Choosing the right ERP for you and your business goes beyond your immediate market reality. The right resource planning must match the expectations of many stakeholders and simultaneously answer all technical challenges and business model requirements.
Choosing the right ERP solution for your business involves a paradigm of crucial factors that need close examination. Betting on the platform with most features is a gamble since many specific conditions and requirements remain unaddressed. Since there is no universal ERP solution, the right approach to getting the right one is nothing like the popular one-stop-shop options.
Some of the common problems after failing to get a working platform are
- high TCO costs
- unknown requirements
- limited customization capabilities
- poor system performance.
The best ERP solution comes from a lengthy process of evaluating this specific bundle of problems.
Important considerations on ERP systems
ERP Features and the Feature Trap
Is the abundance of ERP features a good thing? – How does it feel to have ten thousand spoons when all you need is a knife? Most ERP solutions claim they do it all because they support a prolific library of features. Common mistake executives make believing that many existing features must meet every present or future need. Too many options automatically render most of them useless. The idea that these tools will come into use someday is a myth – most of them sit quietly in the corner. Having too many features is taxing to businesses, but to their customers too.
The User Experience
Like any app with notable success, great planning should be easy to use for everyone. Some users love it, and others do not. It is a brewing disaster. Technological innovation with the capacity to improve the lives of millions is extremely hard to achieve. The same applies to ERPs: most are designed for a wide audience with wide criteria. Nevertheless, a great user experience is necessary and more than keeping the main actors comfortable in their working zone. It has other distinct positive effects: the easy learning curve makes onboarding a breeze: and newcomers learn to use it fast.
System Performance is Key
ERPs work well on paper, but a slow one will leech money, and time from the organization, and rob employees of optimal performance. To rigorously evaluate the promised power behind the platform, you must know its behavior intimately. It is good to test them directly on your system and users first. If your business models are a match for the software, but your team has a concern, you had better learn about this before making a base comparison.
Understand ERP dichotomy: Simplicity vs. Complexity
A well-grinded ERP system must solve complex problems but, at the same time, be simple to use for everyone. The delicate balance of this duality is naturally tough to maintain. Great solutions appear simple from the outside. If the primary system designer did their job well, the complexity would remain hidden from view. You do not want your employees to solve more problems with a flawed “universal” solution.
Limitations – Does the ERP solve everyone’s problems?
Enterprise resource planning is not about a well-knit solution for the sole purposes of the company. Every employee, stakeholder, partner, or supplier must be part of the picture. Such a deep examination will reveal all the problematic areas that need optimizing. Those who use the ERP the most do not always have the upper hand.
Improve only what needs improving
Your company must already use specific software apps for various team members and locations: the office, the warehouse, remote team, or field agents. Each group has a preferred selection of software tools, and this bundle of apps does not always have great compatibility as part of one universal system. For example, a workable ERP solution is one where all agents use a single login point. A reliable source for insights about what is missing is your team evaluation. Interviewing your crew is a way to highlight crucial requirements for your ideal resource system.
Global connectivity – Remote Teams & ERP
If your business relies on the collective effort of a well-knit remote team, the platform must preserve communication integrity and provide data privacy. COVID-19 was enough to boost the popularity of cloud-based solutions.
Great ERP systems are built around expandibility
ERP evaluation can be a struggle if your developing company constantly needs novel solutions to emerging problems. It is not easy to predict how business growth will affect the efficiency of your internal operations. Eventually, progressive businesses adapt their software solutions to change. Business growth requires new best options. To satisfy your emerging business models, your platform needs to be adaptive. Therefore, a future-ready ERP is not only fast and easy to use by everyone but also very flexible to cover unforeseen challenges- So look for easy expandability, API access and more.
7 Important Factors for choosing an ERP system
ERP features are only useful when they come into play. In all other cases, they are the solutions to problems that may never arise. If a feature does not contribute to your daily business requirements, you should explore options that directly tackle existing problems.
1. Performance and Speed
Some ERPs have a noticeable delay between user input and app response, sometimes close to half a minute to see the dashboard! From an individual perspective, this minute-looking downtime looks negligible. However, multiply it by the number of every employee that experiences it, and the cumulative damage escalates to a few hours monthly.
Because of the repetitive pattern of most software-caused delays, fixing them saves massive amounts of downtime.
2. ERP Cost & License fees
Cost is a fundamental factor in picking a solution for digital resource management. A close-up to ERP costs reveal that the license fee is a considerable chunk. Therefore, individual subscriptions of in-bulk licenses impact the TCO. Fast-growing companies accumulate new expenditures, and the demand may force them to switch services, change their plans from monthly to annual, or prefer a per-user license over a shared one.
