ERP Software Selection Process and Criteria

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A good enterprise resource planning (ERP) system should have an impact on every single part of your business. These highly sought after enterprise applications help manage activities including planning, research and development, purchasing, supply chain management, sales, and marketing. There are countless ERP software solutions available, so it’s crucial that you make the right ERP choice that fits your organization. But do you know what the ERP selection process looks like?

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ERP Selection Criteria Checklist


Don’t worry if you’re not familiar! That’s the very reason we built this ultra-comprehensive, step-by-step guide on how to select an ERP system. Packed with tips and recommendations, you can use this article as part of your ERP software evaluation checklist.

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What is ERP Software?

First, let’s straighten out the basics. ERP software is a suite of integrated applications that automates and streamlines key business processes. It serves as a centralized data repository and provides workflow automation and real-time insights. ERP software also comes with capabilities for ensuring compliance with industry and regulatory standards, improving customer service and analyzing the financial health of your organization.

For the sake of keeping things brief, we’re going to move onto the ERP selection process now. However, if you’d like to keep learning and what ERP is, we have that information for you here.

What is ERP Software Selection?

To provide some additional introductory information, we’re going to walk you through what an ERP software selection is like. This easy-to-follow, four-stage process helps you determine your business needs, evaluate and compare solutions, validate your technical requirements, and negotiate a great contract.
ERP Selection Process

1. Requirements and Research

You can think of your list of requirements as an ERP selection criteria checklist. Requirements are what your business needs from a software solution. This will help you decide whether an ERP system is the right fit for your business.

Requirements Gathering

When evaluating business requirements, keep in mind that ERP software’s greatest advantages lie in comprehensive data analysis, thorough and accurate reporting functions and multiple process automation capabilities. We go into depth with this topic in our ERP requirements list, but here’s the reader’s digest version of questions to ask yourself:

  • Evaluate your current business operations and how ERP software can fit into them. For example, do you need a responsive solution to accommodate your employees using mobile devices? What are the reporting and metrics that will be most useful to you when running your business?
  • Consult with senior-level executives who can engage and encourage employees in the process of implementation. If possible, appoint a team to oversee the process of selection and installation, including an executive and a project manager.
  • Take honest stock of the ways your business could and should change. Determine the ways ERP capabilities can transform your operations and improve business performance.

Preliminary Research

Armed with your specific business requirements, you can now perform preliminary research to identify which ERP system meets your needs. You can do most of this research online, but you can also contact ERP vendors and seek informed opinions from colleagues who use ERP software systems. Consider ERP consultants as potential resources to find the right fit for your business.

Get our ERP Software Requirements Template

2. Vendor Comparison And Sourcing

Informal Inquiries

Use the information you’ve obtained from requirements gathering and research to help you get relevant, informative answers from potential vendors.

  • Make sure the vendor’s product works with your existing legacy systems.
  • Check whether the vendor has experience in your industry, which increases the likelihood of a smooth transition.
  • Verify that the vendor completely understands your business needs and provide the vendor with any project plan you’ve drawn up.

Requests for Information (RFI) and Other RFx

After you’ve shortlisted several ERP applications, it’s time to send your RFx documents to those vendors. These include formal requests for proposals (RFPs), quotes (RFQs) and other information.

3. Technical Validation

Once you’ve submitted information requests to vendors and received responses, it’s time to thoroughly evaluate the available ERP systems.

Technical Evaluation Scorecards

Comprehensive scorecards accurately and thoroughly evaluate ERP systems, providing a detailed breakdown of every function and capability. You should assess the ERP system using at least four criteria: cost, supporting user needs, improvement of internal processes and flexibility.

Demos, Proof of Concept and More

After you’ve narrowed down your list of vendors by using tech evaluation scorecards and proposal information, it’s time to request demos from the vendors. In addition to demos, request documentation that addresses how the ERP system will meet your business needs.

4. Financial Due Diligence

Business Case Review

Evaluate the capabilities and cost of an ERP system against your business processes and needs, your organization’s budget, and the projected savings to ensure the ERP system will benefit your business and that it is financially viable at this time. In addition, consider what the true cost of ownership of implementing an ERP project will be.

