Five Common Misconceptions in ERP Evaluation

Over the past few years, my involvement in roughly 30 ERP (enterprise resource planning) evaluations from a vendor perspective, have brought to light some common misconceptions worth sharing.

I have been in the ERP business for more than a few years and have observed some significant changes around the ERP software industry’s “go-to-market” approach that are causing some misconceptions within the target market that I support. This target demographic consists of mostly smaller, discrete manufacturers with annual revenues ranging from $20 to $100 Million that have some level of business complexity in the form of MTO (make to order) or ETO (engineer to order) processes.

If you’re not a small to mid-size manufacturer with some level of manufacturing complexity, these misconceptions may not apply.

Misconception #1: ERP systems are all the same.

There are hundreds of software products available that claim to fill ERP requirements. Some have very limited and point specific functionality, while others tie together all functional areas of a business to provide a complete solution. Additionally, certain ERP solutions allow flexibility to adapt to your business process while others are designed around specific industries to minimize the need for customization.

Generally, the more functionality, flexibility and industry specificity a solution has, the more business critical issues it can solve, so it is important that needs are clearly defined, and the solution is budgeted for accordingly.

Misconception #2: My solution will be implemented in less than 3 months.

If the goal is to fix a very specific problem in a specific area, likely with a point solution, then this is certainly an accurate statement. If you are attempting to implement only specific components of a broader application implementation time can also be shortened.

However, if you have complex requirements and issues that affect your entire organization, such as cross-functional access and visibility to data, you will likely need to implement a complete, integrated solution, which will require careful planning, process review, training and testing. The internal resources that need to be devoted to these tasks is often underestimated.

Implementation time is largely predicated on the scope of the problems you are trying to solve, the departments that will be involved and the internal resources that you will be able to allocate to the project.

Misconception #3: Picking the right software will fix all my problems.

While it is true that you need to choose a solution that meets your business requirements, it is even more critical that the solution is implemented successfully. There are many horror stories around ERP solution failures, not necessarily tied to product choice, but to the subsequent implementation of the software. Incomplete requirements, unrealistic timelines and inadequate resource allocation often contribute to failure of an ERP solution.

In addition to choosing an implementation partner that understands your business, ensure you are allocating the right internal resources to the project.

Misconception #4: A simple UI is the key consideration in evaluation.

Having a user interface that is easy to navigate is certainly a benefit for adoption. However, if the system doesn’t meet the necessary business requirements, then it defeats the purpose of implementing the new solution in the first place.

A better prerequisite for evaluation would be to assess the ease of use as compared to the system’s ability to solve business issues, and the capability of the solution to be customized to maximize end user efficiency.

Misconception #5: Cost is more important than functionality.

With smaller organizations, where funding may be limited, it is often the case that only immediate problems are addressed as they arise. As the company grows and needs change, the applications put in place to fix immediate problems are no longer adequate. More applications need to be purchased, often without integration. The aggregate cost of these applications and their implementation can easily outweigh the cost of a complete solution while also not solving the common data visibility issue. Therefore, it makes sense to consider future needs during the evaluation process and ensure that the chosen solution can grow with your business.

A well implemented ERP solution that ties together the functional areas of your organization can provide significant productivity and profitability gains that make the money, time and effort spent on such a system well worthwhile. It is therefore critical that all possible due diligence be applied during the evaluation process and that the decision committee has a good understanding of current and future objectives that need to be achieved. When possible, quantify the issues to be solved in determining budget and don’t set arbitrary timelines that inadequately reflect the resources that will need to be allocated.

Especially in smaller companies, choosing the wrong solution can have long-term negative impact on the health of your business. Use these tips for better success.

About the Author

Mark Miracle is the EVP of Sales for LogicData and has been personally involved in over 50 ERP selection processes over the past 3 years. He has helped many people understand the ERP selection process and how to avoid the pitfalls inherent therein.