White Paper - The ERP Selection Process - 10 Steps
White Paper - The ERP Selection Process - 10 Steps
White Paper - The ERP Selection Process - 10 Steps
Front Office vs. Back Office Requirements Does it make sense to bundle these requirements under one procurement cycle or are there sound business reasons for separating them?
What if?
For most organizations, change is inevitable and can create significant organizational and strategic challenges. For that reason, its important to consider a number of different what if scenarios and evaluate the organizations capability of responding to the following change drivers: Reorganization and/or restructuring; New regulatory requirements; Rapid growth; Mergers and acquisitions; Business process change; Emergency situations.
If the ERP system is not equipped to handle change effectively, these change scenarios can be very threatening and expensive, and might even impede the organizations ability to take advantage of growth opportunities. Of course, the benefits of change must always outweigh the risks of not changing, so you should consider what would happen if the business were to do nothing. Not all issues have an easily quantifiable dollar value, though the impact (and cost) of continuing with an inadequate ERP system is likely to be significant. Asking this question will help you determine whether your wish to change is a desire or an urgent requirement.
Example: One area to consider is whether or not the current system provides accurate and relevant management information, which allows for the discovery of underperforming areas. The risk of not having this information could allow a loss-making area to go unnoticed, costing the company money every day.
You will also need to appoint a full-time project manager, who will be responsible for moving the selection process through to completion. This leadership position is typically be occupied by an executive in the finance or IT department with a high degree of authority in the company someone who has knowledge of the existing systems and the problems associated with them. He or she must understand the business objectives of the project relative to each department and have a good working relationship with those departments. As well, they should also have a good working knowledge of software. We recommend that a formal selection team be appointed, covering all relevant functions of the organization. This team does not need to be the same team as is appointed to oversee the implementation, but we recommend it. These team members are not required on a full time basis, but are required to have a deep knowledge of their departments business processes. Including a representative from each department of the organization early on in the selection process will encourage buy-in for the system and ultimately increase the potential success of the project.
A typical team should include the following roles: Project Sponsor Selection Project Manager (Finance or IT) Senior executive from Finance Senior executive from Human Resources Senior executive from Budgeting and Planning Procurement Manager IT Manager Senior executive from each operational department
20 50 125 150 16
But what about the future requirements we dont yet know about?
Planning for change is an evolutionary process. If you know that your circumstances are going to change, does it make sense to invest significant time and resources into an implementation that is ideal for right now, but wont accommodate future needs? If your business is continually evolving, or you would like it to, you should consider the degree of adaptability you need from a system. A rigid ERP system can require businesses to finalize processes that will soon become outdated, which may force the organization to hire costly external consultants whenever a post-implementation adjustment is needed. So, when selecting an ERP system, you should be aware of not only the functionality of the system, but also the adaptability and responsiveness of the system. Given that your business is constantly growing, you should pursue an ERP system that has the ability to grow with the company and embrace future unknown business requirements.
For a successful implementation, you will certainly need the involvement of a specialist consulting team from the vendor experts familiar with the solution and experience implementing the system effectively. It is also vital that your own specialist staff commit sufficient time to the project, since they know your business best and can ensure that the application delivers the necessary, and desired, requirements. The cost of implementing a new ERP solution could be dramatically affected by any constraints you have on the time and resources you can commit to the project. It is therefore important to assess these constraints now. The time commitment needed for the implementation will surely fluctuate throughout the project and will depend greatly on the size of your organization. Still, creating a table that outlines the estimated resources required for implementation, with corresponding time obligations will help you expose the areas that lack sufficient resources. If the time you have for implementation is very short and/or you have a low level of resourcing that you can commit to the project, you might require additional support from the vendor. Example:
Time Restrictions Current system maintenance contracts up for review Annual shutdown Need to go-live by the next year end Internal Resources Needed for Implementation Project Manager Financial User IT Specialist HR/Payroll Specialist Project Costing and Billing Specialist Subject Matter Experts from each relevant area of the organization Estimated Time Commitment Required * Full Time Full Time Half Time Half Time (50%) Part Time (25%)
*Note: These example time commitments are based on an average medium- to large-sized organization. However, these values could dramatically change based on the implementation plan, the size of the organization, and the level of customer involvement during the implementation.
Example:
Weight Criterion Vendor A Low (1) Specific Need: Does it provide dashboard views of general ledger and financial data? User-defined fields: Is there the capability of adding and maintaining user-defined fields, or does IT need to be involved? Implementation Process: How well does their implementation method fit our needs? (Timing, effort, etc.) Training: What level of training is the vendor able to provide? Reference Check: Are you able to contact at least two quality reference customers to validate the solution and its scalability? Post-implementation flexibility: How easy is it to adapt the system to future requirements? Vendor Vendor B Vendor C
Low (1)
Medium (2)
Medium (2)
High (3)
49
52
42
In this example, Vendor B has the highest score overall, even though Vendor A has been ranked as Excellent on more criteria. The reason is because Vendor B scored better on criteria of higher importance.
Whichever method you decide to use, it is important to determine the decision criteria early in the selection process and that it is agreed by the entire selection team. It will also be beneficial to have the decision criteria in place before searching for potential vendors so that you can focus on satisfying the highest priority needs first. Regardless of your decision-making approach, you must still rank all of the vendors using the same method to ensure an accurate and fair comparison.
solution and your specific project requirements in more detail, it will be impossible to get an exact figure for the entire solution.
What kind of support do you offer? What is required to make adjustments to the system after implementation? Do you subcontract to 3rd parties for implementation services? Does the solution incorporate workflow or other background automation to drive processes and improve accuracy/efficiency? Do you have an active user group? How much influence do customers have over your future product direction/developments? How long does it typically take to implement the solution for a customer similar to us? Do you have a proven, structured implementation methodology? What technology platforms (operating systems, databases) do your applications run on? Is your system able to adapt to changes in regulatory requirements and growth? Can you describe your technology stack? Questions you should be prepared to answer: What are your annual revenues/operational budget? What is the nature and industry of your business? How many staff and sites do you have? Do you have centralized administration units? Are you considering a move to shared services or business process outsourcing? What is your current IT infrastructure? What is driving the need for a new ERP solution? How many users of the system will you have for each application area? What volumes (documents, transactions) do you process each week/month? What other main systems need to integrate with the application? Do you have a project team in place? What is the scope of the project? Who is leading your evaluation project? Do you have a budget allocated to the project? What is your decision-making process and who is involved? Where are you in the process of the evaluation? When are you looking to make a decision? When are you looking to go live? Which other vendors are you considering?
The approach is impersonal and it is difficult for the vendor to establish a relationship with the customer. For these reasons, we recommend the RFI approach described above. This will reduce the amount of time and resources spent on the selection process, allow your organization to focus on your specific needs and get to know the potential vendors and ensure you get the solution most suitable to your current and future requirements.
also discuss and assign appropriate roles and responsibilities, so that resource constraints can be evaluated and everyone understands which areas of the implementation they are accountable for. Good project planning is essential to a successful implementation it not only provides a guide for the implementation, but it also proves to be an important risk management tool.
So, youre all excited about your new ERP system now what?
The selection process is now complete, but there are still some tasks required to wrap up the decision. You are now ready to formally initiate the client-vendor relationship and begin the implementation project. The selected vendor will likely plan a meeting to negotiate the pricing and finalize the contract. This will include a services contract (which will involve the development of a project charter, implementation schedule, budget, implementation team, risk analysis, communication plan), as well as licensing and maintenance agreements. These deliverables will act as a management guide to support the success of the upcoming implementation. At this point, the vendor and the client should
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