How to Complete an ERP Evaluation? [Selection Process & Criteria]

How to Complete an ERP Evaluation? [Selection Process & Criteria]

“ERP” has become synonymous with efficiency, integration, and adaptability. ERP, or Enterprise Resource Planning, is the linchpin of an organization’s core operations, encompassing everything from finance and HR to manufacturing and supply chain management. Gone are the days of basic ERP systems; today’s solutions harness the power of cloud technology, artificial intelligence, and machine learning to offer intelligent automation, heightened efficiency, and real-time insights.

This article explores the intricacies of ERP evaluation, guiding you through the selection process and the vital criteria that drive this transformative decision-making process.

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ERP Systems

Evaluating an ERP: 100% Guide to Select an ERP, Select an ERP Vendor, Successful ERP Implementation

Enterprise Resource Planning (ERP) systems are comprehensive, integrated software platforms that manage various business functions, from accounting and finance to supply chain management and manufacturing. These systems serve as a centralized hub, streamlining operations and facilitating data flow across various departments.

By collecting and normalizing shared transactional data, ERP systems eliminate data duplication, ensuring data integrity and serving as a single source of truth. They are crucial for businesses of all sizes and industries. They provide the necessary tools to enhance efficiency, productivity, and informed decision-making while unifying people, processes, and technologies across the organization.

ERP Software

Modern ERP software stands in stark contrast to its historical counterparts. In the past, ERP systems operated in isolated silos, necessitating costly, intricate, and customized coding to meet unique business demands, hindering technological adoption and process enhancement.

Today’s ERP software, however, unifies diverse processes into a seamless system. It not only facilitates data integration within the ERP but also extends connectivity to productivity tools, e-commerce, and customer engagement solutions. This holistic approach empowers businesses with comprehensive data insights, optimizing organizational processes.

Moreover, contemporary ERP solutions offer flexible deployment, enhanced security, sustainability, and low-code customization. They prioritize business continuity and resilience, fostering rapid innovation while preparing for future challenges.

ERP Challenges & Their Outcomes

Review the common ERP challenges and the shortcomings for users:

  • Poor project management: 50% of ERP implementations fail the first time around, leading to decreased efficiency and productivity.
  • Failure to manage implementation costs and timelines: Most implementations cost three to four times what was initially budgeted, causing financial strain and budget overruns.
  • Internal resistance to new systems: Implementation can take 30% longer than anticipated due to resistance to change. It leads to workflow disruptions.
  • Unclear ERP implementation goals: 51% of companies experience operational disruption when they go live, leading to operational inefficiencies and errors.
  • Choosing the wrong ERP partner: System modifications needed to improve usability can cause overspending 65% of the time. This leads to reduced user satisfaction and productivity.
  • Purchasing software that’s not right for your company: The top three places ERP systems fall short for users are data accuracy, user experience, and analytics. This leads to reduced data reliability and usability issues.

These challenges and statistics highlight the potential pitfalls of evaluating ERP systems and implementations and underscore the importance of careful planning and selecting the right ERP system and implementation team. Users must know these challenges to mitigate their impact and ensure a successful ERP implementation.

ERP Evaluation Criteria

To help guide your ERP selection process and evaluation, here are some key criteria to consider when assessing potential ERP software:

1. Business Requirements

Start the ERP selection process by thoroughly defining your business requirements. Engage with key stakeholders, such as production workers, purchasing managers, executive management, customers, suppliers, and even former employees. Create a comprehensive list of your business needs, prioritize them, and distinguish between “must-have,” “beneficial,” and “nice-to-have” requirements.

2. Upper Management Support

Upper management support is often underestimated but is critical for the success of your ERP system implementation. It goes beyond financial approval; you need active and visible support from top-level executives. Their commitment can significantly influence the project’s outcome.

3. User Support

The success of your ERP implementation relies on the support and satisfaction of end-users. Involve different functional areas and ensure their needs and preferences are considered in the ERP selection process. Provide adequate support, including training and resources, to help users adapt to the new ERP system seamlessly.

4. Functional Requirements

Assess your business’s functional requirements to determine if the ERP system can meet them effectively. Consider aspects like the handling of sales orders, multi-currency support, and compatibility with tax systems, depending on your business operations. Ensure that the new ERP software simplifies processes for various departments within your organization.

