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1 CIO, "Supply Chain: Hershey's Bittersweet Lesson," Nov. 15, 2002

“Not all companies recover from a

failed ERP implementation.

This is why it's critical to do all you can do

to make your ERP implementation a

success."

Halloween 1999 wasn’t like previous years. While kids were likely going about their trick-or-treating not realizing that some of their favorite candies were missing, Hershey’s executives were questioning how they missed out on approximately $100 million worth of revenue during a critical holiday. Turns out, the candy company had recently experienced a failed enterprise resource planning (ERP) implementation. The situation proved difficult for Hershey’s, resulting in plummeting stock and a public relations emergency, though the company eventually recovered1.

However, not all companies recover from a failed ERP implementation. This is why it’s critical to do all you can to make your ERP implementation a success.

The thought of researching and selecting a vendor and solution might sound daunting. After all, making the right decision about your ERP system can not only provide visibility into your entire organization, from customers to suppliers to employees—it can also provide your company significant savings in terms of time and cost.

At this point in the ERP planning and selection process, you may have already built a business case for investing in ERP technology and received support from the necessary individuals within your company. If this is the case, congratulations—you’ve already crossed two hurdles that many financial and technology executives find challenging. If you’re ready to move forward with researching and selecting a vendor and software solution, this white paper will guide you and your business in that process.

Prepare & Plan Let’s start by getting one thing out in the open—the entire ERP process can be intimidating and demanding. There may be times when you wonder if all of the challenges will be worth the benefits in the end, but remember that the answer will almost always be “yes.” A critical step in minimizing the intimidation factor is to prepare as diligently as possible. This means identifying, gathering and educating a project team; and defining and prioritizing goals. Without outlining these initial considerations, your ERP selection process will be misguided and unstructured.

Reduce Your Risk:Making the Right ERP DecisionsJim Drumm, Partner-in-Charge, Technology

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Build an ERP Project TeamYou know that researching, selecting and implementing an ERP solution is a significant undertaking. Like any other assignment, the success of your ERP journey will much depend on the ERP project team you put together. In addition to an ERP vendor, which we’ll discuss later in this white paper, a strong ERP project team includes technology experts, company stakeholders and executive management. As these groups are among those impacted greatly, offering representatives from each a seat at the ERP table allows them to bring experience and insights to this important project.

ú Technology experts are often individuals from the IT team who may be directly involved with the day-to-day operations of the ERP solution and/or will work closely with your vendor to actually implement the solution. These representatives may include VP of Technology, IT Director or IT Manager.

ú Company stakeholders, such as shareholders or partners, typically have a financial interest in the ERP project. As these individuals are vested in your company, they look at the success (or failure) of the ERP implementation as a direct impact on their bottom line.

ú Executive management support and involvement is the most effective way to encourage others within the company to get onboard with the new ERP solution. Whether you are implementing your first ERP solution ever, or upgrading to keep pace with your company’s growth, change can be intimidating for some. Encouraging adoption from the top down can bring confidence to the solution’s end users.

When selecting individuals for the groups above, it’s important to consider only those who demonstrate full commitment to the project. Furthermore, these individuals should possess similar characteristics that will improve the project’s chances for success: strong communication skills; logical, critical and detail-oriented thinking; organizational skills; and the ability to influence others. These are the individuals who will “sell” this ERP solution to others in their groups.

Define Your GoalsOnce your ERP project team is in place, you should begin the first team meeting by discussing, defining and prioritizing goals for the ERP implementation. For some, high-level goals might include improving business growth rate or surpassing a specific number in terms of revenue. Financial growth is often the overarching goal of ERP implementations; however, there may be more specific goals that drive that end result. Just like defining goals for smaller-scale projects, your ERP implementation goals should be SMART:

ú Specific ú Measurable ú Achievable ú Relevant ú Timely

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Take a manufacturing company, for example. A manufacturer can use ERP to improve efficiency with internal processes and productivity, reduce waste and other costs, and improve quality of materials produced. So, during the first ERP project team meeting, an agreed-upon goal might sound something like, “Reduce monthly design costs by making fewer mistakes using a streamlined design process.” This goal clearly plays a part in the overarching goal of improving financial performance, but is much more specific than, “Reduce costs.”

