By Adam Golden and Dawn Scaiano

Obviously, selecting an enterprise resource planning (ERP) system will have a tremendous impact on your company’s present and future success. With several reputable vendors on the market, it’s not always clear which product represents the best option.

However, by analyzing the way you do business, evaluating your organization’s unique needs, and creating a vision for the future, you can ensure you are investing in the right software package.

Here are several, simple ways to help you make the right choice when determining the best ERP package for your business.

First in a series

Adam Golden is director of e-engineering and Dawn Scaiano is director of software evaluations forAcuent Inc., a provider of e-services for Fortune 1000 companies. In this article, Golden and Scaiano examine how managers can prepare for ERP implementations. After considering your business processes, business requirements, and vision for your organization’s future, you’re ready to look at the external factors that will influence your ERP software choice. Part two of this series will provide pointers on how to evaluate the software vendors that will compete for your business.

Business process evaluation
Begin by evaluating the way your organization does business and determining what needs to be changed. This exercise is commonly called business process assessment.

Remember that all ERP solutions are designed not only to automate what you do but also to change the way you do it. Assessing your processes prepares your organization to use technology and helps streamline procedures.

The most successful companies assess their processes so that they can perform business process redesign work before, during, and after an ERP implementation or upgrade.

Look for inefficiencies that can be streamlined, as well as redundant processes that can be eliminated. For example, is the same information stored in more than one database? Do employees in different departments perform the same calculations?

Also, be on the lookout for tasks and activities that aren’t aligned with the overall objectives of your organization or job function. These might be tasks that employees do because they’ve “always done things this way.” Most likely, there’s an opportunity for improvement.

You may be able to stop performing nonvalue-added tasks, consolidate information into a single database, institute a data-sharing plan among departments, eliminate shadow systems, consolidate similar processes or forms, etc.

Is customization necessary?
The new processes you design should help you better leverage the technology you’re about to purchase. Though it may seem wise to modify software to fit the way you currently work, it’s often not.

Today’s software packages are extremely powerful, yet customers often only use a very small percentage of the products’ overall capabilities, often because their existing processes don’t support some of the software’s most beneficial features. Therefore, it’s generally easier—and much cheaper in the long run—to rethink your processes prior to implementation.

We once had a client that undertook a costly customization to automate its processes on its ERP system—only to learn that the “plain-vanilla” version of the software performed certain functions much better.

A process assessment will benefit your project in several ways:

  1. It will prevent you from migrating outdated processes to your new system. Since you’re implementing ERP to make your company more efficient, it doesn’t make sense to continue using processes that are inherently inefficient.
  2. Studies consistently show that the companies that incorporate business process redesign into their ERP strategies realize a much higher ROI than those that don’t.
  3. By eliminating the duplication of efforts by your staff, you may be able to reduce your operating budget significantly or free up your staff to implement the continuous process improvements you’ve identified.
  4. Understanding the streamlined processes you plan to implement will help you gather the right requirements for your new system—the second phase of choosing an ERP application.

Requirements gathering
Make a list of the functions the new system will be required to perform. Begin by asking those who will use it. Don’t just talk to senior management: Interview end users at all levels about what they need to do their jobs.

For example, an accounts payable department may need the ability to print 1099 forms at the end of the year or accommodate multiple payment addresses for the same vendor. Each of these functions represents a separate requirement for your new system.

After you finish this information-gathering process, you’ll have a long list of requirements. To organize them, develop a summary of your findings and identify common themes and concerns.

Once you differentiate users’ wish lists from their true business needs, you may find yourself with up to 50 requirements for each functional area. The system that you ultimately choose should be able to handle all of them. Refer to this final list as you write a request for proposal (RFP) that you’ll ultimately send to software vendors.

Creating a vision
While it’s impossible to predict what technology will be like in the future, it is imperative that you create an idea of how you want your system to work 10 years from now. Base your vision on what you’d be able to do in a perfect world.

For example, “Ideally, we wouldn’t have to fill out paper forms for the HR department. Instead, end users would submit information online via our company’s portal.” This scenario, though unfeasible today, represents your vision for the future.

Each new technology or process improvement you implement should be a step toward reaching that goal. If your vision includes eliminating paper forms in favor of online self-service, don’t purchase scanning technology enabling you to upload forms to your computer system.

Although you may realize an incremental gain in productivity, the investment represents a short-term improvement that doesn’t help you reach your long-term goal. Instead, invest in process changes and technologies that enable you to create and access new forms directly via the Web.

If you don’t take the time to consider what you want for the future, you run the risk of selecting an ERP system based only on what you do today—forever restricting you to the limitations of your current environment and of today’s technology. Without a blueprint for the future, many organizations lose the motivation to change the inefficiencies that led them to consider an ERP package in the first place. Creating a vision focuses your organization by enabling everyone to keep an eye toward the future—ensuring the project’s long-term success.

How do you choose?

What factors would you add when choosing ERP software? Send us your comments or begin a discussion below.

Adam Golden is director of e-engineering and Dawn Scaiano is director of software evaluations for Acuent Inc., a provider of e-services for Fortune 1000 companies.