3. The total cost of Ownership (TCO)
Although the type of license fee and the regular rate are paramount for TCO, it is by far not the only key factor involved. Let us see all the factors participating in the overall cost:
- Setup: setting up the ERP, one-time-fee
- Customization: adapting the platform to your specific needs, one-time-fee
- License-Fee: /per year /per user /per tier
- Internal IT-Team Costs: if self-managed, then the IT team needs to be up-to-date and paid
- Costs of training: more complex systems have corresponding higher training costs
- Hosting/Servers: data hosting comes with many options: 1) internal servers, 2) cloud servers, or 3) cloud-managed infrastructure
4. Range of Customization & Platform Flexibility
The resource management system should be easy to adapt. Some platforms are extremely strict with expansion and can incur excessive costs. It might limit future projects and decrease the company’s performance.
5. Data & Data-Ownership
Data management is not industry-specific but a key factor for the success of most businesses operating today. Data control of corporations determines how well their business models can integrate with the demand for future services.
GDPR and other data regulations already play a crucial role regardless of project or business size.
6. Security & Privacy
With good user management and less circulating data, data security is a breeze. However, you need a bundle of tools to just cover the basics. SSL and secure server environments remain necessary elements in any cyber security plan. A company must have strong data protection rights and security standards that sustain that protection.
7. Business Continuity
A business continuity plan is insurance against an array of disasters. All software products like apps should be part of a recurring backup system and a fast recovery mode during failure.
Backup is essential for data integrity and without it, failure becomes inevitability, and a matter of ‘when’.
A hard choice: Cloud, On-Premise, or Managed Cloud?
Data management solutions answer a core question: how to manage digital assets best. However, there are fundamental differences in data availability, security, and payment model.
Cloud (SaaS) is easier to scale, and you do not need a specialized team to handle it. However, data might be spread across multiple shared servers, and due to individual licenses, it might come costly, especially with companies that run a score of employees. SaaS also comes with the inherent flaw regarding data ownership: you own your data de jure, but de facto, so does the service provider. Another flaw is the incomplete control over important data access – there is also a danger of a third-party funneling data away using one of the cloud applications.
On-premise data management solutions prevent data from being accessed by outside agents because of its location. However, convenience comes at a price. If you are willing to spend extra resources for an in-house system, your data has a different protection shell, but you need to chip in for a dedicated IT team to sustain it.
Managed Cloud is a complex hybrid between the last two methods: you own your data, but an outside crew handles its deployment. Cloud solutions may discourage investors with many employees because of the individual-based licenses and the consequent steep total price. In contrast, managed cloud solutions are more attractive for enterprises since the more people use the product, the more the cost-efficiency of the investment.
A simple 7 Step Process for ERP Integration
1. Business Analysis
We need to talk to employees and co-workers, constantly assess our working environment, figure out potential future use-cases and expansions.
2. Requirement Engineering
Bring everything together and make a list of important business requirements that need to be met to make an ERP integration successful.
3. Comparing ERP Systems
Different approaches in ERP comparison are influenced heavily by two factors: intent and price. Many businesses bet on having many supporting features. This strategy is near to wishful thinking and often leads to a flawed endgame. When it comes to ERP features, abundance is often inferior to quality, and quality customization brings the best of any ERP.
4. TCO calculations
Why is miscalculating the total cost of ownership a frequent problem? It is hard to cover present issues and accurately predict all future expenses.
Make sure your ERP is customizable and fits your unique requirements. Many systems are rigid and force companies to adapt to them instead of adjusting the approach to the existing business model. Customization makes it easier for companies to set themselves apart. A custom ERP allows businesses to create personalized workflows while generic solutions force employees to do a lot of learning and adapting.
This process determines the value of ERP’s business efficiency. Skipping this step is far worse than the obvious loss of analytical value. ERP must match your team’s work habits and expectations and this relationship clearly shows during these first few days of use. ERP’s introductory period is when you should stand with a looking glass and meticulously measure its effects on your business and team.
Focus on training your staff well. Everyone must understand ERPs best and the most useful sides. In the beginning, everyone needs some help in learning new software. Faster training is possible through an easy learning curve, and easy learning depends on having a flawless interface.
An extra effort during the training phase may give a high start to those who understand the benefits of using the new system. The more people know about the capabilities of the ERP they use, the better its value for them and the added value for the company.
Basic training is incrementally more beneficial with the higher the group of trainees.
Concluding thoughts on ERP sourcing
ERP is critical to both SMEs and enterprises. It must adapt to specific technical needs and be flexible enough to face future challenges. It is wise to choose fast systems that limit wait times and easy interfaces that make interacting easier for those who use them. A perfect ERP solution is easy to get, does not overwhelm users with obsolete features, quickly adapts to the current business logic and future demand, and has a well-thought-out payment plan.
Author: Dr. Andreas Maier, CEO & Founder of SIX.MS ERP