Beyond spreadsheets: A playbook for choosing the right ERP system

Magnus Meier

There comes a time for most growing companies where it’s clear the basic software and spreadsheets on which they have been relying can no longer keep pace with the needs of the business. If that rings true for your organization (based on the indicators detailed in Part 1 of this series) then it’s time to commit to finding a better way forward with a single, integrated system for managing core business processes — in short, an enterprise resource planning (ERP) system befitting a growing, ambitious company.

Be clear about the issues inside your business that you want an ERP system to help you resolve.

Once company leaders have resolved to make such a change, the next order of business is to identify an ERP system that’s well-suited to your company, and that’s supported by a high-quality provider. This is a substantial long-term investment in the present and future of your business, so it deserves serious, thorough due diligence.

Here, based on my experience helping a range of businesses on their ERP journeys, is a high-level playbook for the due diligence and selection processes.

Phase 1: Laying the Groundwork

• Create a team to own the ERP evaluation and selection process. Outcomes tend to be better when all relevant facets of the business, including IT, finance & accounting, operations, etc., have a voice in ERP evaluation and selection.

• Define the investment business case. Quantify and qualify how the ERP investment is expected to benefit the business — the “inside-out” business case (as opposed to the “outside-in” business case, which I’ll touch on in a moment).

• Define the business scope of the ERP implementation, including the capabilities you require and desire from the ERP system, and design the future state — your vision for what your processes will look like with an ERP system in place. Be clear about the issues inside your business that you want an ERP system to help you resolve. Identifying these problems will help you identify a solution that best fits your organization and offers the capabilities you require to realize your vision for the future state of the business. Identify the business KPIs and benchmarks you’ll use to measure the progress and impact of the ERP implementation.

• Set expectations. Honestly assess your organization’s capacity for change. You will need to develop a change management plan for the ERP rollout. Also be realistic about the time required to deploy a solution.

• Prioritize the requirements for the ERP system: must-haves, want-to-haves, etc.

• Establish a high-visibility approval process for change requests during the implementation process to minimize scope creep. No one wants to go back to the executive team to try to justify a request for a high-cost change in scope.

• Establish a high-level budget for the ERP project. This includes not only establishing a price range for your investment but getting executive-level buy-in for the project and the budget.

• Conduct a readiness assessment. To what extent are your data and processes validated and documented?

Phase 2: Ramping Up

⦁ Based on your business priorities, establish a system for scoring ERP systems and vendors using quantitative and qualitative decision criteria:
⦁ What are you looking for in an ERP solution and the vendors (provider and system integrator) who will support you during the process?
⦁ Finding an ERP solution that readily integrates with other key business software and comes with open integrations could be a high priority, for example, so you can build a seamless, scalable digital environment across the business.
⦁ Finding a solution that maps directly to your processes, systems and workflows, with tools and capabilities tailored to your industry, could also be a priority, as this can speed the implementation/migration process on the front end and result in stronger user engagement later.
⦁ You might also prioritize systems that come with embedded business AI to automate processes and support employees in their work.

Beyond rating the ERP systems themselves, you’ll also need to develop a selection framework to rate the vendors providing and integrating those systems. Ultimately, you want a vendor that views your business relationship as a long-term partnership, that’s value-driven, honest and reliable. Look for vendors with proven expertise in your industry, processes and technology, and with all the required relevant certifications. Also look for vendors with a proven project methodology and a track record for delivering implementation projects on-time and on-budget. Positive references and an active user/customer community are also big plusses, as are a clear product roadmap.

Ultimately, the ongoing support your vendors provide is as important as the ERP solution itself. So the goal should be to align with a provider who treats you like a true partner. Look for providers with a dedicated support team whose members are readily accessible, know your industry, and make a genuine effort to understand your company.

• Conduct vendor due diligence, perhaps with the help of a third-party expert. Have project team members gather ERP system and vendor recommendations and insight from peers, professional contacts and others in their network.

• Rate vendors according to the scoring system you developed, then, based on those ratings, select several to invite to participate in your prequalification process. Provide those that agree to participate with discovery and project details.

Phase 3: Evaluation and Selection

• Hold qualification sessions with solution providers, rating each of them. Once you’ve scored the field, select the finalists.

• Schedule and hold demos, discovery and vendor implementation overview sessions with the finalists. This should include a joint discovery session, a joint technology review session, and an implementation methodology overview session where each vendor details their implementation plan.

• Conduct a final round of evaluation based on functional demos and the outside-in business case provided by each vendor.

• Prioritize implementation accelerators from the vendors you’re evaluating, which can cut the time, cost and risk of a deployment project significantly. Accelerators can include solution documentation, a help portal, scenario overviews, business process documentation and process flows, quick guides for prerequisites and activation of settings, configuration guides, settings and documentation, sample master data, automation tools, project methodology and documentation, project management templates and documentation, and more.

• Provide vendors with feedback on their demos and business case (this could entail optional follow-up sessions).

• Perform additional due diligence (references, additional insight from peers, etc.).

• Conduct final planning and negotiation with the finalists. This includes conducting implementation planning workshops with each front-runner and their system integrator, who should provide you with a final version of their scope document, solution architecture, implementation plan and business case.

• Review each vendor’s offer and identify the one you believe will provide the most value. Negotiate with that vendor to finalize contracts and master service agreements. And during negotiations, avoid focusing purely on cost, as this is a measure that could motivate a vendor to cut corners where possible to meet your targets instead of doing what it takes to meet your needs.

When it comes to finding the right ERP system for your growing business, one that provides enough value on an ongoing basis to justify the investment, the best outcomes don’t happen by accident. Rather, they are the result of careful planning and a sound, thorough process like the one outlined here.

Once you’ve selected a system and the vendors to support implementation, now you can move to the really fun part of the journey: unleashing the power of an ERP system inside your business, which I’ll detail in Part 3 of the series, coming soon.

About the author:

Magnus Meier is the global vice president for wholesale distribution at SAP. He’s also a senior lecturer at Texas A&M University, where he teaches the “Digital Distributor” course in the Master of Industrial Distribution program.

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