What Should Be The ERP Selection Criteria

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This is a very tough question and situation for any business entity to opt one ERP Solution. The question is how to define the ERP selection criteria before initiating the ERP implementation activities in the organization.The answer is not as simple as we think. Why because it is going to affect you during your further journey as a business leader.  It is something like opting marriage proposal. If choice become perfect, life will become joyful else divorce is on the card. Here all your future business decisions will follow the outcome of this ERP software. So how to select an ERP application that can robustly matches the business requirements.

Prerequisites of ERP Selection Criteria

  • Top Management Needs
  • Middle Level Process Owners ERP Needs
  • Ground Level Process Owner ERP needs
  • Budget Constraints
  • Well Qualified and Experienced Project Coordinator
  • Decision Making Team
  • Information Analysis / Scope definition
  • Technology Selection
  • Right Vendor Selection
  • Workforce Enthusiasm and Willingness
  • Risk Factor Analysis

Consideration of Top Management needs in ERP Selection Criteria

Now the question is who is the Top Management? Normally, in small and mid-sized manufacturing / servicing entities, promoters are the Top management. They have very good business insights and understanding of business needs, their pain areas and requirements for taking business at next level.

 They may or may not be a computer savvy but have good clarity about their needs. It may happen what they are asking is bit difficult to cater in defined budget but their inputs are extremely valuable while in the process of ERP Selection.

Prime responsibility of this level is taking strategic decisions and makes policies for taking business to next level. This can only be happen if the information they are getting from all roots is accurate and logical.

Consideration of Middle Management needs in ERP Selection Criteria

This is commonly known as Middle Management and Managers, HODs, Supervisors of different departments, process falls in this group. Their prime responsibility is to manage department and provide correct day to day MIS statics to Top Management.

Controlling and taking correct decision in the event of any malfunction or strategic change in running process based on Top Management inputs is also the part of their responsibilities.

So these level executives must be more matured and responsive towards system needs and handling the data provided by the system for taking right decision.

Consideration of Bottom Level process owners needs in ERP Selection Criteria

This is the last most important stakeholder while in the process of ERP selection. Based on my vast experience, I have seen, this is the only pain area in ERP implementation phase that . They have the ability and can make any system successful or scrap.

Generally, companies do mistake while are in ERP selection process. They do not call this level during demos sessions held by any vendor. These level executives directly deal with particular tasks and understand process in better way as compared with someone else.

These level executives know all loop holes and pain areas of the process and further will work in the system as Data Entry level. Hence neglecting their importance during ERP software selection process, may become harmful for both, Company and Vendor.

If the system is not up to their expectations and having some unhandled exceptions, will have to face bad mouth from these level executives. A system that makes their life comfortable and ease in delivering required information will be considered best

Budget Constraints

Budget Constraint in ERP selection criteria

This is the most important factor of any project. Without defining / allocating budget for such activities, cannot move ahead a single step. Budget will define on which technology / platform we can go. Which vendor, we can select to implement the ERP Application in the organization. Like any other project it also has a deviation of budget with a tolerance of normally +10% of the total defined budget. This figure is the tentative figure when ERP Implementation process is very effectively defined and controlled according to defined schedule.

Normally ERP Implementation budget is divided in four major segments

  1. Hardware and Networking Cost
  2. Software Cost
  3. Fixed Implementation Cost
  4. Variable Implementation Cost
  5. Running Cost

What is Hardware and Networking Requirement?

This can be divided into

  • Servers Cost
  • Client Cost

Servers cost broadly depends on Database layer and implementation model, we are opting to implement the ERP Software

On premises and Private Cloud require high initial budget while Public Cloud does not require any such initial budget instead it is a service opted by some cloud service providers and against that settled Invoice amount need to pay to that service provider.

Work-station Hardware Cost

Work station hardware cost completely depends on present available infrastructure position and technology going to opt. If the ERP system is browser based then can be run on even low level client PC otherwise PC with high RAM and processing speed will require.

