Best practise ERP selection and evaluation

Published on the 08/10/2020 | Written by Hayden McCall

Best practise ERP selection_avoid a bad decision

Five tips that can change fortunes…

Buying the wrong software is an expensive and painful decision.

Splashing out on a new application to run your business is a major strategic decision, but it can easily start off down the wrong track creating problems that will be with you for many years after the project is completed.

Every business, and the culture within it, is different (and we’ve seen more than a few), but most are poorly equipped when it comes to buying business software.

The reality is that it just doesn’t happen very often.

To be clear, we’re not talking here about buying small business accounting (Xero, MYOB, Quickbooks/Reckon etc). This is about proper ERP (SAP, Oracle, Infor and their ilk). Whereas small businesses tend to rely on what your accountant recommends (and is set up to handle), ERP selection and evaluation is a much more specialised skillset mapping requirements to functionality and industry credentials.

That you are here reading this, dear buyer, is a good indication you are starting in the right place – putting the groundwork in to educate yourself on the products available in iStart’s ERP Buyer’s Guide, shortlist your options and put in place the steps needed to ensure you make a decision that is right for you.

Best for project
So what is best practise when it comes to the process of ERP selection and evaluation?

Of course Google throws up plenty of good advice, but a lot of it is high level, generic and repetitive – like getting executive buy-in (check), appointing a senior project champion (check), being open-minded with your ‘to-be’ requirements (check) and resolving to do a ‘vanilla’ implementation (check) – although I never really understood what was wrong with chocolate.

The first issue to avoid?

The decision on what to buy and who from is too frequently left to chance. There’s a natural instinct to ask the nearest person that seems to know anything about IT and see what they reckon.

That’s like getting your plumber to design your next house.

Now, depending on your needs and the experience of your plumber, that might lead to a great result. As long as ‘simple’ applies only to your business process, then there’s every chance their answer will be on the right track.

“ You’re going to be recommending a partnership that you hope your business will not hate, so time invested in getting to know the software and people is well spent.”

But if you’re in the ERP game then you’ve probably left simple behind.

ERP is about handling layers of complexity and yours is likely to be a unique blend of industry, culture and markets that needs a more robust solution that can accommodate your particular nuances.

So, here’s some tips that will reduce the risk of a cock-up and save plenty of cash along the way.

TIP #1
Treat selection and evaluation as a mini-project

Decisions made early in project establishment are vitally important and so need proper resourcing.

That means a plan, clear scope and specific deliverables. These should include an updated and approved business case, appointment of a preferred vendor and budget estimates nailed down for licensing and implementation.

To create momentum, appoint a trusted project manager and a busines analyst (type) with an understanding of how your business runs at a process/systems level.

At this stage, representation from finance, IT and operational SMEs (of the subject matter expert variety) may not be necessary within the project team, but guidance and engagement with these key stakeholders will be.

If you’re lucky, the team will have some experience in software selection, but chances are they will need some help. Give them budget and autonomy to appoint a specialist independent advisor in ERP selection and evaluation.

An external consultant is not there as a hygiene factor so you can say yes to the ‘independently reviewed?’ question. Hire them early so they can contribute their experience to project establishment and ensure early work delivers value later.

Resist the temptation to engage with vendors at this stage. Their implementation methodology will be very important, but not until later.

The establishment phase is important as it lays down the groundwork that will ensure the implementation project gets off the ground smoothly.

TIP #2
Define scenarios, not requirements

If yours is like most projects, reaching this stage is not where things have started.

The business has probably been working steadfastly gathering the requirements for a system that will address long-running pain points. But that vital exercise can become a selection overhead that muddies clarity on the key areas that offer the most promise.

We recommend that requirements are kept at a high level and only be developed for areas that will differentiate one system from another. If you are searching online for the comprehensive list of ERP requirements you are off-track.

90 percent of these requirements will be delivered perfectly adequately by 90 percent of the systems you might be considering.

It’s the 10 percent that really counts and that is where your focus should be concentrated.

