After selecting a short list of ERP systems conduct ERP system and vendor due diligence. Commit time and resources to vendor due diligence. An experienced, independent third-party ERP professional can add significant value based on specialized knowledge of vendors and ERP systems. They can also speed up the due diligence process.
Make reference calls with the vendor’s existing customers who are currently using the proposed ERP system. Visit one of the vendor’s customer facilities to see the ERP live in operation in a production environment.
Conduct a background check on the vendor and its management team, and thoroughly investigate its financial position. The vendor's ERP product market share and financial health should be sought. Examine not just its yearly revenues but determine whether those numbers come from actual sales or from contracts that have yet to be signed. Search for early warning signs the vendor is in financial distress, such as the resignation of the chief executive, massive layoffs and restructuring announcements. Check for past and present legal proceedings and regulatory actions against the vendor.
Vendor experience and time when the ERP product was released, including new releases, should be known. Ask more specific questions about the vendor’s plans for the ERP product, such as the amount of money the vendor budgets for development, its plans for rolling out new releases, the average length of service at the vendor for developers and support staff, and the processes the vendor has in place to provide technical support.
It is critical to clearly understand the ERP system and the complete offering by the ERP vendor. Key issues include total cost of ownership (TCO), data migration, complexity of customization, data quality, data warehouse and business intelligence functions, interoperability, and vendor support.
Yet the most important factor may be ease-of-use and complete user acceptance among different departments of the organization (finance, human resources, sales, etc.). Without complete user acceptance even the best ERP system may not deliver the benefits the organization needs.
Review in detail the TCO of the ERP system, including license fees, implementation, data migration, customization, product support, hardware, networking, user training, and data quality - data warehouse - business intelligence. Consider schedule and budget goals.
Consider implementation structure, management and costs. Make a list of expenses including the expense on staffs and time directed towards ERP system implementation. How much customization is required? What is the cost and complexity of the implementation? Will a professional system integrator or vendor take charge or work together as a team. Most implementations are a three way joint venture between the organization, system integrator and vendor. Who is the lead project manager? How are realistic expectations set and managed?
Consider the cost and complexity of customization and integration of third-party products, if any. Architecting the appropriate level of customization for unique business processes is important for ERP system success. Customization is often necessary to match unique processes and maximize ERP value. Yet complex customization can result in high implementation costs and significant delays.
Complex customization often causes implementations to be delayed and invariably lead to requests for more resources. Consider how the organization should balance schedule and budget goals against the benefits of customizing the ERP system. Does the added cost and time outweigh the expected benefits?
Consider data migration issues. There is a huge amount of work required to migrate data to a new system. What are the respective data migration, data quality and structure responsibilities of the organization, system integrator and vendor? Modern ERP systems require high levels of data integrity. Inventory records, bill of materials, financial, human resources, and other data need to become highly accurate, complete and properly structured. This is tricky and may cause the implementation to be delayed and lead to requests for more resources.
Consider ERP system interoperability. How easy or complex to make modifications, or integrate third-party products. Does the ERP system need to share information and interact with other computer systems?
Consider ERP system training. Training the organization to properly use the ERP system is very important. A senior executive should be accountable for ensuring the ERP system is used effectively and delivering measurable benefits to the organization. Committing significant training resources is a wise investment to ensure the system delivers the benefits the organization needs. Ease-of-use and complete user acceptance are important factors and ought to be accorded proper weight.
Attempt to reach a consensus among users to make a selection as to the preferred ERP system and vendor. Remember to include as many users as possible to avoid selection bias.
Remember no ERP system is a perfect fit: expect to make trade-offs as each ERP system has strengths and weaknesses for your unique business processes.
Finalize ERP selection.