Evaluating Potentially ‘Hidden Expenses’

Before choosing an ERP system, you should calculate the costs of replacing hardware, updating the software program and performing routine maintenance.

Contract Negotiation and Close

After you’ve chosen your vendor, received your quote, reviewed your proposal and completed your case review, it’s time to negotiate your contract.

While this strategy may be time-consuming and labor-intensive, your meticulous ERP software selection process will pay off. But to make things a little bit easier, we provide technical evaluation scorecards for extra diligent documentation. Before long, you’ll find the perfect ERP solution for your business.

Get our ERP Software Requirements Template

Selection Criteria

Now that you understand what ERP software is and how the ERP selection process works, we’re going to get into the purpose of this article. Below is our list of the most important ERP software selection criteria. You can use these criteria throughout all stages of the ERP selection process to help determine if a solution is right for you.

1. Functionality and Ease of Use

First thing in the ERP selection process, we have some standard questions to brew over: What are the system’s functionalities and ease of use? And what functionalities and degree of user-friendliness do you need? Answering these questions will help you decide if the product is the right fit for your business on a fundamental level. This criteria may be the most lengthy and mundane to complete – it involves a deep evaluation of your business as well as the ERP product – but hold tight, this is the important work.

Taking the following actions can help you better understand ERP software, gather your requirements or compare systems:

  • Requirements Gathering – Consider the current challenges that your organization faces that could be solved or reduced with an ERP system. Then, evaluate which of the ERP system functionalities would accomplish this.
  • Consider Business Process Automation – Think of all of the routine business processes at your organization that could be automated and evaluate if the particular ERP solution is equipped with the tools to do that.
  • Examine End-Users – How tech-savvy are your end-users, and do they have the capacity to navigate complex software features? Have they used an ERP system before? Answering these questions will help you determine if the products’ user-friendliness is up to par with your requirements.
  • Plan for Centralization – Consider the systems you currently use that will need to be integrated with your ERP system and inquire about integration possibilities. For instance, how does the CRM interface with the overall ERP?

2. Vendor Viability

Before you become invested in a particular solution, it’s wise to ask yourself: What is the vendor’s reputation, and can I work with them long-term? Even if a product comes with all of the right functionality, it should be out of the question if the company isn’t trustworthy and secure. Beyond company credibility, you should review the scalability of the product in order to determine if this can be a lasting transaction.

Analyzing vendor viability ensures not only a great system but a great partner for your business. Consider the following factors when comparing ERP systems and the vendors that provide them:

  • Company Credibility – Investigate how the vendor has changed organizationally in recent years and inquire about the future direction of the vendor’s business. In addition, consider the age and financial health of the company.
  • Product Viability – Find out how long the ERP product has been on the market and seek references from their customers. Ask the vendor how long they intend to keep running the product, and if they regularly distribute updates or work to improve upon the product. If you really want to cover all of your bases, ask the vendor about the products they plan to issue in the coming years.
  • Scalability – Evaluating product scalability requires you to look internally and into the future of your business. Will your need to add users in the future, or expand on functionality? Does your business have the potential to expand into new markets? Consider if the system features can support and enhance your business strategy. This is especially important for young, growing businesses to consider – your chosen ERP system needs to be able to grow with you.

3. Technology

There’s a great deal of technology weaved into ERP systems – for example, a standard ERP software should contain capabilities related to business intelligence, reporting and customization. Similar to the functionality evaluation, you should ask yourself: What technologies does the ERP solution offer, and what technologies do we need?
Consider the following factors when you’re ready to compare ERP or are actively performing your ERP software selection process:

  • Customization – Think about whether the ERP solution is turnkey or will be customized to your organization and unique business processes. If the solution needs to be customized to function, ensure the vendor is able to complete the request.
  • Requirements – Consider whether the solution can meet the technical needs of your organization. For example, can it generate visual, real-time sales reports that can be used in presentations?
  • Value – Evaluate whether the ERP is leveraging the most recent, cutting-edge technology and if the vendor plans to continually update the system. Considering this factor ensures that you aren’t investing time and money to implement a system that soon will become outdated.

