ERP Selection Criteria – Only 3 Features to Look For

Bulbul Ahmed

Strategic Transformation Leader | ERP, IT & Enterprise Solution Project Manager | Master Business Analyst | Management Consultant | Driving Innovation Through Process Optimization, Culture Development, and Automation Technology | 23 January, 2019 (Wednesday)View 2136



More than 70% of companies who try to implement ERP do not get the expected result. This happens mainly because of poor implementation plan and strategy. Among many reasons, not-choosing-the-right-software is one that leads to poor implementation and ultimately failure of establishing ERP.

For selecting ERP, many people will advise to look at

  • License cost,
  • User interfaces,
  • Vendor’s reputation etc.

Are these really the main criteria to choose the right ERP Software for your organization? License cost is just 20% of the total implementation cost! Let me explain the 3 criteria to look for.

#1. Fit

If I buy a cheap software that is not ready-fit for my business, I will end up spending a lot of money on customization to make the software suitable for my company. This cost of customization will be more than the license cost of ERP. ERP projects always go over-budget and over-time due to huge amount of unpredictable customization.

For example, if you have business in several countries, you may need to work with multiple currencies. The software must be able to handle multi-currencies at a time without customization. This is just one requirement. Enlist all of your core business requirements and then check one by one if the software can fit with your business and how well.

Poor fitness leads to huge customization. Customization leads to external consultant dependency. And all of these leads to over-budget and over-time; ultimately leads to ERP failure. So, get a software that is fit for YOU.

#2. Configurable

The business is dynamic and always consists of many different scenarios and special cases. If the software cannot handle all scenarios and cases, you will end up having only partial information in ERP. Partial information is not good enough to plan and make decisions. This will definitely lead to the failure of ERP implementation because people cannot fully rely on the data in software.

Configuration is a key feature in ERP system that allows you to setup different business scenarios and cases without touching or changing the source codes. The configuration can be done by a non-programmer person.

For example, you are a make-to-order company and you receive 3 scenarios of orders from your customer

  1. Orders that you cannot produce, but can purchase materials
  2. Orders that you can produce, but cannot ship before getting confirmation from customer
  3. Orders that you can produce and ship

Now, the software must be flexible enough to handle all the 3 scenarios. That’s possible if the software is configurable.

#3. Open

If you find a software that is fit as well as configurable, still you will have to do some customization. You cannot avoid customization, but you can minimize it and you can own it.

Owning the customization means, you should be able to customize the system by yourself, without depending on the external consultant. Therefore, the software has to be open for you. Your IT/ERP team should be able to learn the software and do all the customizations on their own. You will not pay for the customization, you will just pay for the training only.

Paying the customization cost will lead you to cost-overrun and you might end up stopping the project. So, get a software that is open for you to customize as per your requirement.

What about License Cost, User Friendliness & Vendor’s reputation?

License Cost covers only 20%

If you choose a software just because of lower license cost, without evaluating the above 3 criteria, then you will end up spending a lot of unexpected money. Because the license cost covers only about 20% of your total implementation cost over 1.5 to 2 years of project span. About 12% cost goes to Hardware and Network. The rest of 68% cost goes to Customization and Consultancy.

Ask yourself, would you want to save 20% cost or 68% cost? If you want to save the cost, look for the 3 criteria (Fit, Configurable, Open) before looking for low cost.

User Friendliness comes automatically

If your software can cover the 3 criteria that I talked about, it will automatically be the most user-friendly system.

Vendor’s reputation and support also comes automatically

If your software can meet the 3 criteria, that means it is fit for your business, it is configurable to handle all of your business scenarios/cases, it is open for customization by yourself; then it is a world-class and one of the most flexible software. Only the smart companies can make this type of software. Therefore, you don’t need to be worry about the vendor if the software can meet the 3 criteria.

Bottomline

While choosing the ERP software, look for the below 3 characteristics

  1. Fit
  2. Configurable
  3. Open

Do not look at the license cost first, because it covers only 20% of the total implementation cost. Worry about minimizing the major costs first.

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#ERP #OerationsManagement #BusinessAnalysis



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