The number of goals you define may be impacted by the ERP solution you ultimately select. Some ERP solutions are so massive that defining and achieving too many goals may be unrealistic. Regardless, it is better to have goals set prior to implementing, or even selecting, the ERP solution, as it will help your team understand what is most important for this process.

What to Consider During ERP Software Selection You know that implementing an ERP solution is a costly and time-consuming task. Did you know that an ERP implementation can take anywhere from a few months to more than a year from conception to completion? This fact makes it even more critical that you do this right the first time and avoid spending unnecessary time and money on a failed implementation. To ensure this, ask yourself the following four questions when selecting an ERP solution:

1. Does this ERP solution meet all of our functional requirements? Although this question is a given for many companies in the early ERP stages, it may be one of the more important questions to ask. Looking back at the goals your ERP project team defined, determine if the ERP solutions you are considering would help you meet the most critical goals.

2. Does this ERP solution fit with our overall technology strategy? Selecting a solution that is unaligned with your overall technology strategy can create more complications. For example, it could uncover hidden costs, such as having to purchase additional servers or security software required to support a specific ERP solution.

3. What is the total cost of ownership? More than 50 percent of ERP implementations go over budget. In order to determine the total cost of ownership, you should take into consideration more than just the actual implementation. Many vendors include the implementation consulting, software and support for one year in a quote. Ask for information regarding add-on's, including how many user licenses you receive, whether or not training is included, if the quote includes customizations, etc. These factors, and many others, all play into the total cost of ownership.

4. Is this ERP vendor the right one for our company? There are so many ERP vendors out there; it can be confusing to know where to start in selecting one. While it’s important that potential ERP vendors are established (you know they’ll be around for solution support), you should also consider whether or not they have proven expertise in your industry.

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Research ERP Vendors & Software Selecting the right ERP vendor is equally as important as selecting the right ERP software solution. Yet as we mentioned above, just starting your ERP vendor search can be overwhelming. An effective place to start is researching potential vendors based on what you require in an ERP software solution. Many companies already know which software solution they likely want to implement before reaching out to potential vendors. While this can be problematic in that an ERP vendor can offer recommendations and advice based on decades of experience, it also may help narrow down a list of potential vendors.

Typically, you’ll want to start with a long list of approximately eight to 12 potential ERP vendors. This will allow you to gather thorough information from a number of candidates, especially as it pertains to software- and industry-specific experience. A good rule of thumb is to select potential vendors that have deep expertise in your industry, so they understand the challenges you face and can provide suggestions for how to best use the ERP solution you choose.

It is during this time when you will issue RFPs from these potential vendors to gain a high-level overview on the vendor and what they can offer your company. What you receive will likely vary significantly. Some will inevitably provide you a higher price tag than others, and some will offer you more customization opportunities than others. Review all of the RFPs with your ERP project team in order to determine with which you’d like to move forward into your short list of vendors. Some may be easily removed from the list simply based on budget.

A short list of ERP vendors (approximately four to six candidates) is the most efficient way to drill down even further and engage in serious conversations about your ERP requirements. At this point, it is appropriate to schedule and attend ERP demos, as well as ask for references.

How to Get the Most Out of an ERP Software DemoWhen executed properly, a vendor demonstration can be the most vital part of comparing various ERP solutions that are on the market. As we all know, not selecting the right ERP solution can be disastrous for your company. Vendor demos help mitigate that risk by walking you through the ERP solutions that could work for your company, and helping you find the best possible fit. To do this accurately; however, you should also consider the following tips on making the most of the demos:

1. Communicate your ERP requirements to the vendor. This can be formally through the RFP process, or informally in an email, but your potential vendor should understand exactly what you need in an ERP solution.

2. Schedule an on-site visit rather than a virtual demo. Even though on-site demos can take up more time than you might like, in-person consulting can help a vendor better understand your company and what you need in an ERP solution. Make the most of this time by offering a facility tour and scheduling meetings with members of the ERP project team.

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3. Prepare your demo participants prior to the schedule demo date. To make the most of your time, ensure that anyone participating in the demo has the agenda beforehand. Additionally, send the demo script to both participants and the vendor before the demo, so that everyone is on the same page from start to finish.

