How do I choose the right ERP system?

An ERP system is the beating heart of any company. It is therefore crucial to make the right choice during the selection process. However, this is not a given with the overwhelming range available. In this article, we will help you by indicating what should precede the selection process and which factors you must certainly take into account during it.

The process

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A. Listing your requirements and indicating priorities 

Before you delve into a specific ERP system, it is important to know crystal clear what your company needs. What do you want this ERP system to do, and how will it help your company move forward? It is important to align this vision with the various stakeholders in the company. It may be that different people within your company assess the needs and priorities differently than others. 

Aligning those needs is of great importance and will serve as the basis for the various selection criteria in the further process. When drafting your needs and priorities, also consider the long-term objectives of your company. Your needs today may differ significantly from those of your company in 3 to 5 years. 

Tip: Involve people from different departments who will be using the ERP package intensively on a daily basis.

B. Determine budget & timing

Once you know what your company needs, you must determine how much budget you can allocate for this and within what realistic timeline you can complete the purchase and implementation of the ERP system. The budget you have for this is, of course, partly related to your company's financial situation, but the most important criterion should be the ROI (return on investment). Therefore, it is important not to focus entirely on the budget you have predetermined during the selection process. 

When drafting the budget, you must consider multiple factors: 

• ​​The licensing cost of the software

• ​​The implementation cost of the integration partner

• ​​The cost for maintenance of the system

• ​The cost for support

• ​The cost for upgrades

You should also ask several questions when determining the timing:

• ​​When do I want to go live with the new system (e.g. start of the new financial year)?

• ​​Which start date has the least impact on my day-to-day business?

• ​​How long will/may the implementation take?

Tip: Probeer zo snel mogelijk op basis van bovenstaande elementen tot een shortlist van maximum 2 potentiële softwarepakketten te komen die je echt tot in detail wil gaan onderzoeken zodat je niet onnodig veel tijd verliest. Onderstaande criteria kunnen helpen bij het uitsluiten van anderen. 

Once you have listed your requirements and finalised your budget and timeline, you can start drawing up a shortlist of potential software packages. When deciding which software to examine in detail, you should take the following selection criteria into account:

​1. Costs and ROI

When selecting an ERP solution, it is crucial to consider the total costs, including licenses, implementation costs, maintenance contracts, additional costs for customisation or adjustments, and future upgrades. It is important to conduct a thorough cost-benefit analysis to understand the total cost of ownership (TCO) and evaluate whether the benefits of the ERP system outweigh the long-term investment. 

Tip 1: If the cost-benefit analysis is negative or the cost is significantly above your established budget from part 1, it is advisable to look for another solution.  

Tip 2: Sometimes the cost may be well above your budget, but the return that the package offers is so substantial that you can justify the investment. Just be careful that the benefits are not presented too optimistically.  

Tip 3: Also take into account the time it takes to implement it in your ROI calculation. That is time during which you are already paying for the software but have not yet received any return.  

Tip 4: Investigate what the possible indexing and price increases are for the license you purchase. This way, you avoid budgetary surprises in the future. 

2. Functionality 

The functionality of the ERP software refers to the various modules and capabilities that the system offers to support the key business processes. It is essential to ensure that the ERP software contains all the functionalities needed for your specific business activities. For example, if you consider purchasing and inventory management important, the ERP system must be strong in these areas. The needs analysis you conducted in part 1 will serve as a basis to determine whether there are sufficient functionalities to meet those needs.  

Tip 1: If the standard ERP package does not have enough functionalities to meet your needs from part 1 and therefore requires too much customisation, it is better to look for another system that aligns better with your company. Too much customisation implies higher costs, longer implementation times, and more problems with future upgrades.  

Tip 1 bis: Our rule of thumb is; customisation should make up a maximum of 30% of the total project.  

3. Scalability 

An ERP system is scalable if it can meet the changing needs of a growing business. This includes supporting more users, new functionalities, larger data volumes, and expansion of the IT infrastructure. It is also important that an ERP system supports more complex processes. For example, a particular sales process may work perfectly now because you only have 1 salesperson and 10 customers, but it may not be workable at all when you have 10 salespeople and 100 customers.  

A scalable ERP system prevents you from having to go through a completely new implementation process in the near future and helps manage costs in the long term. 

Tip: Consider whether the ERP system you are looking at also meets the needs of your business within 3 to 5 years. Ask yourself the following two questions:

• How will my business evolve in the coming years?
• What impact will this have on the processes?
• Can the ERP package also handle more complex processes?