Software Cost

This will again depend on Database layer architecture model we are going to opt. If this is On premises or Private Cloud investment on OS, Database have to do at very initial level of implementation.

If it is Public Cloud, only previously decided Bill amount has to pay.

Work-station Software Cost

Work station Software completely depends on present available Licensing position and technology going to opt. Here cost factor depend on selection of OS and the ERP technology. 

Fixed Implementation Cost

This is the cost of ERP implementation, settled with the vendor, implementing the ERP Solution in the organization.  This is the fixed cost and normally pays in multiple agreed slabs. Normally these slabs are the multiple level of ERP Implementation, from SRS (Software Requirements Specifications) to Go Live

Variable Implementation Cost

This is the most important part of cost analysis. Many times organizations missed to consider it. Sometime this leads the implementation cost at much higher level as compared to expected budget.

Multiple factors affecting this cost are

  • Man Days Cost
  • TA / DA / Lodging / Boarding to vendor’s Implementation team
  • Hiring any consultant to audit the system
  • Less homework while deciding scope of Project and then generation of new requirements during implementation phase.

Running Cost

This again depends on Database layer model opted for implementation. If it is On premises or Private cloud, is very less but if Private Cloud then decided payment to Cloud service provider has to do.

Well Qualified and Experienced Project Coordinator

Project Co-coordinator is the only person who can lead to project a successful end or mess-up the entire implementation. Normally small and medium level organizations do not want to invest much on this position and assign the task to less experienced executive.

This is the person who is collecting and analyzing the requirements at multiple levels and present to Decision Making Team for getting approvals and passes on the approved requirements to Vendor counterpart.

If this person is not having good exposure to manage such implementations, will not be able to collect all information and also face difficulty while dealing with highly experienced client counterpart and client team.

 Vendor team can easily manage him while dealing some complex situations or logics of the requirements. It is very easy to prove him about particular task is out of scope or not easily manageable or can be rethink on later stage or so.

So it’s up to you on which horse you want to bet.

Decision Making Body

Strategic Decision Making Bodies on ERP Selection Criteria (1)

This is the most important factor of ERP Selection Criteria. To manage a successful ERP implementation formation of a good team of senior level executives is highly desired. This team is also known as Core Committee. This committee is very much responsible for successful implementation under budgetary control. Due to non-availability of such committee or irresponsible attitude of committee executives , a successful implementation is more or less is very difficult or can say from the very start going towards dead end.

Some responsibilities of this Committee are  

  • Inter departmental discussion to get their requirements
  • Fast and precised Analysis of gathered requirements
  • Early decision on Database layer implementation
  • Routine discussion and meeting to get status of system implementation
  • Brainstorming and fast decision on complex business logic
  • Fast decision if change in some process required in their process
  • Fast decision if particular requirement is beyond the scope
  • Fast decision if particular requirement cannot be derived
  • Fast approval on Reports generated
  • Fast decision on commercial decisions like procurement of Infrastructure, vendor payments etc

We can say this committee is less responsible on technical front rather highly responsible on commercial and decision making front.

Information Analysis / Scope definition

This is the most important part to decide before planning to go for ERP Implementation. This helps in defining budget and selection of ERP vendor. This is something like to get awareness about our requirements and prioritize them according to need on below mentioned basis:

  1. Most Important
  2. Very Important
  3. Important
  4. Moderate Important but required
  5. Less Important but required
  6. Less Important but if can be managed its good
  7. Can Leave. No need to engage resource

How to Define ERP Scope

  • Write down each and every department, we want to cater in new ERP Software, on one white paper.
  • Again write down these Department names on  separate white papers
  • Handover these separate papers to Department HODs and ask them to write down each and every activity they do in their department
  • Collect papers from all HODs
  • One by one sit with department HODs and discuss every written activity
  • Take 7 (Seven) blank papers for every department, going to discuss, and mark headings mentioned above (Most Important,……..)
  • Based on discussion held with HODs, note down all activities they mentioned in their paper on these 7 papers.
  • Now you are having a very clear picture of each and every activity with its priority.

