Enterprise systems — when carefully selected and properly deployed — make it possible for organizations to transform and automate their processes. By enabling seamless flow of transactional data between your organization and the people who you serve, enterprise systems can provide real-time data for management-decision making.
More importantly, decision makers need to follow the right approach in the selection process. An awareness of these key considerations can help you make the right system choices and significantly increase the chances of a successful implementation. Follow this ERP checklist for help navigating a system upgrade.
Process and implementation
IT transformation starts from the time a company recognizes the need to improve its existing IT infrastructure and puts a strategic road map in place. The road map becomes the blueprint driving the selection and deployment of all enterprise system needs.
To ensure a successful selection and implementation, there are five key considerations you should take into account when approaching enterprise system selection:
Unique process needs
ERP system classification or tiers
Available deployment options
Industry-specific solutions
Systems selection approach and landscape
1. Identify your business process needs
The challenge for most organizations is determining whether to implement a single, integrated system with all the needed functional features built in, or have separate applications for each of these business process areas. In other words, should you implement a single integrated system or implement separate, best-of-breed systems for accounting, human resources (HR), payroll, customer relationship management (CRM), and financial planning?
The advantage of the best-of-breed approach is each system will focus on the set of functional features it’s specifically built to handle with more depth than an integrated system.
On the flip side, you have to deal with integration issues and challenges related to multiple systems, databases, and vendors.
The industry trend is moving away from disparate systems towards a single, integrated deployment. It’s driven by cloud-based systems — known as Enterprise Resource Planning (ERP) systems — which offer more depth around accounting, CRM, HR, and basic budgeting and analytics features on a unified platform.
To select the right integrated platform, you need to understand ERP tiers and determine which tier is best suited for your organization.
Systems are classified into tiers based on their functional capability, scalability, revenue, and the cost of implementation.
Tier one systems
Tier one systems have deeper capabilities. They focus on large enterprise and upper mid-market entities with revenue in excess of $500 million.
They can support unlimited organizational structure, higher user count, global revenue base, and are generally more expensive than other ERP tiers. Most deployments cost over $1 million.
These systems are often implemented in a phased roll-out with a timeline of at least nine months. There aren’t many system options in this category as the dominant large enterprise vendors — for example SAP, Oracle, Infor, and Microsoft — have acquired different applications and consolidated them under their brand umbrella.
Tier two systems
Tier two systems have modest capabilities and focus on mid-size organizations with revenue ranging from $20 million to $250 million. On average, they cost between $50,000 and $500,000. Variations in cost depend on an organization’s needs.
Tier two systems are usually implemented within a three to six-month timeline.
Tier three systems
Tier three systems have more restricted capabilities. They’re the least expensive; total ownership cost usually ranges from $20,000 to $50,000. The implementation timeline ranges from six weeks to three months.
Ultimately, the ERP tier suitable to your organization will be determined more by the complexity of your process requirements and strategic outlook than your revenue bracket.
3. Consider cloud deployment
Another key consideration for organizations is deployment method — how an ERP system is situated, accessed, and maintained. There are three ways an ERP system could be deployed.
On premise model
In the traditional on premise model, ERP systems, servers, and infrastructure are situated and maintained in-house, requiring dedicated IT personnel to maintain the system and perform periodic upgrades.
This method is rapidly losing market share because it often requires a dedicated resource and is more expensive.
Hosted deployment
Hosted deployment is also becoming less common.
For this option, the ERP system and related infrastructure are outsourced to a third-party service provider. An organization has its own dedicated, separate system environment with the service provider that’s typically accessed through a virtual private network (VPN).
These customers are ultimately responsible for maintaining their application hosted on the service provider’s servers. They must perform periodic upgrades of their system and maintain their application, as they’re renting servers and disaster recovery services.
Cloud-based deployment
Cloud-based deployments are the fastest growing option because they’re multi-tenant. The same version of the software and supporting infrastructure serve multiple customers. All customers can share the same application instance and access it via web browser anywhere. The upgrade process and all database maintenance are also completed by the vendor.
Cloud-based deployments usually result in cost savings on:
Hardware and database maintenance
Software updates
Fixes
IT-related labor costs
There are hybrid variants of cloud deployments where you can have your own dedicated, private platform in the cloud, but maintain the same version as other customers. This option is associated with higher costs. You’ll pay a premium for enhanced services such as:
Control of your upgrade schedule
Higher concurrent operations
Higher data size limits
4. Determine whether an industry-specific solution is right for you
Another consideration is whether to choose a system that’s adaptable and configurable for a broad swath of industries, known as a horizontal solution, or one built specifically for your industry vertical:
Horizontal Systems. These systems are adaptable, configurable, and comprehensive. They aren’t specific to a particular industry, so they have broad appeal.
Vertical Systems. These systems are pre-built custom solutions specific to certain industries such as: food and beverage, life sciences, construction, and professional services.
Ultimately, the decision should be driven by your organization’s unique requirements. The more unique your requirements, the more suitable an industry solution could be to avoid needless customizations.
5. Adopt the right system selection approach
Selection approach should follow a structured process designed to provide all the information you need to make a rational, factual, risk-aware decision based on your process needs.
Once your strategic plan is in place, develop a vendor shortlist and create a RFP document. Describe your company business, your most critical functional requirements, and request information about the vendor implementation approach and cost estimates. The RFP document should also be clear about the evaluation and decision criteria.
Vendor demonstrations
Organize scripted vendor demonstrations and develop a scorecard for measuring performance against your functional requirements. It should also score nonfunctional criteria such as underlying product technology, implementation team profile, and vendor track record in your industry.
Comparative analysis
Conduct a comparative analysis of the vendors based on the facts gathered from the RFP responses, the demonstration sessions, the total cost of ownership estimates, and your own research and reference check on the vendors.