4. Ease of implementation

SMEs often have a limited IT department and resources. Therefore, it is important to choose an ERP system that is easy to implement and causes minimal disruption to your daily business activities. A quick and smooth implementation helps to keep productivity high and minimizes any operational challenges that may arise during the transition to the new ERP system. 

Tip 1: The less customisation required, the faster the implementation will proceed.

Tip 2: Do not opt for a ‘big-bang’ approach during implementation but divide the process into logical phases that are manageable for your organisation.

5. User-friendliness

The ERP system is used by many of your employees, from managers to workers on the shop floor. Therefore, it is important to choose an ERP solution that has an intuitive user interface and is easy to understand and use, even for people with limited technical skills. A user-friendly ERP system minimizes the need for extensive training and reduces the number of errors when using the system. 

Tip: The user-friendliness of a system is determined by your least technologically inclined employees. If they can work quickly with the system, this is an indication that it is indeed user-friendly. 

6. Reputation of the ERP supplier & integrator

The reputation of the ERP supplier is of great importance, as you will be entering into a long-term relationship with the company that provides and supports the system. Research the experiences of other customers, read reviews, and check the supplier's history to ensure that you choose a reliable and dedicated partner. It is also important to investigate whether the supplier is financially stable enough to eliminate the risk of support being completely withdrawn.  

The integrator of the ERP system and the supplier are not necessarily the same. In many cases, you will work with a third party that will install and configure the software tailored to your company. Again, it is important that this is a reliable party with the necessary experience.  

Tip: If you find few to no satisfied customers of the package you are investigating or of the partner you want to work with, this is usually not a good sign.  

Is there a vendor lock-in?

It is important to assess vendor lock-in. Vendor lock-in is a situation in which you, as a customer, are tied to the ERP package or the integrator, making it difficult to switch to an alternative supplier. When you purchase and implement a specific package, you are of course dependent on that supplier. In terms of integrators, there are usually multiple service providers in the market, and you can avoid vendor lock-in by avoiding customisation and having another party (or yourself) take care of the hosting of the ERP. 

Tip: The more customisation you add to your software with an integrator, the more expensive it becomes to switch to another integrator. An integrator does not simply take over a customised package from another integrator without extensive analysis. 

7. Flexibility and adaptability 

An ERP system must be able to adapt to the unique needs and workflows of your organisation. Flexibility means that the system is configurable without extensive coding work, allowing it to evolve as your business needs change. This enables you to better align the ERP system with the specific requirements of your industry or organisation, giving you a competitive advantage and providing a better user experience. 

Tip: Investigate whether the system allows for small adjustments to be made by core users. This prevents you from having to approach your implementation partner for every small adjustment, which costs time and money.  

8. Integration possibilities 

For your business, integration possibilities are important when choosing the right ERP system. Seamless integration with existing software tools enhances efficiency, minimizes duplicate data entry, and provides real-time access to crucial information, resulting in a better overview of business processes and faster, informed decision-making. Moreover, this also increases the scalability of your ERP. It may be that in the future it could be cheaper to purchase a specific tool for certain needs and integrate it into your ERP than to have this tool fully customised. 

Tip: Try first to evaluate whether existing tools can also be replaced by the new ERP system before you have integrations built. Many ERP systems, for example, also offer CRM functionalities that may make it unnecessary to integrate your current CRM system.  

9. Future development and updates 

The ERP system you choose must be able to grow with technological developments and changing business needs. An ERP provider with a clear long-term vision and a proven track record of regular updates and improvements ensures that your ERP system remains stable, relevant, and competitively competitive. Regular updates also provide better security and functionality. 

Tip: Inquire how often updates occur, what new features the updates contain, and what the impact of such an upgrade is on your current environment.  

10. Security and data protection 

Security and data protection are of utmost importance when selecting an ERP system. Since as a SME you often do not have an extensive IT department, it is essential to choose an ERP system that meets the highest security standards to protect data against loss, theft, or unauthorised access. A secure ERP system ensures that your SME can comply with regulations and build trust with customers and partners by protecting their data and safeguarding privacy. By choosing an ERP provider with a proven track record in data security, you can sleep soundly as a business leader.  

Tip: Always request the security documentation from the supplier and have it reviewed by someone knowledgeable.

Conclusion

The choice of an ERP system is extremely important and a strategic decision. Changing ERP systems is not something you do lightly. Therefore, prepare adequately so that you can make a well-considered decision. The right ERP system, implemented correctly, can provide you with a competitive advantage.