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4 key steps to choosing an ERP vendor

4 key steps to choosing an ERP vendor
ERP software manages day-to-day business activities such as accounting, procurement, risk management and compliance, and supply chain operations. Here are the four steps to take to choose an ERP and ensure the success of your implementation.

As your company grows, you’ll eventually reach a point where running your business with spreadsheets won't cut it anymore. You’ll know you’ve reached that point when your technology platforms prevent you from supporting changes the business wants to make. Other signs that your systems' capabilities are outdated or inadequate include inaccurate data, a lack of integration, high error rates, and over-reliance on email and spreadsheets.

If this sounds familiar, it might be time to migrate to an enterprise resource planning (ERP) solution. ERP software manages day-to-day business activities such as accounting, procurement, risk management and compliance, and supply chain operations. ERP solutions tie business processes together and allow data to flow between them, eliminating data duplication and ensuring data integrity with a single source of truth.

Don’t let the “enterprise” in ERP intimidate you: today’s cloud-based and software-as-a-service (SaaS) ERP solutions have lowered barriers to entry because they don't require expensive investments in hardware like servers. Nor do they necessarily need full-time consultants to oversee implementation projects; these projects typically go live faster than typical ERP implementations as well. As a result, the shift to SaaS ERP has democratized business suite software, making it more accessible to emerging companies, helping them increase efficiency, get real-time visibility into their operations, and become profitable.

In this article, we’ll give you a high-level overview of four steps to take to ensure the success of your ERP implementation. We’ll expand on each of these steps in future posts.

Step 1: Hire a top-notch controller

Make no mistake: ERP implementations have a reputation for being complex and lengthy. But this is changing quickly, and there are steps you can take to ensure your implementation’s success.

First, assemble the right team even before you evaluate any software platforms--and certainly before you purchase one.

Your ERP solution will affect almost every aspect of your organization, but because it will have such big implications for your finance team, it might make sense to have a senior finance executive at the helm. Often that’s the financial controller rather than the chief financial officer. Why?

Both are senior financial manager roles. At some companies, the controller actually runs the finance department; at others, they report to the CFO. However, in most cases, controllers are responsible for most financial and accounting decisions, including decisions about new technology that will help the finance team do their jobs more efficiently. It’s the controller’s job to evaluate these technology platforms and their ROI.

Good controllers usually have the background needed to lead an ERP implementation. In addition to extensive experience overseeing financial data and reports, cash flow, balance sheets, and financial transactions, they’re experts in generally accepted accounting principles (GAAP), financial analysis, risk management, and reporting—all skills that come into play when evaluating ERP software. They’re also used to presenting financial data to executives, translating complex information into plain language, which will be key for updating stakeholders at all stages of the project.

And because your finance team will often be your ERP platform’s first adopter, a good controller will have no problem working side by side with the engineering, IT and HR departments to develop workflows that get the most out of the solution. That’s why it’s also a good idea to have this person on the ground floor of your ERP implementation team.

Step 2: Identify your ERP needs

Once you’ve assembled a cross-functional implementation team under the guidance of a skilled controller, your next step is to determine what you need an ERP system to do for your company. All ERP solutions start with a central, shared database that contains the information your business needs to handle core processes; this data repository provides benefits like real-time visibility, improved internal controls, and smarter business intelligence.

In addition to a central database, ERP systems are composed of various modules that address specific business requirements. Knowing which of your business processes are inefficient or throttling growth will help you prioritize which modules you need first. Most companies begin with a finance module—a foundational element of every ERP solution—to automate basic accounting tasks and deliver visibility into cash flow.

Product-based companies may want to add modules for order and inventory management, as well as supply chain management modules for manufacturing, procurement, or warehouse management. Companies that sell products online may also want to add an e-commerce module or consider integrating their current e-commerce site into the ERP system, while services businesses may need modules for project management and professional services automation (PSA) to simplify employee time and resource tracking and project billing.

Many ERP software systems offer modules for customer relationship management (CRM), marketing automation, and human capital management (HCM) or human resources management (HRM).

Step 3: Choose your ERP solution

Once you have a list of requirements linked to your strategic business goals, how do you choose an ERP provider? Typically, companies start by issuing a request for information (RFI) that tells vendors what they’re trying to accomplish and asks them to suggest solutions, followed by a detailed request for proposal (RFP) or request for quote (RFQ).

Before you start approaching vendors, make a detailed checklist of questions to ask about features, cost, deployment options (cloud ERP or on-premises ERP, or a hybrid), implementation, and how to integrate the ERP solution with your existing systems. Although many growing startups have successfully evaluated ERP systems themselves, if you want outside input, there are third-party ERP consultants who can help you evaluate your options.

There are hundreds of ERP systems on the market from an array of vendors. While the size of the vendor doesn’t necessarily mean its solution will be the right one for your business and its unique processes, major ERP providers and their main offerings include:

  • Oracle: Oracle ERP Cloud, Oracle NetSuite
  • SAP: SAP S/4HANA, SAP ERP, SAP Business ByDesign, SAP Business One
  • Microsoft: Microsoft Dynamics
  • Sage: Sage X3, Sage 100, Sage 300cloud, Sage Intacct
  • Workday: Workday ERP

Once you’ve compiled your shortlist, ask for a thorough technical demonstration, customized to your business needs, that gives your team a feel for what it will be like to use the software as a user, manager, or admin. Now would be a good time to ask about the vendor's future plans for technologies like artificial intelligence (AI), including machine learning, and the internet of things (IoT).

Ask the vendor to provide references to other customers who have businesses that are similar to yours. Be sure to talk to those references about how the software worked, how users adapted to it, and how long it took before they saw a return on their investment.

Step 4: Manage your ERP implementation project

An ERP implementation affects almost every area of the business. Depending on your company size, the level of customization and integration you need, and numerous other factors, the project could take anywhere from three months to more than a year, so your first move should be to identify a dedicated team leader within your organization who has strong project management skills to lead the development of an ERP implementation roadmap.

A project leader is different from an executive sponsor, whose role is to ensure management buy-in, adjust business priorities and marshal additional resources if needed. The project leader, on the other hand, keeps the project on track, facilitates communication and collaboration between various departments, and addresses any issues that arise. It’s a big ask, especially if you don’t have the expertise in-house.

This is why many companies bring in outside third-party consultants with expertise in managing ERP projects. These professionals have the specialized skills and background to manage ERP projects, drive change management, and train users. While most large vendors have professional services organizations that provide implementation support (like NetSuite's SuiteSuccess methodology), many also offer certification programs to outside consultants to ensure they have the qualifications to help your success.

Up next: Hiring a top-notch controller >

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