How to Evaluate ERP Vendors
Selecting software for enterprise resource planning (ERP) is the prelude to a long-term and very expensive commitment. Doing the right homework is essential to pointing your organization in the right direction.
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Things You'll Need
- Functional requirements list
- Technical environment standards
- Evaluation scorecard
- List of vendors
Instructions
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Before looking at technology, look at your business requirements and, more importantly, your business problems. Define your business processes. For each process, develop a list of detailed requirements for data, authorizations, edits, security and interactions with other functions. ERP means it is a total Enterprise Resource -- not just one functional area like Finance, or Payroll.
The list of requirements should be rated for relative importance in the process. Example: Critical vs. Nice-to-have.
Give vendors the option to indicate the level to which their software meets the requirement. Examples: "Fully Meets", "Partially Meets", "Meets with Customizations", "Does not Meet".
Leave out the obvious requirements such as "Payroll system must have a place for employee name". If it is a requirement that all vendors have, it does not help you narrow the field. A better version would be "Employee name can be effective-dated to retain history of name changes".
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Align technical capabilities with functional requirements. In addition to being a tool for your functional customers, the new system must work with your organization's technical environment, as well as planned future environments. Most vendors will be able to run their software on multiple computing platforms.
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As part of your request for proposals (RFP), ask vendors to provide financial information on their firms, helping you to determine their stability. (You do not want to buy software from a company that is or soon will be insolvent.) Ask for their recent sales numbers -- how many customers are buying their software right now (not years ago). Look at how the various vendors rate with industry researchers like Gartner Group. Find out which ones are innovators and which are followers.
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Determine the cost of the project. ERP costs include implementation, hardware and software, and ongoing maintenance. The vendor will charge an annual fee for maintaining the software. Weigh the costs against anticipated savings and return on investment (ROI) gains.
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Evaluate the vendors' responses to the RFP using a scorecard you develop from requirements in the RFP. Check references, and ask for a demo of the software. Evaluate the vendor as well as the software: general status in the industry, how responsive and willing to work with you, and how willing to negotiate prices.
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Tips & Warnings
Functional requirements are more important than technical tools.
Look for vendors that are innovators.
Look for platforms that are mainstream and growing - don't stick to your old infrastructure.
Vendors tend to "Respond to win" when replying to your RFP - so validate their answers.
Beware of hidden license fees - software may require additional products needed to run such as "middleware" that enables the application to talk to a database or to web browsers. Ask vendors for a full list of related software needed.
References
Resources
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