ERP System Evaluation and Implementation Considerations

When to consider an ERP system?

Choosing to implement an ERP system can be a complex and time-consuming process; organizations should take a detailed look at their position, needs, and interests before going forward with planning an ERP implementation. Unfortunately, there is no single qualifier for when a company should do so. There are a number of indicators that signal when a company should consider and could benefit from implementing an ERP system:
  • Fast and uncontrolled growth
  • Difficulties assessing financial health
  • Employee costs inaccurate or unknown
  • Poor inventory controls
  • Duplication of effort across departments
  • Consistently not meeting customer needs or expectations
  • Regularly missing deadlines and delivery schedules
  • Inability or inaccurate forecasting

ERP System Evaluation

For each individual organization, the process of evaluating and selecting an ERP system will be quite different. One cannot assume that what worked for Company A will work for Company B. Every business is completely unique, and identifying which specific business conditions and processes need to be integrated or improved will ultimately determine if a system is necessary. The technology chosen should fit the existing business process model, not the other way around. To ensure a proper software packageis selected, the following steps should occur:
  1. A cross-departmental team should be selected. Each individual should have detailed and specific knowledge of their departments business processes and information needs
  2. Detailed assessment of the current hardware and software infrastructure
  3. Analysis of business processes listing current problems as well as desired functionality
  4. A review of software products that are a "fit?for the organization
  5. Elimination of software packages that do not meet the specified needs and requirements
  6. A short-list of vendors for final review ?typically three to five
  7. Detailed product demonstrations
  8. Request references from short-list vendors and visit similar customer sites if possible

How long will it take to implement a ERP system?

To be clear, ERP System implementations are a huge undertaking, and require a great amount of effort in both the evaluation phase as well as the implementation phase. Vendors that claim implementations of just a few months are failing to mention that these were most likely out-of-the-box or limited solutions with little or no customization. On average, customized ERP implementations take 1 to 3 years. While this might seem daunting, the important thing to focus on is how the business process will be improved in the long term.

How much will an ERP system cost?

Total cost of ownership (TCO) can range from a few hundred thousand to hundreds of millions of dollars for some of the larger implementations. A recent study by Meta Group showed that the average TCO of an ERP systems for the 63 companies surveyed was $15 million. ERP systems can definitely be expensive, and the needs of a company will determine the scope and the cost. While off-the-shelf ERP systems exist and are a cheaper option than highly customized versions, companies must still focus on making sure that any solution chosen will benefit the business process and meet information needs long-term. Often, using a greater number of narrower, more generic solutions results in increased differentiation between them from a functional and technological standpoint, potentially increasing costs (or decreasing benefits) to the business in the long run compared to implementing a single, customized ERP system.

Keys to a successful implementation

  • An ERP system must be championed by a senior executive in order create company-wide buy-in
  • Detailed business process analysis - before and during implementation
  • Adequate resources (personnel and funding) dedicated to completing the project and training staff
  • Patience - change and benefits will not occur overnight

Barriers to success

  • Lack of specific goals and metrics
  • Users under-trained
  • Users resistant to the new system
  • Limited resources dedicated to implementation

The next section introduces a number of customer case studies in which companies have successfully deployed and realized benefits from an ERP system. Read on >