Why are SMEs Choosing ERP Software Instead of Point Solutions?
ERP used to be reserved for large enterprise. But not anymore.
Now, small and mid-size companies have access to advanced capabilities that can have a big impact on your bottom line. Maybe your processes are too complicated and it takes too long to get things done. You might be making decisions based on gut feel because you don't have easy access to your data. Or perhaps you know your current systems can't support the growth you're planning for.
Whatever your situation, know that you're not alone. Many other growing companies are in the same boat. And they're turning to ERP software to solve these challenges.
But with so many ERP solutions to choose from, how do you know which one is right for your business?
The purpose of this guide is to help you through the process. We'll give you a framework that will ease the stress of your ERP evaluation process and ensure you find the software that works best for your business.
Want increased collaboration across their organization
Need a scalable solution to support their growth
Need to replace dated technology infrastructure
What You Need to Start Your ERP Project
First off, you might be wondering whether you need to do a request for proposal to select your ERP software. While large enterprises commonly use RFP's, most small and mid-size companies prefer to manage their ERP selection themselves. Of course, there are pros and cons to both approaches, but for SMEs, an RFP tends to add unnecessary time and cost.
Instead, you can follow the process we've outlined here to manage your ERP evaluation. You'll get a blend of both – the best practices that come from a formal RFP, plus the flexibility and cost-savings of the DIY approach.
Assemble Your ERP Selection Team
We recommend creating a team of five to eight people from different functional groups across the business. You want strong communicators who understand the processes in their area.
Your ERP project team is responsible for:
- Gathering input from users to define business requirements and set objectives for the ERP project
- Researching, evaluating and selecting an ERP solution
- Managing the transition to your new ERP system
Confirm that Your Business is Ready to Embrace ERP
1. Do you have a business need for ERP?
Here, you’ll evaluate your current business processes and systems to determine if you have a clear need for ERP software. This is often easy to evaluate based on where your systems are falling short.
We recommend looking at two areas of impact:
- Visibility & Performance – Do you have a good understanding of your performance? Can you answer key questions about various areas of the business, based on timely, accurate data?
Efficiency – How much effort does it take to compile key performance metrics and reporting? Is your team relying heavily on manual effort and duplicate data?
2. Are your people ready for an ERP project?
By nature, many people are resistant to change. And while an ERP implementation can be a key element of your company’s growth, it can be costly to proceed if your team isn't open to changing the way they do things.
Before you go any further, conduct an ERP readiness assessment to understand how prepared your company is for a project of this scale. If your assessment reveals you aren’t ready yet, shift your energy into communicating the benefits throughout the organization. Helping your people understand why the change is needed and what the payoff is will help them get on board.
Define Your ERP Project Objectives
You need a clear understanding of what you’re trying to achieve before you can measure the success of your ERP project.
For the best results, your ERP objectives should be driven by the objectives of the business. The more accurately you can define the areas you expect to see improvement, the better equipped you’ll be to select the best ERP solution for the job.
To identify your ERP project objectives, ask:
- What is the business objective for implementing ERP?
- Have we defined the strategy, including measurements of success?
Outline Your ERP Requirements
Now that you have a clear picture of your objectives, you can start compiling your ERP requirements list – the features and functionality you need in your new system.
Start by asking your team these questions:
- What do your day-to-day processes look like? What do you need to execute efficiently?
- How do you consume data and interact with the system? (This can influence your decision between public and private cloud ERP)
- What roadblocks do you face with our current systems?
- What areas do you think we need to improve?
How to Fairly Evaluate and Compare ERP Solutions
Identify Critical Success Factors
While your ERP project team has no doubt compiled an extensive list of needs and wants, not all items will be critical to the success of the project. So, in this step, you’ll define critical success factors – the elements that are absolutely necessary to achieve your goals.
It’s easy to identify things that have an immediate impact on your cash flow, like increasing revenue. Keep in mind that savings don’t necessarily have to translate into a cash value but should impact the bottom line in some way.
With your selection team, take a second pass at the master list of objectives and requirements you identified earlier. Use a numbering system to prioritize the requirements and help you zero in on the true must haves. This will help you identify the deal breakers as you’re reviewing solutions.
Create Your List of Preferred ERP Vendors
Now that you understand what you’re looking for in an ERP system, it’s time to research possible options.
Before you start your search, consider what type of ERP makes the most sense for your company. Most of the leading ERP solutions are what we call off-the-shelf – they have a built-in feature set that can adapt to processes across many industries. They offer maximum flexibility over time. You could also look at vertical ERP software designed for your industry or a custom-built ERP if you need heavy customization.
The ERP system you choose should support your needs now, but also 10 years from now, so flexibility and scalability are key.
While most small to mid-market ERP solutions are sold through a partner network, both the ERP vendor and ERP partner will play an important role in the success of your implementation. Choosing a stable ERP vendor with a strong customer base and a good reputation mitigates the risk that comes with lesser established software vendors.
Schedule ERP Software Demos
At this point, you should have a shortlist of one or two potential ERP solutions (three max). Depending on the solution, you'll either schedule a demo with an ERP partner or the vendor themselves if you decide to go the direct route. If you're not sure whether you want to work with the ERP vendor directly or go with a partner, here are a few things to consider.
The members of your ERP project team should clear their calendars to attend each meeting. Prepare for the demo by giving your team team a recap of your business requirements and objectives, as well as guidelines for evaluating both the system and the partner.
Here are a few things to look for during an ERP demo:
- The ERP partner (or vendor) should come prepared with a script to show how the system will handle a few of your key processes.
- The demo should illustrate how the gaps in your current processes will be filled, how processes can be improved and how new capabilities will positively impact your business.
- The look and feel of the software will capture your attention first. But looks don't always equal a good user experience. Pay special attention to ease of use and personalization. Is it easy to navigate through the software? How many steps does it take to execute processes? Can you hide unused functions and customize dashboards for different user groups?
What to Look for in an ERP Partner
The Value of an ERP Implementation Partner
We mentioned briefly that some ERP software can be purchased directly from the vendor. Others are only sold and implemented through ERP partners (like ProjectLine).
The biggest draw of buying directly from the company that develops the software is that you only have one relationship to maintain. But when it comes to your core business system, the quality of the relationship matters – a lot.
What ERP vendors have in deep product knowledge, they sometimes lack in understanding of business process. With a focus on customer volume, they simply can't dig deep and get to know your business the way an ERP partner can.
This is the advantage of working with an ERP partner. They have both deep technical knowledge and business insight. A good ERP partner will spend time with your team doing an in-depth discovery to get to know your business inside and out. But you should also look for culture fit – what we often we refer to as "our kind of people". Your relationship is that much stronger when you share similar values.
When it comes to ERP, choosing the right partner is just as important as choosing the right software.
Final Tips to Select Your New ERP Solution
If you’ve followed along with this guide, you’re well equipped to choose the best fit ERP system for your business. As you make your final selection, be sure to check the box on each of these best practices for selecting your ERP system.
- Customize your ERP only when necessary. But don't be afraid to customize when it will deliver value.
- Use the 80/20 rule to evaluate how well an ERP system fits your needs. The system should naturally fit about 80% of your requirements. The other 20% is what you’ll need to tweak or customize to fit your processes.
- If you're hesitating on a decision, consider the cost of doing nothing. Delaying your decision can reduce efficiency, cost you money and have a negative impact on team morale.