5. Integration with Existing Systems

Evaluate how the ERP system will integrate with your existing systems, as most businesses have tools they don’t want to replace entirely. Look for efficient ways to share and update common data elements between systems. Consider integration tools like web services, XML files, and support for electronic data interchange (EDI) if necessary.

6. Budget and Resources

Determine your ERP budget and available resources. Consider the initial purchase cost, consulting fees, training expenses, and ongoing maintenance and support costs. Your choice today will impact your future budgets, so plan accordingly.

7. Technology and Future Scalability

Assess the technology used in the ERP system and its potential for future scalability. This is an important aspect of ERP selection criteria. You want to avoid being on the cutting edge of technology while steering clear of obsolete solutions. Choose ERP vendors with a track record of keeping up with technological advancements and demonstrating a commitment to future development.

8. Total Cost of Ownership and ROI

Calculate the total cost of ownership (TCO) for the ERP system by considering all costs and benefits over time. This includes initial purchase costs, consulting, support and training, support and infrastructure expenses. On the benefit side, assess how the ERP system can improve efficiency, revenue, and customer satisfaction, and calculate the return on investment (ROI) to ensure it meets your business’s financial criteria for investment.

9. Evaluate and Select Options

Consider the various ERP options available, including on-premises, cloud-based, and open-source solutions. Each has its pros and cons, so choose the one that aligns best with your business goals and technology preferences.

10. Necessary Customization

Evaluate the need for customization in your ERP system. Understand whether customization is essential or existing ERP features can be adapted to meet your needs. Consider factors such as available programming skills, ease of customization, and the impact of customization on other ERP components.

The Complete Process of ERP Selection

Selecting the ideal Enterprise Resource Planning (ERP) solution is a critical undertaking for any organization, irrespective of industry or size. To assist you in this process, we present the Lean Selection Methodology. This nine-stage framework enables you to make informed ERP vendor selection selections.

1. Establish: Self-Evaluation

Initiate the ERP software selection process by conducting a thorough self-evaluation of your business operations. Understand why you need a new system, identify shortcomings in your current system, software, or processes, and outline the improvements you expect from the new solution.

2. Collaborate: Assemble a Selection Team

Form a selection team that includes department leaders, stakeholders, partners, and experts. Their diverse insights will be invaluable in understanding the unique needs of each department and ensuring a well-rounded selection process.

3. Define: Create a Master Requirement List

Work collaboratively to create a comprehensive list of requirements and features your new ERP system must fulfill. This step serves as the foundation for evaluating potential solutions.

4. Distribute: Vendor Shortlisting

Select vendors that align with your requirements list and create a vendor shortlist. Evaluate how well each vendor matches your feature requirements. Utilize tools like RFx (Request for Proposal, Request for Information, Request for Quotation) templates for efficient vendor evaluation criteria and process.

5. Justify: Evaluate and Decide

Evaluate your shortlisted vendors and determine whether you want to proceed with the software selection journey. Consider if you require integrations or add-on modules for your existing software or wish to stick with your current practices.

6. Prove: Demos, Use Cases, and POCs

Request demonstrations, use cases, and proofs-of-concept (POCs) from your shortlisted vendors. Demos showcase how tasks are performed, while use cases provide in-depth insights. POCs simulate the solution’s performance using real or simulated data.

7. Rank: Scoring and TCO

Score each solution based on performance in demos, use cases, and POCs, aligning them with your requirements. Consider the Total Cost of Ownership (TCO) to assess the final price tag.

8. Negotiate: Vendor Review and Contracts

Select your top option and review the vendor’s agreements and contracts. Legal review is essential at this stage, and it’s advisable to consult with a law firm for contract negotiations.

9. Sign: Implementation and Deployment

Once all evaluations and negotiations are complete, it’s time to sign with your chosen vendor. Create an implementation plan to ensure a smooth transition.

ERP Implementation Statistics

Here below, we will review ERP implementation statistics, highlighting key data points and insights related to successful implementations, common issues, and implementation duration.

Successful ERP Implementations (2019-22 survey): 67% of distributors and manufacturers described their implementations as successful or very successful. The reasons for very successful implementations were support from management, good change management programs, and due diligence. The two common issues during implementation were inadequate testing and inadequate business process reengineering.

Post-Implementation Process Improvements: 49% improved all business processes, 5% did not improve.