Identify these and express them in daily shop-floor terms (OK maybe de-coloured) that explain clearly the scenarios where you expect your ERP solution to inform decision making.

There may only be 10-20 that actually matter in a vote for one system vs the other, and these are the ones that go into your RFI document. It is up to the shortlisted vendors to explain back to you in similar terms how their system will address the scenario.

Your RFI document shouldn’t consist of a checklist of hundreds of function points that you expect the vendor to self-assess fit/gap. What does 198 versus 212 ticks out of 223 requirements tell you? Probably more about the respondents’ interpretation of the context in which the question is asked than any measure of system capability.

TIP #3
Build a pros/cons Shortlist

Using a structured approach to identify possible candidates and document the decision process will pay dividends when the Chairman says you should go with the solution his fishing buddy sells.

That means pros, cons, local vendor contacts and reference site checks to back up every yes/no decision.

This is not an exercise in collecting all the contact details for vendors so you can blast a 50-page RFP out to all and await the genius in the responses.

It is the due diligence needed to concentrate your efforts on genuine contenders and avoids you getting inundated with vendor enquiries and complex responses that all need consideration.

And while this point may not be top among your concerns, it also means you don’t waste vendor resources responding to opportunities that are unlikely to convert because they are fundamentally a mis-match from the outset. There’s probably a study somewhere tallying up the total cost to businesses responding to hopeless RFPs, but let’s just agree – it’s a substantial waste.

Aim for a maximum shortlist of five for your RFI and narrow that down to just two to invite into the detailed discovery of an RFP process. Everyone will thank you.

TIP #4
Rank the responses (and then ignore)

There has been plenty of debate over whether software procurement should use the age-old RFI/RFP process. Surely there’s something way cooler these days?

Yeah, nah. Call them what you will, but the fundamentals remain.

So let’s not try and get fancy. The RFI invites vendors into the process, the RFP produces the basis from which an agreement can be drafted to confirm your chosen ERP partner.

So how to pick a winner?

Don’t let vendors respond in freeform, be prescriptive. Direct them to respond specifically and succinctly to the questions posed inside your template.

That means sending out a Word document (no, not a PDF numpty) that contains all relevant background but is primarily structured around your 10-20 real world scenarios (ref Tip #2) that the solution must address. Under each, provide a section for the vendor to insert their response.

From there, you have the basis to conduct a structured evaluation. Assign a 1-5 priority factor to each scenario and score the adequacy of their response on a 1-3 scale.

Priority X Score = Ranking.

And the highest ranking solution wins? Ah, no. The completion of the exercise is what delivers the real value, the number that drops to the bottom is (probably) by that stage fairly arbitrary.

With the metrics in hand, your head can then have a good long chat with your gut, consult carefully with your heart and together resolve why the plumber and the Chairman’s fishing buddy are wrong.

TIP #5
Discovering proof

So you’re down to a two horse race. It’s time to get down to the knitting. You’re going to be recommending a partnership that you hope your business will not hate, so time invested in getting to know the software and people is well spent.

At the same time, vendors will be eager to drill down into your detailed operations and uncover the process steps that make you unique, and also protect themselves from an expensive mis-match.

And you both really ought to make sure you get along with one another.

All that comes together in your demo/discovery workshop(s).

These workshops signal to the business that your project is about to get serious, so don’t approach this phase lightly.

You’re asking senior execs and SMEs to assemble in a room (virtual or not) and explain to strangers the intricacy of how they do their jobs. You’ll also be asking them to endure demonstration of software that is configured for an entirely different business.

It will be a stretch of grey matter, relationships and patience. Good humour is a recommended ingredient.

Fortunately (ref Tip #4) you already have the prioritised business scenarios written up and some idea of how the solution will address your requirements, so the agenda is clear.

If all goes well, you’ll come out of the room both the wiser.

If not, then the decision has probably been made for you.

iStart provides a range of services to assist your software evaluation project. From free advice over the phone to a quick shortlist assessment or deeper advisory services through Software Shortlist, we are always happy to listen. Please get in touch with the author at or 0800 928 268 or 1800 462 388

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