project team finds and fills in the gaps that were not identified earlier and optimizes the system’s performance.

Estimate with your supplier the time required for each step and determine which activities can be carried out in parallel. Of course, remember to adopt a safe time margin for contingencies.

Note that not all functions and modules of the system need to be launched at the same time, and further implementation and development work can be carried out while parts of the system are already running in production.

5. supplier or partner

When you choose an ERP system, you bind yourself to its supplier for many years. You need to be sure that such a partnership will promote the growth of your company. Take a look at a potential vendor for your new system from these several perspectives.

Prior practice, understanding of your needs and well established terms of cooperation with the supplier are the key to success. Choose an experienced partner, it will be a cooperation for many years.

Stability

Pay attention to whether the potential supplier has a stable market position.

A system from a vendor that disappears from the market after the implementation phase, for example, will at best require finding a company to take over its care. The search will not be easy, as it is understandable that entrepreneurs are not keen on the uncomfortable and costly operation of a system designed and implemented by someone else. In the worst-case scenario, if the vendor is one-upping the system, you will be left with having to cope on your own, without updates and support. Or changing the system again, thus additional time and cost.

Resources and competencies

Find out what kind of team the supplier allocates to your company’s project and what kind of human resources it has in general.

You must expect turnover in the project team and the possible need to expand the team, so make sure the supplier employs an adequate number of available, qualified and experienced employees.

Reputation

When choosing an ERP system, it is also worth investigating the reputation of the vendor.

Does the company have a good reputation for system quality and reliability, and for the quality of conducting implementations? If possible, check what experience other companies in your industry have had with a potential supplier.

References

You will confirm the supplier’s reputation by checking references.

Find out how many implementations of similar size and functional scope he has done. Go through the list of shared case studies and check references. Maybe you’ll find companies in your industry or those that operate on similar principles. You’re investing time and money, so ask lots of questions, including the possibility of an interview or reference visit.

Industry experience

When talking to a software provider, ask about its experience in your industry.

A case study, letters, a visit or a reference interview is confirmation of the supplier’s experience. When analyzing this information, look out for companies with similar characteristics to your business. You can also request the presence of an implementation consultant specializing in your industry when discussing your requirements. In this way, you will assess the potential competence and knowledge of the team you will be working with about your industry specifics.

Many companies want to maintain a competitive edge, especially within their industry, so they don’t brag about the specific solutions they have developed, and they hedge this with appropriate provisions in their contracts with IT system providers. You may not learn a detailed description of the implementation of the system you are interested in at the reference company, or you may not even know which companies in your industry are using the system in question.

6. maintenance

What will happen after implementation in the company is often
not thought about at the stage of choosing a system. It is worth paying
attention to this already when verifying a partner with whom we will bind
ourselves for many years.

Scope of support

Find out what the vendor’s warranty or guarantee covers and what post-implementation support is offered. Pay attention to:

• cost and scope of support,
• response time to the request,
• the team responsible for implementing the application.

Also check the proposed method and scope of training. Remember that these will be needed for employees – system users, technical staff and your company’s development team. In addition, examine the forms of access to documentation. Will you get training videos or access to an e-learning platform in addition to written documentation? Such opportunities are especially important at the stage of training new employees.

System upgrade

Legal changes are frequent and almost always force system updates. Find out if your partner provides support for system updates and changes that result from regulatory modifications. Find out how quickly and how these changes will be implemented in your system. Don’t forget to check the cost of such modifications.

Future development

Independent of changes in the law, ERP system providers are developing their products and adding new functionalities. It is therefore worth checking what the conditions and costs of switching to new versions of the system or its individual modules will be. This is especially important with castomized systems. In such cases, a new version of the system may mean the need for re-implementation. Also find out if the partner offers post-launch support and will introduce new non-standard but needed functionality for you. Also ask questions about billing for this type of work and the team responsible for carrying it out.

7 The Future

A glimpse of the future cannot be overlooked. A good ERP system must evolve and grow with technology, business and the regulatory environment.

Choose a system that is compatible with current technologies, and as far as you can foresee – with future technologies. By choosing a system based on technologies that are no longer supported and developed, or that are being replaced by newer solutions, you are driving yourself into a dead end and putting your company at risk.

Choose an ERP system that will grow with your company.

You don’t know what technologies you will be using in a few years, but you can choose a vendor that follows technological developments and market needs and will develop your system in accordance with technological trends.

Business development

When a company grows, changes its structure, scope, scale or method of operation, the system must keep up with it. That is – make it possible to remodel and adapt to new processes.

Implementing an ERP system is a long-term investment.

If your company is focused on growth, even with the most thorough pre-implementation analysis, new processes and needs may arise as early as the implementation stage. A flexible and expandable system will allow you to model these processes and meet new needs without problems. You run a company and you certainly know how many new laws and regulations affect business.

Every year there are changes or new regulatory requirements that management systems must meet. The need to collect different data, change conversion or processing algorithms, and change reporting formats and structures arises.

You need a vendor that will absolutely provide system updates to accommodate changes in the regulatory environment and new requirements.

Good choice, good future

An ERP system is a multi-year investment that, in retrospect, can be evaluated in different, even extreme ways. It can prove to be an indispensable engine of growth, and you won’t be able to imagine your company without it. Unfortunately, ERP software can also become just a waste of time, energy and money.

Why?

Much depends on the right approach at the stage of system and partner selection. The actions you take at the beginning will translate not only into the first results of the implementation, but also, long term, into the path your business will follow.

Here is the shortest possible summary you need to remember

A good ERP system will support the day-to-day operations of your company from the moment of implementation and allow it to model itself with changes in the company or business environment.

The supplier will sell you and implement the system.

A professional partner will share experience, help align the functions in the system with the company’s processes, and advise on how to improve business processes to make the company’s operations supported by the IT system even more effective.