Implementation Duration (by revenue size): Midsize companies (revenue $100M-$250M) – 6.7 months, Very large companies (revenue >$25B) – 12.35 months

Key Trends and Growth Factors in the ERP Market

The global Enterprise Resource Planning (ERP) market has witnessed remarkable growth, with a value of $43.72 billion in 2020, projected to surge to $117.09 billion by 2030, at a CAGR of 10.0% from 2021 to 2030 (“Enterprise Resource Planning (ERP) Market Statistics: 2030”).

ERP solutions have evolved from aiding minor processes to integrating entire business operations, including critical functions like decision-making and hiring. Comprising customizable modules for various business activities, ERP software caters to material purchasing, inventory control, accounting, finance, and HR.

The COVID-19 outbreak has fueled the demand for cloud-based ERP solutions, supporting advanced planning and mitigating supply chain disruptions. Enterprises now focus on enhancing operational efficiency and transparency. Small & medium enterprises increasingly adopt ERP software, driven by the rise in cloud and mobile applications. However, the availability of open-source ERP applications and high implementation costs pose challenges. Yet, the future holds opportunities for ERP expansion, notably in small & medium enterprises and the transformation of business models.

On-premise ERP solutions dominate the market, facilitating resource and operations management. Nevertheless, cloud-based ERP solutions are expected to grow significantly due to the modern business landscape’s increased cloud adoption.

North America leads the ERP market, driven by high digital and cloud technology adoption. The use of ERP software in the region improves productivity and efficiency. Meanwhile, Asia-Pacific is poised for substantial growth, capitalizing on its economic transformation and growing cloud adoption trends. The ERP market’s future is bright, fueled by the need for enhanced business processes and technological advancements.

ERP Market Statistics

The ERP market is experiencing significant growth and transformation, driven by the increasing digitalization of businesses, global trade expansion, and the need for efficient data management. These statistics offer a glimpse into the current landscape and future trends of the ERP market.

Importance of ERP for Businesses

ERP systems have become indispensable for businesses seeking efficient resource allocation and streamlined processes. They enable organizations to optimize their financial and human resources, enhancing core business operations without compromising quality or performance.

ERP systems also excel in planning and coordination, offering real-time insights into inventory, customer orders, and supplier purchase orders to prevent issues. Improved communication and collaboration are additional benefits as employees can access departmental updates.

Furthermore, ERPs serve as comprehensive data sources, delivering valuable reports and analytics that empower executives to make informed decisions and visualize trends for a successful future.

ERP ROI Statistics

Dive into the positive impact of ERP systems on businesses, their role in enhancing efficiency, cost savings, and improving various aspects of operations.

ERP implementation led to business process improvement: 95% of businesses experienced improvements after ERP implementation.

Achievement of projected ROI timeline: Among companies with projected ROI timelines, 82% successfully achieved ROI within their expected timeframes.

On average, companies implementing ERP saw ROI in just over 2.5 years.

Exploring ERP Deployment Options

ERP deployment models vary to suit different organizational needs, and it’s crucial to grasp their distinct characteristics when selecting the right fit for your business. This is more than just an on-premises vs. cloud choice.

On-Premises ERP

In this model, the organization manages the ERP software on its servers, handling security, maintenance, and upgrades in-house. It was once the sole ERP option, but its popularity has waned, with IDC forecasting further declines.

Cloud-Based ERP

Cloud-based ERP operates on remote servers managed by third parties, offering greater flexibility and accessibility. There are two key variations:

Hosted Cloud Solution: Companies purchase licenses but run the ERP on remote servers managed by a third party. Data is stored in a private cloud, granting more control and customization.

True Cloud Solution: Firms pay for access to servers and software without the burden of management. This multi-tenant model, often associated with SaaS, ensures up-to-date, secure software without needing an in-house IT team.

Hybrid ERP

Hybrid ERP integrates elements of both on-premises and cloud deployments. This approach, such as two-tier ERP, can combine centralized on-premises systems with cloud solutions for subsidiaries or regional offices.

Open-Source ERP

Open-source ERP offers a cost-effective alternative, with providers allowing free software download and low fees for cloud access. However, it necessitates technical expertise for configuration and support, making it a choice for those well-versed in software development.

The ERP vendor landscape has evolved, with cloud ERP fueling innovation, enhancing collaboration, and providing valuable insights to drive businesses forward.

ERP Implementation Case Studies

Real-world case studies shed light on successful ERP implementations transforming businesses, delivering greater efficiency, unification, and cost savings. These stories exemplify the power of clear vision, business strategy, teamwork, and employee buy-in in achieving digital transformation.