Compare Top ERP Software Leaders

4. Cost

It may feel obvious that you should consider the cost of an ERP system, but unfortunately, it’s not as simple as it sounds. With several disparate elements to account for, it’s important to ask yourself: What will the true cost of the ERP solution be? The true cost consists of licensing fees, which depend on how many users you have, the software itself or the modules you select, hosting or hardware, implementation, maintenance, training and support. It’s wise to determine a rough estimate of your ROI before you sign any kind of contract.

Consider the following factors while evaluating the cost of an ERP:

  • Basic Pricing Information – First, evaluate the cost of the ERP platform and whether it is appropriate for the functionalities and technologies it offers. If the vendor’s pricing structure is unjust, you can likely find another ERP product – there are plenty of fish in the sea.
  • True Cost – Next, work on determining the true cost of the ERP solution. Calculate the long-term total cost of ownership (TCO), making sure to incorporate all applicable costs from the list above.
  • ROI Once you’ve finished the latter evaluations, estimate whether the projected return on investment (ROI) will be significantly more than the TCO.

5. Support and Training

Support and training are the pieces of the pie that get an ERP system up and running and functional at all times. In the current ERP market, there’s a wide range of what vendors offer for support and training. A comprehensive training plan typically includes access to training videos or documentation, an online knowledgebase or user community and options for in-person training. Comprehensive support typically includes access to a call center as well as various online resources. On the opposite side of the spectrum, some vendors offer no support or training, or outsource support and training.

Considering these points, it’s important to take a close look: What kind of support and training will be provided? What kind of support and training do we need? You should review support and training offerings, ensure they’ll work for your end-users and draw up a clear agreement with the vendor.

Consider the following factors while reviewing support and training:

  • Needs of the End-Users – First, take some time to consider the needs of the end-users. What sort of training, such as in person versus virtual, will be the most convenient and effective for the end-users? Do you have an internal IT team that can assist with technical support, or will you rely completely on external support?
  • Pricing – Is the cost of support and training included in the licensing fees, or will this be an additional investment?

6. Industry Expertise

Industry expertise essentially refers to a vendor’s ability to cater to your specific needs. Depending on your requirements, you very well may be able to find a solution that’s designed specifically for your business type and size. Working with a vendor that understands how your business works is a major advantage and allows for things such as industry best practices built into the system. Ask yourself: Does the nature of your business require a specialized platform?

  • Expertise – Consider how long the vendor has worked in your particular industry and if they’ve proven success within the industry.
    E2 Shop System Dashboard

    Example: E2 Shop System is an ERP software designed specifically for the manufacturing industry.

7. Implementation

Implementation is literally vital to getting your new ERP system up and running. It’s good to ask how the vendor will ensure a successful ERP implementation. This step will be especially important if you anticipate an involved implementation, such as with migrating from a legacy system to a new ERP. You can read our comprehensive ERP implementation guide here, but the following factors are good starting points to consider in the ERP selection process:

  • Implementation Assistance – Does the vendor offer implementation assistance? If so, what implementation approach do they take?
  • Implementation Partner – If the vendor doesn’t offer implementation assistance, you’ll likely want to hire an implementation partner.

This concludes our list of ERP software selection criteria. You can use this list to evaluate ERP solutions throughout your entire software selection process.

Last Thoughts

Selecting an ERP system is a long process with many factors to consider. But as you can see, it can be broken down into manageable parts. Follow the step-by-step process we’ve outlined, and remember to begin by gathering your requirements. With rigorous research and selection, you’ll end up with an ERP vendor that will deliver the system to take your business to the next level.

Do you have any remaining questions or comments about the ERP software selection process? Let us know by leaving a comment below.

Madeline ReinboltERP Software Selection Process and Criteria

2 comments

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  • Vittorio - February 7, 2018 reply

    Thanks, great to see a comprehensive guide. What are the suggested ERP systems for the smaller end of town? I.e. 10 to 20 employees companies that are starting to outgrow their current accounting packages? Seems like most ERP platforms are cost-prohibitive for smaller companies?

    Michael Shearer - February 7, 2018 reply

    We have a product directory for ERP found here: https://selecthub.com/categories/enterprise-resource-planning-erp that has filters on company size and price so you can drill-down on some recommendations. Talk to our team, too. They could give you some recommendations based on your specific needs and business size.

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