How to Replace an ERP System – Part 2
The goal of the Final Selection Project is to find the vendor who best meets the company’s overall requirements and budget. Selection of an ERP system requires careful analysis to ensure that vendors can meet your company’s expectations. Continuing on from the previous post, here are the steps to make the final decision:
Create a demonstration script
Software vendors love to talk about what their systems can do and show off the more visually appealing features. Those may be helpful to your company but you also need to know how it will work in day-to-day operations. To put you in control of the demo process, have the selection team create a demo script based on the process design and required features defined above. Send those scripts to the vendors several weeks in advance of the demos and ask that they work through those scripts at demo time. This helps you discover what works for your company and what doesn’t. It also provides a structured approach to compare how the systems meet your needs and facilitates the decision process.
I have worked on both sides of the ERP sales process. As a ‘sales engineer’ on the selling side we would show how the systems we represented fit the business but would make sure the CEO saw the more visual features like performance dashboards, as that is what often closed the deal. On the buying side of the exercise I like vendors to show these features but also make sure they cover how those features get deployed as part of the implementation process.
Have the team prepare for the demo sessions by setting up a scoring mechanism for each area so the selection team members can rate each vendor on how their solution meets the needs of the company by area. The system demos will tend to blend together in peoples’ minds so having a score for each area and a section for observations will be useful in the final selection discussion.
The team should spend time with each vendor to make sure the vendors understand your business and the context of your company’s needs. If they do an onsite demo, plan time to give the vendor team a tour so they can better visualize how to best fit the software to the company.
Schedule the demo sessions close together to enable the team to be able to compare the systems. Allow the vendor some flexibility so you see all of the features they think may apply to your business but make sure they cover all of the high-priority areas in the demo script.
After each demo sessions are complete, the selection team should evaluate and score each of the solutions. You may want to join them as they work through each function of the business using the demo script discussing what went well and what didn’t. If work-arounds weren’t sufficiently covered in the demo or the features presented weren’t clear, schedule another time to review those particular areas with the vendors.
Also, at this point the vendors should have enough information to provide final proposals on their software and services. Ask for the preliminary proposals which should include software license costs, support costs, high-level implementation plans and implementation costs. Don’t forget to factor in travel costs when you get to tallying the total costs.
Once all demo sessions are complete and the project team has answered all open questions, it is time to review the results and do some follow up research:
- Compare the ranking of each demo by area comparing how the solutions will fit the business
- Note any workarounds and any noted deficiencies in the systems as they were presented
- Compare the costs to your expected benefits
- Ask the vendors for reference customers you can talk to and ideally visit onsite
- Explore with the references what they like about the software and support and what they don’t like
- Ask the reference customers if there are other companies they can refer you to who also use the software
- Also, check with those in your network to see if anyone uses the system you are considering and if you can talk to them. It’s useful to get references independent of the vendor as they will only supply you with references who are happy with the system
Once you have the demo session comparisons, proposals and reference customer input you are ready to make a decision. Select the final vendor and negotiate your best deal. Work to take advantage of discounts, as many ERP vendors are anxious for business and salespeople are anxious to make quota, particularly at the end of a month or quarter. Keep in mind also that they will be long-term partners in your business.
Phase III – Implementation
Now the hard work starts. Form a project team, most likely made up of members of the selection team. Provide the team with the proper resources to implement the system and refrain from introducing additional work like starting a new product line or acquiring another company until the system is implemented.
Work with the team to establish a reasonable implementation schedule, which often ranges from 3 to 12 months, depending on the complexity of your business and the available time of the project team. The quicker the system is implemented the sooner you’ll see the return on your investment. The drivers of that return are often reduced inventory levels combined with higher levels of on-time delivery to customers, reduced inventory and labor costs as well as increased sales. In addition more timely and accurate information will help in making daily as well as strategic decisions.