A Clear Vision: Discover Financial Services Moves to Cloud ERP

Discover Financial Services, a prominent U.S. credit card brand, streamlined its complex IT landscape by migrating from seven customized on-premises ERP systems to Oracle Fusion Cloud ERP. The project team‘s vision extended beyond IT upgrades, focusing on enhancing data quality and making enterprisewide decisions. Discover completed the ERP implementation on time and within budget, benefiting from faster access to financial information, more accurate planning, and standardized functionality.

Teamwork and Trust: ERP Helps Hormel Foods Unify the Business

Hormel Foods, known for iconic brands like SPAM and Skippy Peanut Butter, overcame IT system fragmentation and customization challenges by implementing Oracle Cloud ERP. Teamwork between Oracle, KPMG, and Hormel Foods was critical to the project’s success. The unified system improved business processes, data quality, and decision-making, allowing Hormel to identify growth opportunities and analyze vendor performance efficiently.

Employee Buy-In: Taylor Corporation Rallies Support for Digital Transformation

Taylor Corporation, a global company with diverse operations, embarked on a digital transformation journey, moving financial, supply chain, and manufacturing applications to Oracle Cloud ERP. CEO Charlie Whitaker’s commitment and leadership rallied the workforce to view the program as vital to Taylor’s growth. Skeptical managers eventually became advocates for change, supporting data consolidation and business processes across 85 systems. The transformation has streamlined operations, enabled real-time decision-making, and improved customer service.

These case studies demonstrate how ERP implementations can drive significant business benefits when guided by a clear vision, teamwork, and enthusiastic employee participation.

Actionable adverbs

Your organization’s success depends on choosing the right ERP system and ensuring a seamless transition. At Onboard, we prioritize “People First, Technology Second” because we understand that individuals, not just systems, experience change. We specialize in supporting digital transformation, training, and change management during the implementation or upgrade of leading ERP systems such as Microsoft Dynamics 365, SAP S/4HANA, and Oracle Cloud ERP.

With a rich history of successful projects, including collaborations with industry leaders like Dr. Martens and PANDORA, we bring over 25 years of experience. Our tailored ERP training and change programs are designed to meet your unique needs, ensuring a smooth transition. When you partner with Onboard, you choose a trusted ally for your ERP journey, and your success is out.

Most Common Questions About ERP Evaluation

1. How do you evaluate an ERP vendor?

Evaluate an ERP vendor’s system capability, scalability, and customization choices. Take into account the vendor’s track record, industry experience, and client references. Check for compatibility with your business procedures and future expansion plans. For a comprehensive decision-making process, evaluate support and training offers.

2. How do you compare two ERP systems?

Focus on critical characteristics such as system capability, scalability, user interface, ease of integration, and vendor support when comparing ERP systems. Consider deployment alternatives, customization abilities, and overall cost of ownership. Obtain user feedback and evaluate each system’s alignment with your specific business demands and targets for the future.

3. How many ERP characteristics are there?

When evaluating ERP systems, there are numerous crucial features to consider. Scalability, system functionality, flexibility, ease of integration, deployment options, user interface, customization abilities, vendor support, and overall cost of ownership are some of the most important. Each of these elements is important in establishing the viability of an ERP system for a specific organisation.

4. Is Oracle an ERP system?

Oracle does provide ERP solutions. Oracle ERP Cloud is a comprehensive package that includes finance, procurement, project management, supply chain, and other components. It assists firms in streamlining operations, increasing efficiency, and managing many areas of their enterprise operations.

5. What is ERP assessment?

An ERP assessment will help you evaluate your existing ERP system (if you’ve got one), analyse your business requirements to establish the viability of a successful installation and provide a general estimate of the cost of the implementation or update.

6. What is the ERP selection process?

Defining business needs, researching available options, picking vendors, performing demos, and reviewing proposals are all part of the ERP selection process.

Nicky Cortes
Nicky Cortes
Director of Training and Development

As Director of Training and Development, Nicky's role encompasses Trainer Management and the development of Onboard's strategic training solutions. After 25+ years as a trainer she has a wealth of information at her fingertips. She scopes complex requirements and devises training plans to roll-out ERP end user training. Nicky is able to analyse large organisations and user groups, presenting the information back to clients in a comprehensive and clear manner.

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