4. Don’t rush the demo. We’ve said it before and we’ll say it again—implementing an ERP solution is costly, so you want to do it right the first time. Provide ample time to drill into specific ERP solution features that could help you meet your ERP goals, and leave plenty of time for questions and answers.

Talk to ReferencesYou’ve created a short list of ERP vendors and have met for demonstrations with all of them. Now, you may have narrowed the playing field a bit more and are ready to learn what your final candidates’ references have to say. There are hundreds of questions you could ask a vendor’s references, but we have put together a list that will hit on some critical points, and may generate additional questions of your own.

ú Overall, are you happy with the vendor’s service and ERP solution you received? ú How long did the implementation process take, and did you finish on time? ú Did you finish on budget? If not, how much over budget were you? ú Who did you specifically work with from the vendor’s team? ú Did you have any problems with the vendor or the software, and if so, can you

provide specifics? ú Since the go-live, have you received ample support from the vendor? ú What lessons did you learn from the implementation process?

Choose Your VendorBy this point, you have conducted a wealth of research on ERP solutions and potential vendors. You should be close to making a decision—but what if you’re not? This is one of the biggest and riskiest decisions a company can make; you need to be absolutely sure that what you select is right. If you’re still lingering, it might be time to go back to your final candidates and gain reinforcement on some of your most critical questions:

1. How will this solution help us make better business decisions and generate more revenue?2. What security protocols are used to protect data from both external threats and possible

user error?3. What specific implementation tasks will your team handle?4. What will happen if there are functional and/or technical problems during the implementation?5. What will happen if we go over budget and/or the implementation runs long?6. Aside from ongoing support, what training resources are available to our team, and which are

included in your proposal?7. What would you recommend if we outgrow this solution?8. What benefits would we see quickly using this solution?9. How long will it take to realize a return on this investment?10. Is there anything not included in your proposal that you would recommend for us? (Are there

any “hidden” costs?)

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What Not to DoWe’ve spent quite some time addressing what to do when planning for, researching and choosing an ERP software vendor, but what should you not do? There are a few key points to make when thinking about actions that could hinder your ERP selection process.

1. Select a solution that doesn’t meet requirements. This should be an obvious point to make, but we cannot stress it enough. Particularly for companies with complex and/or unique processes, your requirements should go into great detail so your vendor understands what needs to be accomplished.

2. Rely only on a vendor’s demo. Vendor demos are an essential part of the ERP decision-making process, but they are far from everything you need to know. Make sure you select a vendor that can help you reach your long-term goals and keep you supported on this solution until you outgrow it.

3. Select a solution based only on cost. While an ERP solution brings with it a significant expense, don’t base your decision only on the price tag. Other components, such as future proofing the solution and complementary infrastructure, might drive the price up, but might also drive long-term business growth.

4. Involve only a few individuals in the decision-making process. Earlier, we discussed the need to include technology experts, stakeholders and executive management in this process. By including these individuals, plus others from departments such as sales, you will ensure that the solution you choose will be a functional fit for the overall company.

5. Sign before you understand the full offering. Ask questions in order to understand what exactly you are getting from the proposal. Know what specific implementation tasks the vendor will handle, what is required of you and whether or not there are costs outside of the proposal. All of these components and more could be what separates you from an on-budget, on-time implementation.

Going through the ERP selection process could be a full-time job for many. For you, it's likely just one aspect of a position that holds much responsibility. Because planning for, researching and selecting an ERP vendor and software solution can be a high-profile, high-risk task, moving through all the steps thoroughly is the best way to ensure implementing a software solution right the first time. In the next few months, we will release stories about how business leaders like you have selected and implemented ERP solutions, so stay on the lookout for those. Right now, you can learn more about technology investments and how you can make the right decisions for your organization by visiting sikich.com/erp-crm.

Sikich LLP is a leading professional services firm specializing in accounting, technology and advisory services. For 32 years, Sikich has been helping clients focus on overall business growth and the components that result in building the bottom line. Sikich has more than 600 associates, has been ranked as one of the country's 35 largest accounting firms and is the ninth-largest value-added technology reseller nationally. Visit www.sikich.com to learn more about Sikich's dedicated approach to ensuring clients' long-term success.