How to Select Quality-Friendly ERP Applications
There are a few simple steps that every business should go through when evaluating ERP software.
The key to selecting a quality-friendly ERP system is to understand where ERP came from, where it’s at today, and where the market’s going in the decades ahead. Since most companies keep their ERP software for at least 10 years, the software you choose now will become the cornerstone of your business for many years to come.
Quite simply, ERP is enterprise resources planning software born out of the early days of the 1970s to manage all aspects of a manufacturing business from accounting through to material planning; scheduling to human resources; and supply chain to customer relationships and sales.
ERP technology became mainstream in the 1980s as technology shifted from expensive mainframes to affordable minicomputers and personal computers. ERP has progressed from Microsoft DOS to Microsoft Windows and now to the cloud. Even the consumer app revolution that has swept the mobile phone market is making a significant impact on the enterprise application space, as businesses expect plug-and-play apps that are easy to add on to their core business systems.
The ERP market today is at a crossroads. Many fantastic legacy products haven’t made the technology leap to the cloud and are poised to fade off into the sunset, despite having incredible features and substantial loyal customer bases. This is due partially to the tremendous market consolidation that started in the late 1990s, leaving behind a handful of large vendors with fewer small niche ERP vendors than ever before.
The Next ERP Wave
Many of the ERP innovators that were acquired by larger ERP software vendors are back at it again introducing brand new products. This new breed of ERP applications are developed from scratch for today’s cloud technology. However, the newer ERP players are still relatively young and most do not have the deep manufacturing and quality management features available in more established Windows-based applications—but they will very likely get there in due time.
The ERP market is shifting away from purchased software installed on your own internal servers to software subscriptions hosted on the cloud. Like it or not, this is the way of the future and ERP isn’t the only software category embracing this new licensing model.
Businesses today may want to consider some of the newer cloud-only vendors, but they shouldn’t forget established ERP vendors who’ve been busy reworking their applications for the cloud, with most offering compelling options with the same great features in their traditional desktop applications.
Many people still prefer to pay their bills with a check and many older Americans reminisce about the good old days when a human would physically pump your gas. The only constant in life and, certainly in technology, is change. The cloud is proving to be a very good thing. Not only does it help reduce initial licensing costs, it also makes it much easier for smaller software developers to go to market, increasing options for third party applications. You’ve probably noticed this when you search for software online and notice many new names that you have never heard of before.
So what should a business evaluating ERP software do with such a major shift in the market and so many unknowns? Really, the process for evaluating ERP systems hasn’t changed much, even though there are a few new vendors and everyone’s changing pricing and deployment options. There are a few simple steps that every business should go through when evaluating ERP software. These include:
Understand Your Requirements: Conduct a business process review to document critical processes within your business. Consider hiring a reputable consultant or third party to help as this tends to be more impartial allowing you to remove internal bias and assumptions.
Audit Your Existing System: Many companies waste a lot of time and money replacing their current software when there were much more affordable and effective options available by sticking with their existing system. Evaluate new features in newer versions, add modules you don’t already own, find third party products that can integrate to your software to solve specific business problems, or hire someone to customize the software to meet specific business needs.
Analyze Gaps: You should be able to clearly see the functional gaps in your business system once you understand your critical business needs and have evaluated the pros and cons of your existing software and all options available to reinforce what you already own.
Make a Decision: The decision to switch ERP software is not easy and will have a dramatic impact on your business—positive or negative. Stick with your existing software and you may not be competitive in the market. Switch applications and you are faced with a monumental task of moving your data to a new system while conducting business as usual. But often times the risk is worth the reward and newer technologies can help you reduce costs, increase profits, and gain new insights to drive your business forward.
Find the Right Partner: If you’re ready to switch software you must do your homework and select the right partner. This means finding the right vendor, the right product, and the right organization to help you implement it.
A great research source for general and industry-specific ERP systems is the online Capterra directory. There are many others, of course, but Capterra is one of the largest and offers customer feedback and ranking for many of the products on their site.
Some companies prefer to buy from larger vendors who have more staying power, while others prefer to work with smaller vendors who are more apt to listen to their requests.
The product you choose will depend greatly on your industry needs and the size of your company, but most businesses will evaluate a few products from larger vendors and several products from smaller niche industry vendors.
Lastly, consider who’s going to implement the software, train you how to use it, customize it, and inevitably support it. Some vendors do not provide any options for services—you must work with them. Others sell through partners or allow consulting partners to assist with these types of services, providing you with more options should you have a personality conflict or other issues with someone on the service team or the service provider themselves.
Rome wasn’t built in a day and neither are ERP systems. Consider that PeopleSoft was launched in the 1980s as an accounting and human resources application, but grew into a full-fledged ERP system by the 1990s. This is similar to where we’re at today with many of the newer ERP vendors who may provide a solid foundation for your business but are likely missing critical features like quality management.
The decision on which ERP system to use is never the sole discretion of the quality management team. It’s usually driven by the executive management team with considerable input from accounting, information technology, and operations. However, quality management should be involved in the process and should have a say in the overall decision. Failure to consider quality’s needs could cause significant problems or force the company to invest in disparate systems which often represent a significant step back in automation and business intelligence.
Regardless of which ERP system you choose, you must carefully document your quality management requirements and work with each vendor or partner to understand if those requirements can be met within the software or if they require a third party application, customization, or if they simply cannot be addressed within the proposed software.
Consider how you’re tracking quality today, what external sources need to be integrated to get the data you need, and what reporting you need to manage quality more effectively. After all, selecting the wrong ERP system could result in major compliance costs, fines, and penalties—all because you simply selected the wrong ERP application.
As such, most businesses utilize a third party consultant to help them evaluate potential vendors, products, and partners to limit their risk and to maximize their potential for success.