 

Note:

This exercise must be conducted in very friendly manner. If required, ask HODs, if by mistake they have forgotten any particular activity to mention here, pls do not bother. Note down them again. During this discussion, you shall get a clear picture of each and every task which are important and must be included in the system and what we can leave.

My experience says, many activities are there in each and every department which are either of no use or can be managed differently or doing duplicacy of work.

Right Technology Selection

In ERP Selection Criteria , Technology selection follows the ERP budget.

 Now you are almost ready to go implementing the ERP solution in your entity. You have Budget. You have IT team. You have decision making body. You have scope of the system. Now what’s left? Yes, Technology! It will help you in finding a good technology partner that can implement the system in your Organization. Your budget has already tentatively defined the technology you can bet for. Now only have to find some good vendor.

Right Vendor Selection

The basics of Vendor selection while setting ERP selection Criteria, follows the Technology, organization wants to use.

Vendor Selection can be done either researching or discussing with other companies which have already implemented the system and based on their inputs, you can discuss with their vendor.

You can surf internet for the right vendor with reviews, if you have to find out some vendor without references and then ask them to send their profile. Do a good study of their profile and their website and ask them to give some online / offline demo.

Better first only IT team should take online demo and if they are satisfy then only arrange a demo for all stakeholders with Q & A session.

Hope this exercise will give you a good insight about right vendors for you organization. Now it is the time of decision making body to go for Techno-commercial discussion with shortlisted vendors and finalize one for future ERP Implementation.

Workforce Enthusiasm and Willingness

Though this exercise has nothing to do with ERP Selection Criteria but still a very important area to understand

Now you have Budget. You have right technology. You have Right vendor. You have right IT team. You have Right IT Infrastructure. You have right Core Committee. What left? Nothing?

Have you ever given a thought about your functional and ground level executives for their willingness and enthusiasm towards new system? If they are happy and motivated, no one can stop a successful implementation but if they are not. I bet, you can never achieve your goal and may put yourself in a dead lock situation followed by blaim game.

So what can be done for their motivation?

  • Call them in routine meetings and status discussion.
  • Never hide clear picture from them
  • Listen their ideas and inputs calmly and if pitching, accept and notify them.
  • For good work praise them in open meetings
  • For any deficiency, discuss them separately and also listen their version before jumping on any decision.
  • After all money is everything. We all work for money. Reward them who are doing good and motivate others to get it in future.
  • You cannot measure someone’s output with biased scale. If doing so, you are sowing wrong seeds.

Risk Factor Analysis consideration in ERP selection criteria

Risk Factor Analysis in ERP selection criteria

Risk factor analysis is same while discussing ERP selection criteria like any other project. This is a well-known fact and we all have listened – ERP implementation get failure. Is this only ERP which become failing? Answer is NO. ERP is also a project like many and it also has attributes affecting it that can make it successful or fail. If you are routinely doing and keeping an eye on Risk factors and analyzing them properly, I challenge, it cannot be a failure.

The main problem of failure is inefficient Core committee, defined for decision making and motivating others.

 When due to any reason if this becomes fail in delivering it’s duties then at the time of any dispute or complex situation, instead of taking responsibility and resolve the issue, normally they pull them out and start pointing out on IT and vendor’s team.

This may lead the implementation in a dead lock situation which is very dangerous for both Organizations in terms of money, efforts and resources involved and to vendor, its reputation.

While preparing Core Committee, it must be considered, committee must have executive of high level of business knowledge, moral and can deliver responsibilities honestly.

Thank you and Best of Luck for ERP Implementation in your Organization and reading - What is ERP Selection Criteria

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